Report: Affordable Care Act to Raise Premiums in Texas

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The Affordable Care Act will increase the average cost of insurance premiums, making health care less affordable for those Texans on whom the system financially depends, according to a report from a conservative think tank.

The report, released Monday by the Texas Public Policy Foundation, says premiums for health insurance plans will increase for young, healthy Texans under the Affordable Care Act, also known as Obamacare. The health care law requires private insurers to cover essential health benefits and establishes a federal marketplace for insurers to sell coverage plans, among other requirements.

The report concludes that premiums will be on average "significantly higher than coverage available on the individual market in Texas prior to the ACA." Nonetheless, it concedes that comparing pre- and post-ACA health care plans “presents some difficulties” because of the costs associated with mandating that health plans cover essential benefits, and because the impact on individuals will vary depending on age, gender, location and other factors.

As an example, the report highlights changes in premiums for catastrophic plans for young people living in metropolitan areas. Catastrophic plans have lower premiums than comprehensive plans but provide protection only from worst-case scenarios. John Davidson, the report’s author, said those plans are the most attractive to young, healthy Texans, and that they operate “the most like insurance” of any health care plan in the insurance marketplace.

“For a 27-year-old, non-smoking male in Austin, low-cost catastrophic plans on the exchange, which are available only to those under 30 or those with low incomes who qualify, will be on average 84 percent more expensive than pre-ACA catastrophic plans,” the report found.

Proponents of the health care law, however, say the comparisons are misleading.

Stacey Pogue, a senior policy analyst for the left-leaning Center for Public Policy Priorities, says the pre-ACA premiums — what she calls “teaser rates” — analyzed in the report do not reflect average rates paid on the individual market. “These are the advertised rates by insurers,” she said. “Some young, healthy people get the teaser rate, but certainly not everybody does. To represent that as the average rate is misleading."

A September report from the Center for Public Policy Priorities asserts that comparisons between coverage pre- and post-ACA are unfair, saying, "The truth is that health care tomorrow will look very different from many of the insurance policies available today."

Davidson rebuffs the term "teaser rate," preferring "listed rate." "Rather than just take the lowest one that was advertised, we averaged the three lowest ones we could find to come up with an average picture of the low-cost catastrophic rates in Texas," he said.

Plans available under the Affordable Care Act are more comprehensive, Pogue said. They cover more medical services, including pre-existing conditions, and have lower out-of-pocket maximum costs. On the other hand, the pre-ACA insurance market is one “where the policies you can buy are full of holes, whether it’s mental health coverage or out-of-pocket costs that can be up to $13,000 a year,” Pogue said.

Davidson agrees that policies will change under the ACA, and he attributes their higher costs to those changes. "It's precisely because of the changes in the plans that they're more expensive," he said. "And they're most expensive for the people who had the ability to get the cheapest insurance before the ACA."

The federal government will offer relief for some facing higher costs in the marketplace. Texans with incomes between 100 and 400 percent of the federal poverty threshold could qualify for subsidies to offset higher health insurance premiums. Texans below the federal poverty line will not qualify for those subsidies and are instead encouraged to apply for Medicaid, although many will not qualify for Medicaid either. Gov. Rick Perry and the Texas Legislature did not to expand the program to cover impoverished adults, with many citing concerns about a system they say is not efficient.

The TPPF report says many Texans in their late 20s and early 30s will not qualify for subsidies because their incomes are too high. “Young, working Texans are most likely to bear the brunt of these higher costs,” the report says. “Premiums for ACA-compliant plans for Texans in their late 20s and early 30s are significantly higher than pre-ACA plans currently on the individual market.” The report says that those individuals have little incentive to follow the ACA mandate that they enroll in an insurance plan, and predicts that many will instead opt to pay a fine rather than sign up for a plan.

Health care officials say the exchange system under the ACA will depend on having a broad participant base, not just the elderly and afflicted.

“The success of the program is really contingent on young, healthy adults being able to broaden the risk pool and pay premiums to allow them to be more affordable for the older, sicker populations,” said David Gonzales, executive director of the Texas Association of Health Plans.

But Gonzales was hesitant to draw comparisons between pre- and post-ACA coverage. Asked whether rates had gone up, he said, “Unless you’re comparing apples and apples, it’s hard to really know.”

_{*An earlier version of this story said that Texans with incomes between 100 and 400 percent of the federal poverty threshold will qualify for subsidies to offset higher health insurance premiums.}