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U.S. sees lower-than-expected Obamacare insurance costs

A Tea Party member reaches for a pamphlet titled "The Impact of Obamacare", at a "Food for Free Minds Tea Party Rally" in Littleton, New Ham
A Tea Party member reaches for a pamphlet titled "The Impact of Obamacare", at a "Food for Free Minds Tea Party Rally" in Littleton, New Ham

By David Morgan

WASHINGTON (Reuters) - Hoping to gain the high ground in an escalating war of words over Obamacare, the U.S. administration on Thursday forecast sharply lower than expected insurance costs for consumers and small businesses in new online state healthcare exchanges.

The exchanges represent the centerpiece of President Barack Obama's Patient Protection and Affordable Care Act, and their success could depend on the cost of so-called "silver plans" with mid-range premiums, which are expected to attract the largest number of enrollees.

A report by the Department of Health and Human Services (HHS) said data from 10 states and the District of Columbia shows preliminary 2014 premiums on the lowest-cost mid-range silver plans in those marketplaces to be 18 percent lower on average than earlier administration and congressional estimates.

Rates for businesses with fewer than 50 employees that purchase small-group coverage through exchanges could also be 18 percent lower than what the same plans would cost without the healthcare reform law, based on data from six states, HHS said.

The report was released in conjunction with a speech by Obama on how healthcare reform is already benefiting consumers. [ID:nL1N0FO0ZY] It represents the administration's latest bid to counter Republican allegations that consumers and businesses will see sharply higher costs from the exchanges than the individual insurance plans already on the market.

The new exchanges are slated to begin enrolling as many as 7 million uninsured Americans for 2014 on October 1 in federally subsidized health plans ranging in quality from platinum, with the highest premiums, to bronze, with the lowest.

"Today's report shows that the Affordable Care Act is working to increase transparency and competition among health insurance plans and drive premiums down," Health and Human Services Secretary Kathleen Sebelius said in a statement accompanying the report.

The actual rates consumers see could be lower than current estimates, the HHS report concluded, saying that rate reviews and negotiations under way in the District of Columbia, Oregon, Rhode Island and Vermont have already reduced prospective costs announced in the spring.

It was not clear whether the lower rates contained in the report would be reflected nationwide. The report's authors cautioned that some states could see costs closer to earlier projections.

RATE SHOCK, OR RELIEF?

Speculation about Obamacare's ultimate effect on health insurance costs has led to a rankling debate between opponents who warn of a coming "rate shock" for consumers and healthcare reform advocates who have become increasingly confident as states have released data suggesting no disaster.

Republicans in Congress responded to the new HHS forecasts by reiterating longstanding predictions of crippling upward spikes in insurance premiums and other costs when compared to health plans available on the market today.

"If the administration is concerned with saving people money on their healthcare, I have some advice for them. Work with us to repeal Obamacare and start over," said Senate Republican leader Mitch McConnell.

Independent experts saw the HHS report as fresh evidence of a trend. "From what I'm seeing, rates are coming out lower than were anticipated when people started to talk them about a couple of years ago -- that is fact," said Dave Axene, a fellow at the Society of Actuaries.

He cited several reasons including a reinsurance program covering medical claims, the entry of low-cost insurers that specialize in Medicaid plans and Obamacare's requirement that insurers undergo rate reviews for proposed premium hikes of 10 percent or more.

But experts also noted that the HHS report focused on the lowest-cost silver plans, while some silver plan premiums reported by states have been significantly higher.

HHS compared state-reported rates with its own cost estimate for 2014, which it derived from a forecast for 2016 from the nonpartisan Congressional Budget Office (CBO). In March 2012, CBO projected that a typical family would pay $15,400 a year for the second-lowest costing silver plan in 2016. HHS translated that number into an average 2014 monthly individual premium of $392.

Monthly premiums for the cheapest silver plans in the 10 states ranged from a low of $226 in New Mexico to $400 in Vermont. The second-lowest costing silver plans, seen by some analysts as a better guide to market costs, are 10 percent less expensive than expected, with individual premiums ranging from $280 in Oregon to $412 in Rhode Island and $440 in Vermont.

The 10 states examined in the HHS report are California, Colorado, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia and Washington. Ohio and Virginia will have federally operated markets similar to those the administration is building in 32 other states. The remainder will run their own exchanges.

The HHS report said prospective premiums in the 10 states studied appear to be affordable for younger adults, including men. In Los Angeles, which has the largest number of uninsured people in the country, HHS said the lowest-cost silver plan for a 25-year-old individual will cost $174 per month without subsidies and $34 per month for an individual whose income is $17,235. A catastrophic plan, which mainly covers major medical costs, will cost $117 per month for an individual.

(Editing by Michele Gershberg and Matthew Lewis)

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