Yesterday, Governor Cuomo announced that health insurance plan rates that will be offered through New York’s Health Benefits Exchange have been approved. There was much mad ein the press about the fact that the rates in the individual market that will be offered in 2014 are at least 50 percent lower than current rates. Of course that is the current rates in the individual market. Those are not the same rates employers are paying on group coverage, nor has coverage ever been sorted so definitively into assigned tiers. So, as with understanding penalties, really evaluating the exchanges takes a little deeper review of the figures.
In 2011, the average cost of family health insurance coverage in New York for an employer-sponsored group coverage was $16,572 per employee per year, or $1,381 per month. I could not find 2012 or 2013 data, but assuming a modest increase each year, you can imagine that the average annual premium for 2013 is somewhere close to $18,000. Now, that is the average for all of New York, and for all employer-sponsored coverage. So really good coverage and not-so-good coverage is lumped into “coverage as a whole.” Thanks to PPACA, we now have 4 defined levels of coverage (bronze, silver, gold and platinum) to consider. So to really see what we are getting you would have to be able to go back and sort all that coverage into the appropriate tiers and then price them out, which you probably can’t do. Otherwise, you are comparing apples to donuts…both taste good and are good to eat (in moderation) but have decidedly different reputations in the food world. So let’s set that thought aside and look at numbers.
For 2104, the New York exchange rates are established across 8 geographical regions and offered, more or less, by 21 different carriers. Not all carriers offer for all regions, and not all regions have the same price. For example, bronze-single coverage ranges from $217.83 per month for Rochester to $$595.71 per month in Long Island depending on the carrier you select. Gold-family ranges from $887.95 per month to $2,394.91 per month depending on where you reside and what carrier you choose. You might recall that a few weeks ago I wrote about the Vermont exchange that will have an average bronze-single rate of $365.76. Well, according to the New York published rate, the average bronze-single coverage rate will be $404.84 statewide, and $425.00 in New York City. So the average annual cost for base family coverage in New York City will be about $14,535 a year if purchased through the exchange.
Of course employers don’t face a penalty in 2014, and if the average annual cost of coverage is about $18,000 for family coverage for the employer, the real question becomes whether or not to offer coverage or how much employee contributions to require. Hypothetically, if an employer requires an employee to contribute anything less than $14,535 toward family coverage, they are getting out ahead. However, until we get out 2014 group renewal rates, we also won’t know just how much employers are subsidizing exchange coverage through increased premiums for group coverage. Plus, employers will definitely need to consider whether to offer coverage from a lower tier (like going from gold to bronze) as a cost-control mechanism.
The point is that over the next few weeks, many more states will release their exchange rates and much will be made about whether there will be great savings or too high or good or bad in comparison to other things. In reality, for employers, they are sort of just noise. Plans sponsors have to look at their costs and evaluate three things: (1) whether to offer coverage, (2) what level to offer and (3) what contributions to require. Comparing the exchange rates to group premiums for employer-sponsored coverage is not a fair comparison. But just for the record, based on the rate published yesterday, the average 2014 family premium across all plans, all tiers, all regions and all carriers for 2014 in New York will be $1,515 a month or $18,179 a year.