The Health Insurance Marketplace – Consumer price sensitivity will likely be a major factor

With open enrollment in the new health insurance marketplace plans only months away, should consumers be worried they may end up paying more for health coverage rather than less because of Obamacare?

As reported by The Wall Street Journal late last month in an article titled “Health Insurance Costs Set for a Jolt”:

  • “Healthy consumers could see insurance rates double or even triple when they look for individual coverage under the federal health law later this year.”
  • The article also cites the lowest available monthly prices proposed for a “bronze” plan on the insurance exchanges under the health law (for a 40 year old nonsmoker) range from $149-$242 a month.

These two points raise two important questions:

1.  How will people react if insurance rates double or even triple?
…and…
2.  What are people willing to pay per month for health coverage out of their own pocket?

Public Opinion Strategies conducted a national survey on behalf of American Action Forum earlier this year among 801 younger adults age 18-40 years old eligible to purchase health coverage through the health insurance marketplace.

  • What are the implications of increased premiums for insured younger adults?  More than four out of ten respondents who currently have health insurance coverage (45{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}) report they would no longer purchase health insurance and would instead pay the penalty each year if their premium costs were to increase 30{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222} in 2014 as a result of the health care law.The table below shows the cost increase scenario tested, and the percentage of insured respondents selecting each response category.

    DATA IS AMONG THE 522 RESPONDENTS IN THE SURVEY WHO CURRENTLY HAVE HEALTH INSURANCE COVERAGE AND PAY A MONTHLY PREMIUM OUT-OF-POCKET

    Would Still
    Purchase
    Coverage

    Would No Longer Purchase and Would Pay Penalty

    Would No Longer Purchase and Would Pay Penalty and Wait Until Sick to Purchase

    10{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222} increase

    83{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    10{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    7{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    20{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222} increase

    65{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    24{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    11{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    30{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222} increase

    55{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    25{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

    20{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}

  • What are younger adults willing to pay each month for health insurance?  All respondents were asked to imagine they were uninsured and had to purchase health insurance on their own.  They were then asked how much they would be willing to pay per month for health insurance.  The average mean dollar amount younger adults would be willing to pay was $140, and the average median dollar amount was $100.  Looking more closely at the range of responses, 28{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222} of respondents said they would pay less than $50 out of their own pocket each month for a premium, 42{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222} said they would pay $50-$149 a month, and 30{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222} said they would pay $150 or more a month.
As we head into Fall and open enrollment begins:

  • This data is a powerful reminder of the price sensitivity among adults 18-40 years old.
  • This data strongly suggests that should premiums increase by as much as 20{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}-30{09f965da52dc6ab4c1643a77bd40d1f729d807040cd8db540234bb981a782222}, many younger adults could respond by dropping out of coverage and paying the penalty or waiting until they are sick to purchase health coverage.

 

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