Priced to sell: Sweet Obamacare deals for young
Health insurance for most young adults on New York and California's Obamacare health exchanges will cost dramatically less than what twentysomethings have said they'd be willing to spend on insurance, a new analysis finds.
The attractive prices could significantly boost enrollment in those states' exchanges and help keep premiums low for people of all ages, said Christina LaMontagne, vice president of price-comparison site NerdWallet, which did the analysis.
"Health insurance can be as affordable for young adults as their cell-phone bill," said LaMontagne.
"We expect many young adults will find the monthly subsidized prices of $101 in California or $114 in New York affordable," said LaMontagne, whose site has created a cost calculator for comparing premium pricing in those states.
NerdWallet's interviews with young adults have consistently shown they'd be willing to purchase health insurance if it cost in the range of $150-$170 per month, LaMontagne said. Those people, like effectively everyone else in the United States under the Affordable Care Act, must obtain health insurance by 2014 or pay a financial penalty.
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"Most young people want insurance, they value insurance, but they just can't afford it," she said.
LaMontagne said getting young adults enrolled in insurance doesn't only help their health, but also will offset the costs on insurance plans that come from insuring older, sicker people. "From an actuarial standpoint, we need young, healthy people to pay into the system, and use health insurance to balance out the larger consumers of health services," she said.
But she warned that attractive prices alone won't get young adults to enroll. LaMontagne noted the "abysmal" results of a recent Commonwealth Fund study, which found that just 27 percent of that population knew they are going to be able to buy insurance on the exchanges.
(Read more: Obamacare ignorance threatens exchanges)
"The burden then falls on the legislators, media, the state exchanges to do the heavy lifting to help these people understand," she said.
New York and California are the largest of the 16 states and District of Columbia operating their own new Obamacare insurance exchanges, which open for enrollment Oct. 1, and will offer individuals competing plans from insurance companies.
The rest are being run by the federal government alone or in partnership with states.
NerdWallet's analysis of New York and California's exchange rates is based on the average lowest monthly payments for insurance being offered on the "silver" tier of plans, the second-least expensive level after the "bronze" level.
Most exchange buyers are expected to buy silver or bronze plans—and there is expectation that buyers will gravitate toward the least-expensive plans in each tier. There can be variability, sometimes significant, between the prices of plans in different geographic regions within a state.
The analysis factored in the effect of federal subsidies, in the form of tax credits, that are available to offset the cost of the insurance to people below certain income levels. LaMontagne said that 83 percent of young uninsured people will qualify for at least some subsidy because their pay falls below those maximum adjusted gross income limits—about $46,000 for individuals, and $78,000 for a family of three.
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The effect of those subsidies can be significant.
In California, NerdWallet found that a 27-year-old single woman making $23,000 per year—the median income for the young uninsured—would be offered a plan with a $243 per month premium. But after getting a $142 monthly subsidy, that plan would cost her just $101 per month—a 58 percent discount.
In New York, that same woman would be offered a silver plan for $337 per month. But after getting a $223 subsidy, she'd be paying just $114 per month, LaMontagne said.
NerdWallet's estimated health plan prices for young adults in major New York and California cities
|State||City||Minimum subsidized silver plan price|
Subsidized premiums for bronze plans in both states are even cheaper—with the caveat that out-of-pocket costs like deductibles and co-pays can be significantly higher in such plans. In California, the minimum average subsidized bronze plan for a 27-year-old is $46 per month—and it's just $44 per month in New York, NerdWallet found.
Josh Martin, a 27-year-old San Francisco-area man who works as a driver for a hired-car service, goes without insurance because his wife's employer's plan doesn't cover families, and they have to buy coverage for $165 per month for their 16-month-old daughter.
"I don't just don't have enough money to go around," said Martin, whose annual gross income before deductions is about $48,000.
Told that the state's Covered California exchange has an Anthem Blue Cross plan that would cover both him and his daughter for $214 per month, which includes a $31 subsidy, Martin said, "That's totally reasonable, that's something I could do."
Kevin Nazemi, co-founder of new insurance provider Oscar, which is offering plans on New York's exchange in New York City, Long Island, and two other counties, said his company is offering a bronze plan priced at $300 per month. With a subsidy, Nazemi said, it "could be free to almost free" for certain young adults whose income is low enough.
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Nazemi noted that New York's current individual insurance market has fewer than 50,000 people covered. The Obamacare exchange, which could draw a million or more customers, is "a ripe opportunity to compete for the business of the uninsured population," he said.
The affordability of plans for young adults in New York and California contrasts with fears raised by Obamacare critics, who have claimed the exchanges will lead to escalating premiums.
Joanne Peters, spokeswoman for the U.S. Health and Human Services Department, said, "Competition and transparency in the marketplaces are consistently leading to premiums that are lower than expected, and for those who qualify for a tax credit costs will be even lower."
—By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.