Competitive Obamacare prices may lure employers
The phrase "sticker shock" has made headlines in stories about individual Obamacare enrollees, but premium prices for health insurance plans sold on Obamacare exchanges nationally are actually about the same—and in some cases cheaper—than premiums for comparable employer-offered plans, a new analysis reveals.
If that trend holds in coming years, employers may strongly consider moving their workers into those public Obamacare exchanges for health coverage, once that is an option in 2017, a report released Thursday by PwC's Health Research Institute said. That could land millions more people in those exchanges.
"There's been a perception that the plans on the exchanges were not a good deal, that they were either a lot more expensive, or didn't provide much in the way of coverage," said Ceci Connolly, managing directly of PwC's HRI.
Given that, Connolly said, "we were a little bit surprised" when PwC crunched the price data and found "the exchanges are competitive, and even cheaper in some instances." She also said that PwC clients "have been very intrigued by" the results.
The report found that the median rate of Obamacare exchange-sold plans that offer coverage comparable to employer-offered plans is $5,844 annually.
That's 4 percent less than the $6,119 for the average cost of an employer-provided plan of comparable benefits coverage, the report found.
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If consumers opted for the lowest-priced Obamacare plans in each state, the price difference was even more dramatic: 20 percent less, at an average cost of $4,885.
"Across the board, at every level, average exchange premiums are lower than this year's average premiums for employer-sponsored coverage," the report said.
However, the report warned, "it remains to be seen whether the these patterns will continue over time."
The analysis also noted that "many of the exchange plans have narrower provider networks, with more limited choices of doctors and hospitals," than employer-offered plans. Such so-called "narrow networks" have held down the costs of exchange plans.
As insurers gain more experience selling on the exchanges, and as several Obamacare provisions that limit insurers' losses in the first few years are removed, "premiums could change substantially in the public exchanges."
But if the price trend continues—with costs being cheaper on the exchanges—"this may provide an opportunity for employers to re-examine new approaches to providing health insurance coverage for their workers," the report said.
For its analysis, PwC looked at the price of Obamacare plans sold in the "gold" and "platinum" plans, the highest-priced options on the exchanges. A gold plan covers about 80 percent of a person's health-care costs, while platinum covers about 90 percent. Those plans were used because employer-offered health plans tend to cover about 85 percent of health-care costs—exactly halfway between the two exchange tiers.
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And PwC did not factor in the subsidies that most employers offer workers to offset the cost of their health coverage, nor did it factor in the federal tax credits that an estimated 85 percent of Obamacare exchange enrollees will be eligible for to lower their out-of-pocket premium payments.
Most people buying coverage on the Obamacare exchange either had previously bought coverage in the individual market or didn't have insurance last year. Few have the option of buying employer-sponsored coverage. Some of the people who have moved from the traditional individual market to the Obamacare exchanges have been unpleasantly surprised by higher premiums for their new plans.
As of January, more than 3 million people have selected plans from one of the new government-run Obamacare exchanges, which are selling insurance to help people comply with the Affordable Care Act mandate that they obtain health coverage by 2014 or pay a tax penalty. The exchanges, including the federally run HealthCare.gov, offer consumers a menu of competing plans by private insurers.
Asked about PwC's findings, Health and Human Services spokeswoman Joanne Peters said: "The health-care law is making insurance affordable for millions of Americans."
"We're thrilled that 3 million Americans have already selected plans, and we will continue an aggressive outreach campaign to get as many Americans enrolled as possible," she said.
Most Americans—more than 156 million of them—get health coverage through employer-offered insurance.
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Beginning in 2017, employers will have the option, if the Obamacare exchanges in their respective states allow it, of having their workers obtain coverage through such an exchange. The employer can, as most do currently, subsidize the cost of the insurance purchased for their employees.
Connolly said, "Employers today are frustrated by the cost and hassle of providing health insurance, so they are looking for an affordable alternative to keep their employees healthy."
"This may be an option for employers in the not-too-distant future," Connolly said. "This data suggests this will be a competitive market."
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The PwC report noted that health providers, including some higher-cost medical centers that have refused to negotiate inclusion in narrow networks, may rethink that strategy if a large number of people flock to the Obamacare exchanges.
Likewise, insurers "may face increased demand from employers to replicate less costly plans offered on the public exchanges," the report noted. "In particular, insurers may need to focus some resources on creating higher performance and higher-quality provider networks to replace or supplement traditional wide-access plans for all segment of the market."
—By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.