(Caroline_1: Flickr)

A major new analysis shows that hundreds of thousands of Californians will see their monthly insurance premiums fall an average 47 percent under President Obama’s health care overhaul, in large part due to tax credits and subsidies. It is the first detailed look at how health insurance premiums could change under President Obama’s Affordable Care Act, which goes into effect on Jan. 1, 2014.

Covered California, the agency charged with creating the state’s new health insurance marketplace, commissioned the analysis. The report looked at the individual market only and did not examine the small or large group market.

Under the ACA people with incomes up to four times the federal poverty level (about $94,000 for a family of four; $46,000 for an individual) will be eligible for subsidies from the federal government. That’s about 570,000 people, Covered California said.

Major findings from the study include:

• Individuals with incomes less than four times the poverty level are “likely to pay” 47 to 84 percent less for their monthly premium compared to this year
• Premiums would have increased 9 percent in 2014 because of health care inflation, even without the ACA

The analysis was conducted by Milliman, a large actuarial firm.

According to the non-partisan Kaiser Family Foundation, just over 2 million Californians buy insurance on the individual market. About 85 percent of Californians get insurance from their employer. Larry Levitt, senior vice president of the foundation, called the report a “complete and well done analysis.”

“Probably the most important thing this analysis did,” Levitt said, “was to help people understand that not everyone is going to be faced with higher premiums as a result of the Affordable Care Act.”

Still, some people will see higher premiums, in particular, people with incomes above 400 percent of the poverty level. More than a million of these middle and upper-income earners will likely experience an increase of 20 percent, the report found.

The Milliman analysis comes on the heels of another actuarial review completed this week. That one, from the Society of Actuaries, concluded costs would go up 32 percent under the ACA. But Levitt said that report was flawed, in part because it did not look across the ACA as a whole — or at the two primary ways people pay for health care: through premiums and through direct out-or-pocket costs such as deductibles and co-pays.

The Milliman report looked at both these fees to consumers. Because of anticipated benefits of the ACA, increased premium rates that some will pay could be partially offset by reduced out-of-pocket costs for health care, the study found.

In a release, Covered California Executive Director Peter Lee called the study “an important step in determining strategies to help protect” individuals from cost increases.

In California, people buying insurance on the individual market have experienced dramatic premium rate hikes over the last several years.

“Our top priority is to provide Californians with affordable health insurance options,” Lee said. “We are pleased that most individuals will pay lower rates and receive better coverage.”

The report also found that people in their 20s are likely to experience the biggest increase in monthly premiums (roughly 25 percent higher than the average increase for all ages), but in its release Covered California said many of these younger Californians are likely to be eligible for subsidies.

Levitt credited the study for estimating cost reductions due to competition expected under the Affordable Care Act. Right now on the individual market in California, it is very difficult for consumers to comparison shop. Often they cannot even find out what their premium will be until they fill out a detailed health questionnaire, Levitt said. The goal of the new insurance marketplace is to allow a more straightforward comparison of health insurance plans.

“Insurers will respond to that price competition by changing their cost structure,” Levitt said. The analysis found that this competition should bring costs down an average 6 percent.

The California Association of Health Plans reiterated the group’s overall support for the Affordable Care Act, but acknowledged the new competitive marketplace coming.

“These are completely different products in the individual market than what is sold today,” said Charles Bacchi, vice president of the group told KQED’s Mina Kim. “Health plans are going through the process of changing the way they provide coverage to this portion of the population, all on top of trying to price the products, deal with underlying health care costs and still remain competitive in the marketplace.”

Insurance companies are expected to submit plans to Covered California next month, to determine eligibility for the marketplace. Plans — and premiums — will be announced this summer. But this study is well-timed, Levitt said.

“People are forming impressions now about how this law will work and what it means to them,” he said. “So having accurate information out there about how people may be affected is really important.”

The new health insurance marketplace is scheduled to open to consumers on Oct. 1. Individuals will be able to shop for insurance that will take effect Jan. 1, 2014.

California's insurance marketplace, Covered California, will open in October, 2013. People will be able to buy health insurance, which will take effect January 1, 2014.

Peter Lee could hardly contain himself yesterday.

“In 2010, California was the first state in the nation to say we want a state-based exchange. Then, earlier this month, the federal government approved our blueprint for the exchange,” said Lee, the executive director of the state’s health insurance exchange, Covered California.

“And now,” Lee said, “the feds have given us the resources we need to launch Covered California. This is an historic moment.”

Yesterday federal officials awarded $674 million to the California exchange, a grant that funds the set-up of the exchange through the end of 2014.

It was slightly short of the $706 million originally requested for the grant, but Lee was not about to quibble.

“The feds reduced 2014 potential payment for outreach and enrollment by about $30 million,” Lee said. “But we think we have enough resources on hand to do the biggest outreach that I’ve ever seen.”

State HHS Secretary Diana Dooley pointed out that the extensive planning for the exchange was accomplished in a relatively brief time frame, as the exchange board was only formed in April 2011.

“I just have to say how proud I am of the work this group has done in such a short time,” Dooley said. “The work that’s been done is nothing short of extraordinary.”

Yesterday’s federal announcement came a few hours before the board’s monthly meeting — this time held in Los Angeles — where the good financial news continued.

Exchange board member Robert Ross, who also sits on the board of the California Endowment, had another funding announcement.

“We are committing a minimum of $225 million to implement health care reform in our state,” Ross said of the California Endowment.

“There will be four major areas of spending,” Ross said. “Outreach and enrollment, health workforce, chronic disease prevention and cost control and the fourth one is thinking about the population that’s left behind, the undocumented.”

Lee said he hopes the work being done to make health coverage affordable for low- and middle-income Californians will have a ripple effect throughout the health care industry.

“Covered California is not only going to make health care coverage available for millions,” Lee said, “Covered California is going to be integral to creating a health care marketplace that works for everybody.”

California's insurance marketplace, Covered California, will open in October, 2013. People will be able to buy insurance, which will take effect January 1, 2014.

As expected, the federal government on Thursday approved California’s plan to run its own health insurance exchange — a marketplace where individuals and small businesses will be able to shop for health insurance. The exchange is one of many requirements of the Affordable Care Act.

The exchange, now known as Covered California, was granted “conditional approval” from the U.S. Department of Health and Human Services. Seven other states also received conditional approval, bringing the national total to 19 states as well as Washington, D.C. which have been fully or partially approved. States have until February 15 to apply to run an exchange in partnership with the federal government.

The Associated Press reports that Covered California expects to expand coverage to two million people. About seven million Californians — or 18 percent of the state’s population — lack health insurance.

More from AP:

Health and Human Services Secretary Kathleen Sebelius said Thursday’s action will accelerate development of the health insurance marketplaces, where she said consumers will be able to buy affordable, high quality insurance. Conditional approval “will provide the information states need to guide their continued work.”

California was the first state to authorize a health insurance exchange after passage of the federal Affordable Care Act in 2010. …

The federal health care law seeks to increase health coverage by 2014 by creating new online insurance markets for individuals and small businesses to shop for subsidized private coverage, and by expanding Medicaid for low-income people. Medicaid is known as Medi-Cal in California and currently serves 7.7 million adults and children. …

The approval was granted on the condition that California demonstrates it can meet exchange requirements and comply with deadlines and regulations.

In a statement, California’s Secretary of Health and Human Services and Covered California Board Chair Diana Dooley said, “This is another significant step in California’s long but determined march toward better health at an affordable price.”

Californians will be able to shop for insurance via a web portal starting on October 1. Insurance purchased will go into effect on January 1, 2014. The website will provide tools for people to determine if they qualify for a subsidy to purchase insurance or to see if they qualify for other government health insurance programs, such as Medi-Cal or Medicare.

President Obama signs health care reform law. (Photo: White House)

The Department of Health and Human Services issued a whole slew of long-awaited regulations Tuesday about the Affordable Care Act. They are important to consumers because they have to do with both cost and (loosely) what must be covered. States have some latitude in the coverage area, more on that in a moment.

Friendly reminder that most of what the feds released are for the new state based exchanges. Individuals and small businesses will be able to buy insurance through the state’s exchange, Covered California. If you get insurance through your employer, you will continue to do so.

1. Guaranteed issue and renewal: you no longer can be denied getting insurance due to a pre-existing condition. Insurance companies can no longer jack up rates or drop you completely when it’s time to renew. They may only raise rates annually (on your birthday!) and only by a set amount.
2. Fair premiums: premiums can only differ based on age, family size, tobacco use and where you live. Adults will be within a 3:1 ratio. In other words, a premium for a 63-year-old can be a maximum of three times the rate of a 21-year-old. Everyone over age 63 is in the same rate band. Women can no longer be charged more than men.
3. Young adults special option: Younger people tend to be healthier than older people. But, as noted above, older adults are capped at paying a max of three times the premium of a 21-year-old. There was concern that this would mean high premiums for 20-somethings. The new rules allow for catastrophic health insurance plans — plans with lower premiums and higher deductibles for those generally health younger adults.
4. What’s covered: The feds have already detailed that each state must offer coverage within ten categories. States have some latitude in exactly what they’ll put in their plans. But one question had been around prescription drugs. The federal government had initially indicated that plans need only cover one prescription drug per category in a policy’s “formulary” — which could be problematic for the millions of people with chronic illnesses who take more than one drug. There were concerns that only one drug would be covered in a huge category, such as diabetes for example. The new rules today say that insurance sold in the exchange must match the benefits of the most popular small group health plan in the state (the “benchmark plan”). In other words, in all likelihood, more than one prescription drug will be covered in each category.
5. Wellness programs: A new rule encourages employers to offer a new kind of wellness program. If employers participate, people who receive insurance through their employer will be able to participate in enhanced wellness programs. Specifically, they can win a reward (real money here, folks: discount on premium or co-pay, for example) if they meet a specific health target: reduce or quit smoking; lower cholesterol; weight loss, etc.