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Premiums on the new health exchanges are lower, across the board, than the average premium paid by the majority of Americans who have employer-based coverage, according to a new report released Thursday.
This suggests that the exchanges may be an appealing option for employers looking to provide enticing but affordable benefits to their workers, the team at PwC’s Health Research Institute 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,” said Ceci Connolly, managing director of PwC's Health Research Institute. “This may be an option for employers in the not-too-distant future.”
Connolly’s team analyzed all the various insurance policies offered on the 15 exchanges run by states and the District of Columbia, plus those run by the federal government for the rest of the states. They compared them to data on employer-provided plans.
“In 2014 health insurance plans offered on the ACA’s 51 new exchanges are on average, comparable to, or lower priced than, similar employer-based plans. In addition, most exchange shoppers have a wider variety of plans than the typical employer-based offering,” the report reads.
Most Americans – 156 million – get their health insurance through an employer. It was a voluntary system that evolved over the past 70 years. The 2010 Affordable Care Act (ACA) enshrines this in law, requiring large employers to provide it.
The law also aims to get insurance coverage to the 45 million or so Americans who don’t have it, and provides for the state and federal health insurance exchanges to help provide it. The law sets rules for all insurers, aimed at ending what the White House has termed the worst abuses of the insurance industry – turning away people seeking coverage, ending coverage for people whose care gets too expensive, and refusing to pay for certain areas of care.
So far, the federal government says, about 3 million people have signed up for coverage on the exchanges.
The exchanges set up four levels of coverage: bronze, which pays for 60 percent of medical costs but which has the lowest premiums; silver, which pays 70 percent of costs; gold, paying 80 percent and platinum, which pays 90 percent of costs but which has the highest premiums.
Connolly’s team calculated that the average premium for a plan with coverage similar to that of the average employer-sponsored plan in 2014 would be $5,844. This compared to $6,119 for a worker getting coverage from an employer.
“The exchanges are competitive and even cheaper in some instances,” Connolly said.
“If an individual chooses the lowest priced plan in each state, the average exchange premium would be $4,885, or 20 percent lower than the average premium for comparable employer-sponsored coverage,” the report adds.
"Come 2017, when states will have the ability to open these exchanges to employers, we believe that some employers will look to that as an alternative to the employer-sponsored coverage they provide, and this data suggests it will be a competitive market,” Connolly said.
Some critics of the exchanges have complained about “sticker shock” for people either buying insurance for the first time or switching from buying their own personal health insurance. But PwC says the premiums are in fact lower than what similar bare-bones employer-provided plans cost, and that the insurance people are getting is more comprehensive than the plans they had before.
“Prior to the ACA, individual insurance coverage was more limited than employer insurance, and, on average, comparable to bronze plans purchased on the ACA’s exchanges,” the report reads. “More than half the people in the individual market had coverage below the bronze level of 60 percent, the lowest level in the exchanges.”
And people can get government subsidies in the form of tax breaks if they have certain income levels. The average employer-provided plan pays about 85 percent of costs, putting them somewhere between a gold and platinum plan on an exchange.
With lower premiums, the insurance companies have to find other ways to save money so coverage is profitable, and many are doing this by narrowing the networks of hospitals and providers available to patients. That’s because they can make deals with the smaller groups of doctors, hospitals and clinics.
But the PwC team says insurers working with employers are also considering this option, so it may be the wave of the future, anyway.
“The higher-cost medical centers that have historically refused to negotiate for inclusion in some plans may need to rethink that strategy and pursue ways to lower costs,” the report reads.
CNBC’s Dan Mangan contributed to this article