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Will Obamacare save you money?

By Jay MacDonald ·
Friday, June 7, 2013
Posted: 6 am ET

Having emerged relatively unscathed from its legal battles, the Affordable Care Act now faces the question most Americans want answered: Will Obamacare save me money?

The topic ignited quite the pundit pile-on recently between supporters and opponents of health care reform. Here's how the drama unfolded.

Two weeks ago, California, the nation's most populous state, surprised analysts by announcing that many consumers will save money based on rates filed by the 13 health insurance companies selected to sell their plans on the state's ACA-compliant "Covered California" exchange.

"The rates submitted to Covered California for the 2014 individual market ranged from 2 percent above to 29 percent below the 2013 average premium for small-employer plans in California's most populous regions," according to a news release.

California is considered something of a test case for the rest of the nation. Skeptics had feared that shoppers would experience "sticker shock" when exchanges open for early enrollment Oct. 1. Some still worry.

While premiums will vary by region within the state, a 25-year-old Los Angeles resident can look forward to paying $117 per month for a rock-bottom catastrophic plan or $147 per month for a more comprehensive "bronze" plan.

"We've hit a home run for consumers," crowed Covered California's executive director Peter V. Lee.

Reaction was largely positive. Betsy Imholz of Consumers Union, the publisher of Consumer Reports, admitted: "I'm impressed. I actually think they are good prices." Caroline Pearson of the consulting firm Avalere Health said the "very competitive" prices reflect "the number of carriers that were attracted to the market, and that the exchange created competition to drive down prices."

But not everyone was convinced. Micah Weinberg of the Bay Area Council, a trade group that represents large employers, pointed out that half of Covered California's customers are expected to qualify for federal subsidies. And what about the families with incomes of more than $94,000 a year that won't? "For that small number of people, those premium increases are going to be staggering," he predicts.

He wasn't the lone doubter. Several others, including Philip Klein of the Washington Examiner, Lanhee Chen of Bloomberg View and Forbes contributor Avik Roy, accused California of comparing apples to oranges. They claim the rates under Obamacare will actually double the premiums currently offered by some online health insurers.

But Nobel Prize-winning economist Paul Krugman says poppycock. He points out that the inexpensive online insurers the skeptics champion achieved those sunny California rates the old-fashioned way, by simply excluding applicants with pre-existing conditions. In states such as New York that prohibit that practice, "premiums are very high because only those with current health problems sign up, while healthy people take the risk of going uninsured," he writes.

Krugman predicts the only sticker shock that will accompany the exchanges will be the absence of sticker shock for most.

"A handful of healthy people may find themselves paying more for coverage, but it looks as if Obamacare's first year in California is going to be an overwhelmingly positive experience," he writes.

Who do you believe?

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Jay MacDonald is a Bankrate contributing editor and co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.

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July 21, 2013 at 9:52 pm

Millions of young healthy people are now going to have to pay $1404 dollars a year for coverage that they're highly unlikely to need (and probably don't want) in order to subsidize unhealthy people with existing conditions. Just call it what it is: another tax.

June 09, 2013 at 11:38 am

You think your car, home, and other insurance claims are *not* subsidized by others--those who do NOT file claims yet pay their premiums anyway?

June 08, 2013 at 6:56 pm

"expected to qualify for federal subsidies."

Soooo, their insurance rates are going down because I'm going to pay for it?