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Tax credits, shopping around keep Obamacare marketplace plans affordable, feds say

Any premium increases would be offset by comparative shopping and tax credits, says Department Health and Human Services.

Susan Morse, Senior Editor

Despite the exit of insurers and a rise in premium rates, consumers who purchase health insurance through the marketplace will still find coverage affordable, according to a brief released Wednesday by the Department of Health and Human Services.

This is because the majority of consumers get an advance premium tax credit and shop around for the lowest prices, HHS said.

This year, 85 percent of marketplace plan selections on were done using a tax credit, HHS said.

Using a hypothetical scenario of a 25-percent premium increase, the majority of marketplace consumers who get advance premium tax credits would be able to get coverage for less than $75 per month, just as they did in 2016, HHS said.

[Also: Obamacare marketplace shakeout rocks Arizona, Southeast]

Last year, some observers said based on rate filings, consumers would experience double-digit increases in 2016. But, after taking into account shopping around, the increase in the average premium from 2015 was 8 percent, HHS said.

Among the 85 percent of consumers with advance premium tax credits, the average monthly net premium increased just $4, or 4 percent, HHS said.

Ahead of the fourth year of open enrollment starting in November, health insurance premiums for ACA plans are rising - some predict by double digits.

But shopping by consumers keeps premiums affordable, HHS said.

Among 2015 consumers who re-enrolled in the marketplace for 2016 coverage, 43 percent chose to switch plans and realized substantial savings, HHS said. The average savings in premium costs was $42 a month.

[Also: Financial assistance enables drop in median marketplace deductibles]

Tax credits covered 73 percent of the total premium cost.

In a hypothetical scenario in which all marketplace plan premiums were to increase by 25 percent from 2016 to 2017, 73 percent of consumers could find coverage for $75 or less, and 78 percent could find coverage for $100 or less, HHS said.

When benchmark premiums rise faster than expected, more individuals are protected by the tax credit, according to the brief.

In 2016, 87 percent of marketplace consumers were eligible for tax credits. Given hypothetical premium increases of 10 percent, 87 percent would still be eligible. If premiums increased to 25 or 50 percent, 88 percent of consumers would be eligible.

[Also: CMS cracks down on abuses to risk pool to strengthen the marketplace]

In 2016, 70 percent of marketplace consumers could purchase plans for $75 or less and 76 percent could get plans for $100 or less. If rates were to rise by 50 percent, the number of consumers who could purchase plans at $75 a month would also increase, to 76 percent; and if rates were to rise 100 percent, the number of consumers who could get tax credits would increase to 80 percent, according to HHS.

Health and Human Services said it did not have final marketplace premium increases for 2017.

HHS did not address the effect the exit of insurers from the marketplace will have on competition and comparative shopping by consumers.

Twitter: @SusanJMorse

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