A Small Business Owner Figures Out How to Save on His Health Insurance

Scroll down and look at the 'Various Health Plans Cost Curve' which shows cost versus age for 7 different plans this employer was considering.

They key takeaway is the all have the exact curve, the only difference being a scalar dollar offset per plan. I knew that pricing insurance plans was actually startlingly easy, I knew ACA limits the maximum rate adjustment due to age at 3x, but I was surprised the entire age-vs-cost curves are actually identical across plans. Apparently it's not just the 3x overall delta, but the exact rating adjustment year-by-year which is mandated by law for all federally run exchanges.

That means to exactly accurately price a family's insurance policy on Healthcare.gov, you need one array of 46 values (< 20, and 20 - 64), a 'base cost' per plan per zipcode, and a tobacco adjustment. That is all, system ready for launch, thank you.

So then you have to ask, why doesn't the calculator which lets you browse plan pricing let you enter ages for members of the family, and instead make you pick an age range and then give the lowest price within that age rate? When they could have given exactly accurate pre-subsidy pricing by asking for ages and looking up the multiplier in a global array.

Now I'm really happy Paul Downs dug enough to uncover this, but I think he does make one false assumption. While the 2014 per-age rating factor curve is consistent across all plans, that does not mean that you can use 2014 rates to predict 2015 rates. The base prices for plans can change from year-to-year, and perhaps even the age rating factor curve itself will change in 2015. Just because the array is static/global, doesn't mean it will be constant over time.

Paul does correctly conclude however that this pricing structure means you can take a single number for each policy and multiply times the employee count to immediately see the total price difference across plans. Of course, if you provide employees any choice in their own plan, it's not that simple, but being able to boil down "Plan A costs $X more than Plan B per person" is cute.

However, it's extremely hard to enumerate, let alone appreciate all the implications, trade-offs, benefits and hidden costs that come with imposing such strict and perhaps over-simplified pricing controls on a market.

If you're male, and particularly if you're a single male, you should check out Chart 5 which is the actual cost curve by age as calculated by Society for Actuaries in 2013. Before ACA you would pay based on cost...

Based on the data in that report, females consume ~33% more health care than males from age 20 - 65. But under ACA men and women pay the same amount (men subsidize women). That seems mighty chivalrous. More specifically, it's a very significant financial penalty for single men, and doubly so for men who marry men.

If you sum up health care costs for men versus women Age 0 - 64 (See Chart 28: Group PPO/POS data for calendar year 2010) you get $252k per man versus $309k per woman. I'm not sure I quite understand the justification why every man should be paying an extra $28,500 (on average) so that every woman can pay $28,500 less (on average) for their health care?

Interesting to consider... Given the demographics of most startups (young single men) and how ACA has a double sucker punch against being young and male... male dominated startups who want to offer insurance will be paying a hell of a lot more -- around 50% more to insure a team of 25 year old single men under ACA's pricing regime.