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Average Obamacare premiums are lower than projected: why yours may not be (+video)

With Obamacare's health insurance 'marketplaces' set to launch on Oct 1, the Department of Health and Human Services released its first data on average health-care premiums, but what individuals actually pay varies widely.

By Staff Writer / September 25, 2013

Debbie Wilhite of the Arkansas Insurance Department holds a map showing different health insurance exchanges in the country during a meeting of the Arkansas Health Insurance Marketplace Board of Directors in Little Rock, Ark., on Sept 20. Arkansas is one of 36 states whose state exchanges will be supported or run by the federal government.

Danny Johnston/AP

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NEW YORK

Nearly three and a half years after the passage of the nation’s sweeping health-care overhaul, Obamacare is set to go online next Tuesday with new, federally mandated health insurance exchanges – a key provision of the 2010 Affordable Care Act. 

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Uninsured individuals nationwide must either find an affordable plan to purchase by the end of the year, or pay a tax penalty.

That's why the Obama administration's release, on Wednesday, of a comprehensive summary of the average health-care premiums that private insurance companies will offer next week on these exchanges, or state “health insurance marketplaces,” drew immediate scrutiny.

According to the summary released by the US Department of Health and Human Services (HHS), the average monthly premium for a mid-level health plan on these exchanges will be $328 – about 16 percent below projections.

But this average premium number can be very misleading, since it is a weighted average for the entire country, experts say, based on some of the cheaper plans offered by the exchanges. Indeed, the rates provided by the summary give a dizzying array of premiums, varying widely according to age, region, and family size – as well as the kind of plan purchased.

The federal government will support or fully run the private insurance marketplaces of 36 states, with 11 other states currently choosing to run their own. For those exchanges run by the federal government, there are an average of 53 plans and premiums per state to choose from, and an average of 8 carriers providing these plans, and competing for enrollees. Some areas, however, will have as few as six plans, and some will only have a single carrier to choose from – another significant regional variance.

In Minnesota, the average monthly cost for the cheapest plan is $144, while a similar plan in Alaska costs an average of $385, according to the HHS summary. A mid-level plan in Arizona, by contrast, costs an average of $252 a month, while a similar plan in Wyoming costs $516.

And Obamacare provides for four different levels of plans, organized into platinum, gold, silver, or bronze – with an additional, bottom-basement “catastrophic plan” added for young adults and some others. The more expensive “platinum” plans will cover 90 percent of health-care costs, while the least expensive “bronze” plans will cover 60 percent of costs, which means a consumer choosing these plans must pay out-of-pocket for the remaining 40 percent.

But according to the Affordable Care Act, these out-of-pocket costs would be capped at $6,350 for individual policies and $12,700 for families. These caps were delayed until 2015 by the Department of Labor in February, however, which could put a strain on those who purchase these plans and incur medical bills next year.

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