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Although Republicans and even some insurers anticipate rising health care premiums in the coming year, an Urban Institute and Robert Wood Johnson Foundation joint report released Tuesday could ease those fears.

The report analyzed 2014 premiums for policies on the Affordable Care Act exchanges in Washington, D.C. and seven states: New York, Maryland, Alabama, Michigan, Minnesota, Colorado, and Oregon. The study’s most notable finding is a correlation, arguably a direct one, between a state’s local health care market and insurance premium rates for the people of that state. A more diverse local health care market often times involves “nongroup” market insurers: Blue Cross plans and startup insurers, among others. The significance of these nongroup markets is found in their influence on the entire health care marketplace. As the report notes, “subsidies in the individual nongroup market are tied to the second lowest cost silver plan,” which then means that “individuals buying a more expensive silver plan or a gold or platinum plan would have to pay additional amounts.” This provides insurers — particularly those outside the nongroup market — greater incentive to “price aggressively to gain market share.” As a result, competing premium rates assigned to an assortment of health plans comprise the marketplace.

If “2014 premiums were moderate and below original expectations” as a result of diverse health care exchanges — established through the ACA — then 2015 rates should be similar, considering that most of the current insurers included in the exchanges plan on staying, and other new insurers will join in the coming year.

“How these scenarios will play out is hard to know, but claims that premiums will skyrocket are unwarranted based on 2014 experience and the evolving conditions for 2015 suggest otherwise as well,” the study says.

Another factor that supports the study’s findings is the inevitable increase in enrollments in the year to come. Competition among insurers participating in the market will be further fueled by greater numbers of Americans obtaining coverage through the exchanges. This also explains why “urban areas” as defined in the report, which boast higher numbers of enrolled Americans, tend to have a more diverse exchange, resulting in lower premiums.

Premiums in urban areas also tend to remain lower than those found in “rural areas,” which often face “difficulty in negotiating with the limited supply of physicians and hospitals” nearby.

Ultimately, diversity plays at least some sort of a role in determining whether or not rates will increase or decrease over time. Even the report concedes that “there may be real reasons to believe that premiums will increase substantially” — but only before adding that such an event would occur “particularly in less competitive states.” As Obamacare experiences increased participation from new and old health insurers and increased enrollments, “there are even stronger reasons to believe that premium increases will be moderate.”

For now, the rates of premiums for insurance plans nationwide make it almost impossible to deny that President Barack Obama’s health care reform has had a substantially positive effect on the cost of health insurance. The news reflects a similarly positive report from the nonpartisan Congressional Budget Committee that had originally projected Obamacare would cost $41 billion in 2014 alone; the report says that Obamacare coverage provisions are expected to cost $5 billion less in 2014 and $164 billion less in the next 10 years, in no small part due to reduced premium rates.

In spite of new data, hysteria over impending increased premium rates will certainly continue. But those who point to the Affordable Care Act as the source of the problem ignore the law’s capacity to shape the health insurance marketplace and foster competition beneficial to Americans.

AFP Photo/Joe Raedle

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