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PPACA premiums are a magical mystery tour

The good news: Prices are falling slightly. The bad news: Contrary to optimistic early reports, that doesnt mean that everyones costs are falling.

By Megan McArdle | Updated on September 10, 2014
(AP Photo/Jon Elswick)

Last week, we finally learned the prices for the new benchmark plans for the Patient Protection and Affordable Care Act. The good news: Prices are falling slightly. The bad news: Contrary to optimistic early reports, that doesn’t mean that everyone’s costs are falling; consumers will have to be attentive to make sure that their costs don’t go up. The worse news: We won’t actually know what effect the Affordable Care Act is having on insurance prices until 2017, when a bunch of temporary subsidies for insurers expire.

The important thing to keep in mind is that when the “benchmark rate” goes down, that doesn’t mean that the cost of the old benchmark plan has fallen. It just means that whatever plan is now the second-cheapest “silver” plan on the exchanges is cheaper than whatever was the second-cheapest plan last year. Industry expert Bob Laszewski writes:

The new 2015 Silver baseline plan may have a lower premium than the 2014 Silver baseline plan. But that is almost always because the insurance company that held that slot in 2014, and almost always got the largest share of business, significantly increased their rates for 2015.

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