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Few people in New York State today buy their health insurance directly from an insurer, largely because the cost is so high. For a single person in this region, the premiums alone can exceed $1,200 per month.

But next year, in the first major change introduced in New York under the Affordable Care Act, people could pay less than half as much when buying insurance on the state exchange.

The huge savings promised by the exchange – touted by Gov. Andrew M. Cuomo and President Obama, but dismissed by their political foes – raise the question: How can they do that?

Experts say the lower rates are possible due to increased competition, an expected influx of young, healthy people into the insurance pool – and a shift by the state to allow health insurers to offer a wider variety of low-benefit, lower-priced plans.

“It’s not an exact science. You have to make assumptions, and that’s what we did. But they’re informed assumptions, based on our experience in the market,” said Don Ingalls, HealthNow New York’s vice president for state and federal relations.

The less-expensive options offered on the state exchange, and the federal subsidies available to many buyers, are designed to give millions of uninsured New Yorkers access to health care.

It’s too soon to know whether the assumptions behind the price predictions will prove accurate, but experts are optimistic about the initial rates proposed by insurers and approved in this state.

“The early signs from New York are very promising,” said Heather Howard, program director for the State Health Reform Assistance Network, which is funded by the Robert Wood Johnson Foundation.

To be sure, some will pay more next year than they pay now, primarily those who sign up for plans that offer more comprehensive coverage.

But proponents say the exchanges create a true, competitive marketplace for individual coverage in a state where such a market doesn’t exist.

However, the system will succeed only if healthy, uninsured people sign up for coverage, balancing out the costs for everyone. An individual mandate, in fact, requires everyone to buy insurance, and to pay a penalty if they don’t.

If they don’t sign up – because they still feel insurance premiums are too high, or they have trouble navigating the enrollment system for the exchanges – then the new system will not work.

Given the high stakes, insurers, government officials, academics and advocates for the uninsured are all waiting intently for what happens in 2014.

“This is a brand new environment for everyone – the state, insurers and consumers. The exchanges are very much a work in progress,” said Peter Kates, a Univera Healthcare spokesman.

Few buy their own

Today, while millions of New Yorkers receive coverage through an employer, and many receive health insurance through the federal Medicaid and Medicare programs, just 17,000 people in the state pay for insurance coverage directly.

Independent Health serves about 200 of those customers, while HealthNow New York has fewer than 1,000.

Potential customers – particularly those who are young and healthy – are driven away by the price. Individual, single HMO plans in this market cost $1,081 per month for Univera, $1,174 for BlueCross BlueShield, and $1,277 for Independent Health, according to state data for July.

“For an individual looking for insurance, it is virtually impossible to find affordable coverage, or to access it,” said Larry Zielinski, a former president of Buffalo General Medical Center who teaches at the University at Buffalo School of Management.

Insurers say one reason for the high prices is because New York required insurers to provide ever-more-costly benefits – such as acupuncture, or chiropractic care, all included at the behest of interest groups – even if the buyer had no need for the coverage.

It’s the equivalent of forcing anyone who wants to buy a car to pay for the most-expensive options, or requiring all cable subscribers to buy every premium channel, experts said.

“One of the unintended consequences is that the coverage became more expensive and people dropped out,” Ingalls said.

This is expected to change dramatically when the state exchange, a key piece of the most significant overhaul of our health care system since the 1960s, is up and running Jan. 1.

In New York, a group of health plans has received state approval to sell on the exchange a set of standard plans at each of four levels, ranging from “bronze” to “platinum.” Insurers also will offer nonstandard and off-exchange plans.

Yugos and Cadillacs

Cuomo’s office in July publicized its findings that the rates for the platinum and gold plans are as much as 53 percent lower than the rates now available to individual insurance shoppers.

The figure is based on a statewide average comparing the current, direct-pay rates to the gold and platinum plans available on the exchange, said Matthew Anderson, a spokesman for the Department of Financial Services. At the platinum level, the plan prices for single coverage range from $371.87 to $834.66 per month, the state reported. Family plans cost about three times as much.

State officials insist it’s fair to measure current individual plans against top-tier exchange plans, but experts say a direct comparison is impossible.

“I will say it is very difficult to make comparisons between the rates for coverage being paid today and the rates for coverage beginning in 2014. That’s because the coverage will be so different,” said Jennifer Tolbert, director of state health reform for the Kaiser Family Foundation.

One industry insider said it’s disingenuous for state officials to pat themselves on the back for the lower rates available on the exchange next year, when they’re just letting insurers offer the lower-priced, lower-benefit plans that weren’t allowed until now.

“Last year, you were only offering Cadillacs. This year, you’re offering Yugos, and Beetles. You can’t say the price dropped on Cadillacs,” said the industry official, who asked not to be named for fear of angering state regulators.

Representatives from the three largest area insurers say they are confident in their projected plan rates, which were generated by actuaries relying on past customer medical spending and assumptions on who will sign up for insurance on the exchanges.

Today, most people buying individual insurance are heavy users of health care, or people who don’t have any other options for buying insurance. On the exchange, this is likely to change, with a broader cross-section of consumers likely to sign up for coverage.

Nine companies are approved to sell insurance in the region through the state exchange, including HealthNow New York, the parent of BlueCross BlueShield of Western New York; Independent Health; and Univera Healthcare, part of Excellus Health Plans, as well as some new additions to the local health insurance market.

Rates may change

While health insurance premiums will go down for many individual buyers, the cost could go up for some. Those who receive subsidized coverage through the expiring Healthy NY program will likely pay more because they will get better coverage. For small businesses with 50 or fewer employees that choose to buy insurance through the state exchange, their employees could pay more in premiums if their benefits change. And owners of any small companies who now pay for group coverage through a chamber of commerce will have to buy insurance through the individual exchange, and they, too, may see higher premiums.

But most of the exchange customers are likely to come from among the 2.7 million people in New York who lack health insurance – including 64,000 in Erie and Niagara counties, according to the Urban Institute.

Will the lower-priced options – combined with the federal tax credits – be enough to pull into the exchanges the uninsured and underinsured? State officials expect 615,000 uninsured New Yorkers to enroll through the exchange over its first three years.

The exchange plans will be most attractive to people who are eligible for a subsidy or who are in bad health, said Greg Pasieka, HealthNow New York’s director of health care reform.

“We do not expect all of the uninsured to enroll in a policy with us,” Pasieka said, adding, “We’re trying to forecast what consumers will do.”

Many people in good health may opt to pay the penalty, said Brian M. Murphy, a partner with Lawley Benefits Group.

“That’s why the insurance carriers are really nervous,” Murphy said, because to make it work financially, “you need the good and the bad.”

News Staff Reporter Henry L. Davis contributed to this report. email: swatson@buffnews.com