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Where insurance premiums are highest, new health law’s subsidies are, too

Under the federal Affordable Care Act, taxpayers will have to subsidize a bigger slice of the health insurance coverage promised to individuals in some areas of the country than in others.

Some of the biggest federal subsidies will be required in portions of Colorado, Georgia and Nevada, where premiums are highest, according to a Digital First Media analysis of premiums and tax credits across 50 states, plus the District of Columbia.

Far fewer tax credits will be needed in places such as Minneapolis, Pittsburgh and Tucson, Ariz., where insurance premiums already were among the lowest in the nation.

The analysis shows that tax-credit subsidies don’t eliminate variations in what people from different regions pay for similar policies, although the spread is significantly diminished. In a few cases, tax credits mean that people in regions where premiums are higher could pay less for similar policies than those in lower-premium regions.

“Because there is so much geographic variation in cost, the government does have to pitch in a larger portion of premium in higher-cost areas to make coverage affordable,” said Cynthia Cox, a researcher at the California-based Kaiser Family Foundation, who also has developed a national database on premiums and tax credits.

Subsidies and related spending are projected to cost about $1 trillion over 10 years, according to the Congressional Budget Office.

Some question whether the structure of the health law’s tax credits effectively reward inefficiency in some parts of the country. The analysis shows why tax credits have resulted in good and bad surprises for consumers this year as people learned about the complicated structure of subsidies.

“We’ve got some premiums that are less than 25 cents per month” after subsidies, said Maria Morris of the Mississippi Primary Health Care Association. “I think that’s amazing.”

“Some people were disappointed because they expected that everyone would have a tax credit up to (a certain income level),” said Allen Gjersvig of the Arizona Alliance for Community Health Centers in Phoenix. “That’s not the case.”

“We’re not really getting our fair share of federal tax credits,” said Ray Magnuson, an insurance agent in Tucson and president of the Arizona Association of Health Underwriters.

Health policy experts say the law wasn’t intended to give individuals or geographic regions equivalent amounts of subsidy dollars. The law also didn’t stipulate that everyone pay exactly the same price.

Instead, the Affordable Care Act lets people at certain income levels pay no more than a set share of income to buy the midlevel “benchmark” health plan where they live.

The Pioneer Press is a media partner with Forum News Service.