Double-digit Premium Hikes Unlikely to Affect Most ACA Shoppers

Health insurance premiums for the benchmark exchange plans are set to rise 25% on average in 2017—an eye-popping figure that has fueled another wave of finger-pointing among Republicans seeking to dismantle the healthcare law.

But policy experts say the projected double-digit hikes are unlikely to affect the majority of people who enroll in health plans through the federal exchange.

The fourth open enrollment kicks off Nov. 1 and will run for three months. The latest HHS report released this week shows the average benchmark plan premium in 2017 will be $302, compared with $242 in 2016. HHS uses the second-lowest cost silver premium for a 27-year-old before tax credits as its benchmark. It’s the most popular plan on the exchanges and the one used to calculate premium subsidies.

The HHS data doesn’t include state-based exchange coverage. But HHS said benchmark premiums would increase at slower rate of 22% in 2017 after including data from four state-based exchanges for which data is available.

Premium hikes varied widely across the 39 states using the federal exchange. Arizona will experience the largest average increase for the benchmark plan at 116%, HHS said. Benchmark plan premiums will rise 69% on average in Oklahoma and 63% in Tennessee.

At the same time, benchmark premiums in some states, including Arkansas, Indiana and Ohio, will increase only slightly or even decrease in 2017.

That “tremendous volatility” reflects issues some states are having with low participation, said Chris Sloan, senior manager with consultant Avalere Health.

In many states where insurers like UnitedHealth Group, Aetna and Humana pulled out or drastically scaled back exchange participation, states “were scrambling to get insurers to stay” and ended up having “to let them price how they wanted to price,” Sloan said.

Many insurers still selling coverage on the federal marketplace are having to raise premiums drastically to make up for pricing too low in previous years. During the first two years of the exchanges, premiums varied widely from state to state as insurers figured out how to set premiums with very limited data on the populations and new regulatory requirements established by the Affordable Care Act, Cynthia Cox, an associate director and health insurance researcher at the Kaiser Family Foundation, said during a briefing Tuesday.

“Some insurers guessed wrong,” she said, and are now having to correct their mistakes by boosting premiums by double digits. Arizona, Tennessee, Minnesota and parts of Pennsylvania had “abnormally low” exchange plan premiums in the early years and are now hiking their rates to cover costs. The prices for next year now fall more in line with what the Congressional Budget Office predicted several years ago.

Other factors driving the premium hikes are sicker-than-expected customers and states’ decisions. States that expanded Medicaid and did not allow transitional “grandmothered” plans to continue likely have healthier markets and lower premium hikes today, Cox said. HHS said the phase out of two of the healthcare law’s payment programs to help insurers in the early years of the exchanges isn’t helping premium matters either.

Still, the vast majority of exchange customers won’t see a 25% increase in their premiums, though they might see a bump. Most enrollees will be insulated because they are eligible for tax credits, which are available for people making less than 400% of the federal poverty level and who don’t have employer-based insurance. Cost-sharing subsidies are available to people who earn less than 250% of poverty and choose a silver plan.

In total, HHS estimates 78% of individuals who are uninsured, purchase marketplace coverage or buy individual coverage outside of the exchanges have incomes low enough to qualify for subsidies in 2017.

Additionally, 77% of returning marketplace customers will be able to find a plan for $100 per month or less, and 72% will be able to find a plan for $75 or less per month. But that might require some shopping around—and that could force some consumers to lose their doctors.

“If you have a plan that covers your doctor and medications and it goes up, there’s a chance other plans aren’t going to meet your needs quite as well,” Sloan said. “On the plus side, sometimes you can find a better deal.”

About a fifth of exchange customers will have only one insurer to choose from during open enrollment, leaving them with limited options to shop around.

HHS said 167 insurers will sell coverage through the exchanges next year, down from 232 this year. Across the 39 states using the federal exchange, 15 insurers will enter the market for 2017, while 83 insurers will stop offering exchange coverage. Reduced participation reflects large, multistate withdrawals from UnitedHealth and Aetna, which account for 26 and 17 exits, respectively.

The average customer shopping for exchange coverage will be able to choose from 30 health plans and three insurers in 2017. About 79% percent of shoppers will have a choice of two or more insurers, and 56% can choose between three or more.

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