July 11, 2016
(Bloomberg) — Premiums for the most popular type of insurance plans sold through the Affordable Care Act (ACA) marketplaces will rise faster in 2017 than in recent years, according to a study released Wednesday.
Consumer payments for the two lowest-cost “silver” plans will rise by an average of 10 percent to 11 percent next year, according to the study from the Menlo Park, California-based Kaiser Family Foundation that analyzed information from 14 major U.S. cities. Silver plans are selected by about 68 percent of ACA enrollees, according to the study, and annual increases in the same plans had averaged about 5 percent.
The acceleration is due in part to the scheduled expiration of the ACA reinsurance program. The reinsurance program has been using cash from insurers in the employer market to help issuers of ACA-compliant individual coverage pay catastrophic claims. The reinsurance program had been holding down premiums by 4 percent to 6 percent, according to Cynthia Cox, a Kaiser associate director of health reform and private insurance, who led the study. Insurance companies also underestimated the number of enrollees and their costs, she said.
“It turns out a number of insurance companies just guessed wrong,” she said. “They guessed too low and they lost of a lot of money.”
Many people have enrolled in ACA exchange coverage with pre-existing medical conditions, driving up insurer costs, while enrollment for the young and healthy has been below expectations, said Mitchell Morris, global leader for the health care sector at Deloitte Consulting.
“That skews the pool to those who use more resources” Morris said. “You need everybody in the pool — the healthy people and the sick people.”
Minnetonka, Minnesota-based UnitedHealth Group and Louisville, Kentucky-based Humana Inc. have both exited some ACA exchange markets because of losses on the individual exchanges. The study found that while insurer participation in the cities analyzed will be slightly lower in 2017, the decrease in participation is mostly due to the departure of UnitedHealth.
The analysis was based on proposed rate filings in states where complete information was available. Most customers who receive premium subsidies might avoid rate increases by shopping for suppliers, according to the study. The 10 percent jump is weighted by 2016 state marketplace enrollment but higher this year than in the previous years, according to the study.
Benjamin Wakana, a spokesman for the U.S. Department of Health and Human Services, said in an email that consumers will end up paying smaller increases than the proposed prices.
“This is just the beginning of the rates process, and despite headlines suggesting double digit increases, proposed rates aren’t what most consumers actually pay because the vast majority of consumers qualify for tax credits that reduce the cost of coverage below the sticker price, and people can shop around and find coverage that fits their needs and budget.”