ACA marketplaces see decreasing premiums, healthier competition
The overall trajectory of the marketplaces, after a setback in 2018, seemed positive for consumers.
Premiums for the Affordable Care Act have declined three years in a row—while private plan premiums have increased during the same time frame, a new study has found.
The report by the Urban Institute said that although the ACA marketplaces seem stable overall, different markets had different results; markets with fewer insurers had substantially higher premiums than markets with more insurers. But the overall trajectory of the marketplaces, after a setback in 2018, seemed positive for consumers, the report said.
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“In 2021, the Affordable Care Act (ACA) marketplaces entered their eighth year of operation and appear to be approach a steady path, as reflected by premium growth. Predictions that the federal and state marketplaces would shrink over time or fail in some areas of the country have not come to pass, and insurer participation is increasing,” the report said. “A large premium increase in 2018 did not disrupt the market as much as projected, because the premium tax credits are designed to shield subsidized enrollees from such changes. Since then, premiums appear to have stabilized.”
Declining premiums linked to increased insurer participation
Not surprisingly, more competition helps, when it comes to ACA premiums. “Increasing insurer competition is an important factor in dampening premium growth,” the study said. “IN 2020 and 2021, insurers increased their participation in marketplaces…. Expanding to new states and to new rating areas within states.”
New plans were introduced in this time period by national and regional insurance carriers, Medicaid insurers, and small start-up insurers. The report noted that many Medicaid insurers have traditionally offered Medicaid plans exclusively, but some have expanded, and in cases where they have offered broader consumer plans, their use of narrow, low-cost provider networks give them the ability to offer lower premiums.
The study found that the number of insurers participating in a region had an impact on premiums. “A rating area with just one insurer was associated with a benchmark premium (for a 40-year-old nonsmoker) $148 per month higher than the benchmark premium in rating regions with five or more insurers,” the study said. “A rating area with two participating insurer was associated with a benchmark premium $114 per month higher than those in markets with five or more insurers. Rating areas with three or four insurers were associated with benchmark premiums around $45 per month higher than those in regions with five or more insurers.”
Location matters
The ACA, as written and as implemented with input from the courts, has different models in different states. Some states run their own marketplaces; others rely on the federal ACA website to market policies in their state. Some have expanded Medicaid as the original ACA plan envisioned, others have declined to expand Medicaid programs, after a Supreme Court ruling on that provision in 2012.
The report found that states with their own marketplaces and states that have expanded Medicaid are seeing lower overall premiums in the ACA marketplaces. In addition, some states have taken other steps to stabilize their markets, such as establishing reinsurance policies for ACA insurers, which also have led to lower premiums.
“States that expanded Medicaid, adopted reinsurance, and run their own state-based marketplaces have average monthly benchmark premiums for a 40-year-old nonsmoker lower than states that have not implemented those programs by $42, $35, and $48 per month,” the study said.
The report concludes by saying that decreasing premiums over three consecutive years and increasing insurer participation underscores the stability of the ACA market. New legislation from the Biden Administration, including expanded premium subsidies, will also help—the study noted that the Congressional Budget Office has projected ACA enrollment will increase by 1.7 million in 2022. The Biden Administration is also spending more on marketing ACA plans than did the Trump Administration.
“The expanded premiums subsidies proposed in the American Rescue Plan are currently temporary but making them permanent would improve affordability for many individuals and families with low to moderate incomes,” the study said. “If the enhanced premiums subsidies were made permanent, marketplace enrollment would increase by more than 5 million people 2022 and nongroup premiums would be 15 percent lower because of the healthier risk pool.”
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