ACA rates expected to substantially increase in 2023

A new analysis provides bad news for those in the Affordable Care Act (ACA) marketplaces —premium rates may increase as health plans adjust to the new realities of the pandemic. The report by the American Academy of Actuaries, finds that changes to federal policies and other factors, including inflation, are likely to increase ACA premiums significantly in 2023. Other reporting shows that some states, such as Maine, may see increases as much as 15% for ACA premiums.

“Proposed health insurance premium rates reflect many factors, which can include the effects of legislative and regulatory changes,” says Academy Senior Health Fellow, Cori Uccello. “This is especially true for 2023 rates, due to the possible expiration later this year of enhanced Affordable Care Act (ACA) premium subsidies and of a key support of Medicaid coverage during the pandemic.”

Generous government programs ending — and carriers adjust

The analysis points to two COVID-related programs enacted by the federal government to help Americans weather the worst of the pandemic. The American Rescue Plan Act of 2021 and the Families First Coronavirus Response Act took steps such as expanding tax credits to Americans on ACA plans and increasing federal aid to states for covering Medicaid enrollees.

The result of those two programs was an increase in Americans with health insurance, as the ACA plans became more affordable to more people. With these programs being phased out, it is likely that ACA insurance pools will shrink as some drop off the plans. This will raise costs for the carriers that administer ACA plans and prompt rate increases, the report says.

Other factors that could affect ACA premiums include changes in the small-group market, changes in utilization for telehealth visits and mental health care, and ongoing medical inflation.

“The costs of preventing, testing for, and treating COVID-19, while expected to stabilize, could also be important factors for certain health insurance plans, depending on projected trends in the pandemic, particularly should a new variant emerge that is not mitigated by the immunity provided by prior infections or vaccinations,” the report adds. With signs that new strains of COVID are more infectious, that last point could be important, as the pandemic moves to an endemic stage, with fewer deaths and ICU stays, but still a high rate of overall incidence of COVID. Even a less-virulent strain of the disease will likely have health care costs felt by carriers and plan sponsors.

The news from Maine — a big rate increase

One of the first states to announce projected rates for the upcoming year was Maine, which on June 27 said insurance rates for individuals on the state’s ACA marketplace could increase by nearly 15% for 2023.

A story in the Portland Press Herald says the state’s insurance bureau published proposed rates of 14.7% for individuals, and a lower 3.4% rate for the small group market in 2023.

“The requested increases in the individual market appear to be the result of several factors, including increased health care utilization in the past year, since more people have resumed scheduled medical procedures,” Timothy Schott, the state’s acting insurance superintendent, says in the story. “The Bureau’s actuarial staff will review the justifications for the rate changes and may object or request additional information from the insurers.”

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The report also lists some factors that might work to restrain rate increases. These include state-led efforts such as reinsurance programs, which show some success in holding down premium increases. But even that news was mixed, the study finds: “Although reinsurance can result in premiums lower than they would be otherwise, beyond the first year of the reinsurance program the rate of premium growth is less affected.”