ACA Exchange Premiums

PWC’s Health Research Institute takes a look at premiums on the health insurance exchange, analyzing premium data from each state’s most populous county.   (PWC Report)   The “benchmark” premium is the cost of the second-lowest cost silver plan on an exchange, and is used to calculate subsidies for those consumers eligible for them.  Silver plans don’t have rich benefits, however, so they tend to have pretty high cost-sharing amounts.  This is the third year of exchange activity and premiums for the benchmark plans are rising.  There were 20 states in which the benchmark premium grew by double digits in 2016, there were only 11 states that saw decreases in the benchmark premium.  States are experiencing a wide range of premium swings from year-to-year, which itself is not good for a stable market.  Between 2015 and 2016, across the country benchmark premiums rose about 4%, on a par with employment-based plan increases.  And looking at the state data, the most populous states tend to have lower increases, or even decreases, which you might expect since they should draw more competitors, but the insurer offering the benchmark plan has also tended to rotate from year-to-year, suggesting that the insurers who got the most enrollment saw heavy losses and raised prices, leaving the next sucker plan up at bat.  Unfortunately in many states that next sucker is a provider owned plan, and they are ill-prepared to handle insurance risk.  At some point you run out of naive insurers to rotate to.  Over 60% of states experienced a change in the insurer offering the benchmark plan from 2015 to 2016.  The churn in benchmark plans affects consumers–they have to change plans, and often providers, to maintain the maximum subsidy.  Carriers are also offering fewer plan options, probably hoping to minimize adverse selection.  And as you might expect, insurers are dumping the richest plans first; many states now have no platinum plans available.

2017 is shaping up to be a crucial year for the exchanges.  Most coop plans are out of business.  Almost every Blues plan, which were heavy participants in the exchanges, is reporting substantial losses for policies sold in those forums, and most are saying they will either drop out, raise premiums significantly or cut back on offerings.  Most national for-profit carriers have similarly reported losses and announced actions to limit exchange business.  Less competition generally means higher premiums, if I have my basic economics right.  Higher premiums generally mean fewer people buy, and the ones who do are less healthy and they buy because they feel more need for insurance, so claims go up, higher claims mean higher premiums, and so on and so forth.  All part of basic insurance actuarial dynamics and all heading toward an unsustainable market.  Younger, healthy consumers are realizing they can figure out a way to go without insurance and not pay a penalty.  Yep, that reform law sure is working just great.