August 26, 2019

Why ACA premiums are staying flat (or even falling)

Daily Briefing

    Insurers are planning to provide consumers on the Affordable Care Act's (ACA) exchange market with more health plans options for the 2020 coverage year, and exchange plan premiums are projected to either stay flat or even decrease.

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    Background

    Both the expansion into new markets and lower premiums come after insurers hiked rates in previous years to help generate enough revenue to meet rising claims costs. Insurers also increased premiums after the Trump administration cut off cost-sharing payments to insurers and Congress zeroed out the ACA's individual mandate penalty.

    But insurers' exchange plans are "now generating profits," even as the overall number of consumers on the individual market has decreased.  

    Insurers to enter new exchange markets

    As such, a number of insurers that currently sell exchange plans are planning to enter new markets. Insurers that plan to offer health plans in new markets next year include:

    • Anthem, which is expanding its exchange plan offerings in at least two states—California and Virginia;
    • Bright Health, which is expanding its exchange plan offerings in states with few exchange plan options such as Nebraska, where only one insurer is currently selling exchange plans;
    • Centene;
    • Cigna;
    • Molina Healthcare; and
    • Oscar Insurance, which is expanding its exchange plan offerings in Colorado, Florida, Georgia, Kansas, Missouri, Michigan, Pennsylvania, Texas, and Virginia.

    Geoff Bartsh, a vice president at nonprofit insurer Medica, which sells exchange plans in a number of states, said insurers expanding into new markets is "a good news/bad news situation." He explained that, on the one hand, the exchange markets are stabilizing and there is increased competition among insurers, but on the other, "[t]he broader individual market continues to have a lot of problems, and that's shown by the number of people who are leaving."

    Meanwhile, a number of other insurers, are not planning big entries. UnitedHealth Group plans to sell in the three markets it's currently in, and CVS Health's Aetna and Humana, which do not currently sell exchange plans, do not plan to enter the markets. (Daily Briefing is published by Advisory Board, a division of Optum, which is a wholly owned subsidiary of UnitedHealth Group.)

    Deep Banerjee, an analyst with S&P Global Ratings, said the exchange market's limited growth is likely one reason insurers that exited the market in the past have decided to not reenter the market for the 2020 coverage year. 

    Exchange premiums projected to decline or see modest increases

    As insurers prepare to enter new markets, exchange premiums are expected to decrease or increase only slightly. According to an analysis by Charles Gaba, who tracks the exchange market, average exchange premiums will remain virtually flat or decrease in a handful of states. For instance, Blue Cross Blue Shield of North Carolina will decrease the average premium for an exchange plan by 5.5% in 2020 (Wilde Mathews, Wall Street Journal, 8/22; Japsen, Forbes, 8/22; Owens, "Vitals," Axios, 8/22).

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