Premium Increases under ACA, 2010 to 2014

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Impact Analysis >> ACA Impact on Costs >> Impact on Private Health Insurance Premiums >> Premium Increases under ACA, 2010 to 2014 (last updated 11.19.15)

Topic Outline

1 Overview
2 2010-2013
- 2.1 Employer Plans
3 2013 to 2014
- 3.1 ACA Exchange Plans
- 3.2 Employer Plans

Overview

This page focuses on measured (as opposed to projected) premium increases under the ACA in various years between 2010 and 2014. Most of the adverse effect of the ACA on premiums occurred in 2014 as various insurance regulations were imposed on the non-group and small group markets and subsidized coverage became available for the first time through the ACA Exchanges. For that reason, the material has distinguished between the 2010-2013 period and the much larger body of estimates available for the rise in premiums between 2013 and 2014.

2010-2013

Employer Plans

Bureau of Labor Statistics. Employment Cost Index (ECI). ECI is a quarterly economic series detailing the changes in the employer costs of labor for businesses in the United States economy, inclusive of health benefits costs. The ECI for health benefits shows the 12‐month percent change in employer health benefits costs per hour worked on a quarterly basis. The compound annual change for the four quarters reported for 2011-2013 (each quarter showing the percent change from 12 months earlier) was 2.9%. This compares to 4.4% for the years 2008-2010. For all civilian workers, health benefits were 8.3% of total compensation in March 2010 vs. 8.6% in March 2013, representing $2.48 and $2.67 per hour worked respectively.
KFF/HRET Annual Employer Health Benefits Survey. This survey showed that total premiums for single (family) coverage rose 5.2% (5.9%) between 2010 and 2013; this compares to 4.1% (4.4%) from 2007 to 2010 (computed from Exhibit 1.11).
Mercer’s National Survey of Employer-Sponsored Health Plans. Health benefits cost per employee grew , 6.1% from 2010-2011, 4.1% from 2011-2012 and 2.1% from 2012-2013 (Fig. 1). This represents a compounded annual rate of change of 4.1% for the period 2010-2013. This compares to a compounded annual rate of 6.2% from 2007-2010 (6.3% from 2007-2008, 5.5% from 2008-2009, 6.9% from 2009-2010). Over 2,500 employers participated in 2014, reportedly far more than in any other health benefits survey.

2013 to 2014

ACA Exchange Plans

The following studies compare actual premiums in the non-group and small group markets to the actual premiums being charged in the Exchanges for 2014. Studies listed in reverse chronological order.

Health Pocket (October 2014). Without Subsidies Women & Men, Old & Young Average Higher Monthly Premiums with Obamacare. “Average premium costs for 23-year-old women and men increased 44.9% and 78.2% respectively after the ACA’s implementation. For 63-year-olds the increase was 37.5% for women and only 22.7% for men. Young men had the highest premium increase (78.2%) among the groups examined while senior men had the smallest increase (22.7%) though senior men had the highest baseline premium in 2013 against which their 2014 increases were calculated.”
Manhattan Institute (June 2014). A county-level analysis of premiums on the ACA Exchanges showed that on average, individual market premiums increased by 49 percent in 2014 as compared to 2013. The highest premium increases exceeded 200% in some counties, whereas the lowest showed premium reductions of more than 60% (the latter occurred in New York state, where the effect of the ACA is to deregulate an overly regulated non-group market that had experienced a significant death spiral in recent years). Across the country, for men overall, individual-market premiums went up in 91 percent of all counties: 2,844 out of 3,137. The study includes an interactive map that allows users to find out by Zip code how much premiums are increasing for men and women in 3 different age categories: 27, 40 and 64.
Pauly, Mark, Scott Harrington, and Mark Leive (June 2014). “Sticker Shock” in Individual Insurance under Health Reform. This paper provides estimates of the changes in premiums, average or expected out of pocket payments, and the sum of premiums and out of pocket payments (total expected price) for a sample of consumers who bought individual insurance in 2010 to 2012, comparing total expected prices before the Affordable Care Act with estimates of total expected prices if they were to purchase silver or bronze coverage after reform, before the effects of any premium subsidies. We provide comparisons for purchasers of self only coverage in California and in 23 states with minimal prior state premium regulation before the ACA now using federally managed exchanges. Using data from the Current Population Survey, we find that the average prices increased by 14 to 28 percent, with similar changes in California and the federal exchange states; we attribute the increase primarily to higher premiums in exchanges associated with insurer expectations of a higher risk population being enrolled. The increase in total expected price is similar for age-gender population subgroups except for a larger than average increases for older women. A welfare calculation of the change in risk premium associated with moving from coverage that prevailed before reform to bronze or silver coverage finds small changes.”
ADP Research Institute (2014). ADP Annual Health Benefits Report (2014). This report highlights significant trends in employer-provided health benefits between 2010 and 2014 by aggregating data on key metrics from U.S.-based client organizations (drawing from actual, anonymous client data, rather than self-reported surveys). These are large employers (1,000 or more employees), who are primarily self-funded.
- Employees ages 50 to 59 participated in the largest percentage, with 73% of those eligible participating (among employees under age 30, only just over half participated); “as children remain on their parents’ health insurance policy up to age 26, there may be an additional motivation for older parents to participate in their employer-sponsored health insurance.”
- In 2014, the average monthly health plan premium for full-time workers was $870 (employer and employee premiums), an increase of 15% since 2010. However, after a spike of 6.9% between 2010 and 2011, the rate of increase moderated. Premiums rose 1.7% between 2013 and 2014.
- The cause of moderating premium costs is unclear. It may have been due, in part, to an increasing number of employers reducing actual coverage value, using high-deductible health plans with higher co-pays, or implementing spending accounts and consumer-directed health plans.

Milliman (May 2014). 2014 Milliman Medical Index (May 2014). The Index is based on the average cost of healthcare for a typical family of four with employer-provided PPO coverage (inclusive of out-of-pocket costs but exclusive of insurer administrative costs/profits); the MMI is projected to be $23,215 in 2014. The report includes spending trends starting in 2009; in nearly every year of the past decade, the average annual increase in the MMI has decelerated: the increase between 2013 and 2014 (5.4%) is the lowest it has ever been since the index was first reported in 2002. However, the report concludes that the ACA has had “little direct impact on the cost of care for our family of four in 2014 because this family tends to be insured through large group plans.” The report also observes “Some of the most far-reaching reforms are focused on access to insurance in the individual and small employer markets. Additionally, while the reforms are having immediate impacts on premium rates in those markets (the individual market, in particular), it is unclear whether they will ultimately have meaningful effects on growth in the cost of healthcare services.” The report offers no additional qualitative or quantitative assessment of ACA’s impacts on the costs of group coverage.
CMS, Office of the Actuary (February 2014). Report to Congress on the impact on premiums for individuals and families with employer-sponsored health insurance from the guaranteed issue, guaranteed renewal, and fair health insurance premiums provisions of the Affordable Care Act (2.21.2014). The Chief Actuary was required to estimate the impact of these three specific ACA provisions – fair health insurance premiums, guaranteed issue and renewability – on the premiums for individuals and families with employer sponsored health insurance. Since fully insured small group policies are already guaranteed issue and renewal in all states, we expect there is no material net impact of these two ACA provisions on premium rates. As a result, the premium rate impact in the small group market is expected to result from only the new adjusted community rating provision in section 2701 of the PHS Act. Based on our review of the available research and discussions with several actuarial experts, we have estimated that roughly 65 percent of small employers offering health insurance coverage have premium rates that are below average. This results in roughly 11 million individuals whose premiums are estimated to be higher as a result of the ACA and about 6 million individuals who are estimated to have lower premiums.
Heritage Foundation (2013). Gonshorowski, D. How Will You Fare in the Obamacare Excanges? Heritage Foundation, October 16, 2013. Changes in States’ premium rates using The Heritage Health Insurance Microsimulation Model (HHIMM). Interactive state map showing increases for 27-year-olds, 50-year-olds, and family of 4.
American Action Forum (2013). This study (10.03.13) compared premiums for the lowest cost plan available in the non-group market in January 2013 to the lowest cost bronze plan available on the exchange on October 1, 2013. The analysis showed that on average, a healthy 30 year old male nonsmoker will see his lowest cost insurance option increase 260 percent. Premiums for such individuals will increase in all fifty states and the District of Columbia – from a low of 9 percent in Massachusetts to a high of 600 percent in Vermont.
Manhattan Institute (2013). A study (9.25.13) of 9 states with state-run exchanges and preliminary data from 36 states with federally-run exchanges found that compared to the lowest cost plan in the pre-ACA non-group market:
- 27-year olds males who purchase the least expensive plan through the exchange will see their rates go up by an average of 97 percent (only 2 states would see lower average premiums: CO, NH) ;
- for 27-year old women, the average increase will be 55 percent (only 2 states would see lower average premiums: CO, NH, OH, RI);
- When the lowest cost plan for 40-year-olds is compared to the premiums for the average exchange participant (which varies by state, but typically falls in the mid-30′s, hence this comparison is stacked slightly in favor of the ACA), rates will go up an average of 99% for men and 62% for women.

These figures represent raw premium changes, not taking into account subsidies. A separate analysis examined the subsidy break-even point (i.e., the maximum income one can earn and still qualify for a subsidy large enough to eliminate any additional premium increase that would otherwise result from the ACA) to the median household income for 6 age/gender categories. Both for 27-year olds and 40-year olds (whether male or female), the break-even income is well below median household income meaning that most families will pay higher premiums even after accounting for exchange subsidies.

National Journal (2013). Obama’s Affordable Care Act Looking a Bit Unaffordable (August 29, 2013). This independent assessment concluded that even after taking into account subsidies available on the exchanges, 66% of workers with single coverage and 57 percent of workers with family coverage will face higher premiums on the exchange compared to what they would pay for employer-sponsored coverage. The analysis showed that a single wage earner must make less than $20,000 to see his or her current premiums drop or stay the same under Obamacare, For a family of four, income would have to be less than or equal to $62,300 in order to see net premium savings (i.e., after subsidies are taken into account).

Employer Plans

Bureau of Labor Statistics. Employment Cost Index (ECI). ECI is a quarterly economic series detailing the changes in the employer costs of labor for businesses in the United States economy, inclusive of health benefits costs. The ECI for health benefits shows the 12‐month percent change in private employer health benefits costs per hour worked on a quarterly basis. For December, the annual change reported for 2014 was 2.4%. This compares to 3.0% for 2013, 2.1% for 2012, 3.5% for 2011, 5.0% for 2010 and 4.3% for 2009. For all civilian workers, health benefits were 8.3% of total compensation in March 2010 vs. 8.6% in March 2014, representing $2.48 and $2.75 per hour worked respectively.
KFF/HRET Annual Employer Health Benefits Survey. This survey showed that total premiums for single (family) coverage rose 2.4% (3.0%) between 2013 and 2014; this compares to 4.8% (3.8%) from 2012 to 2013 (computed from Exhibit 1.11).
Mercer’s National Survey of Employer-Sponsored Health Plans. Health benefits cost per employee grew, 6.1% from 2010-2011, 4.1% from 2011-2012, 2.1% from 2012-2013 and 3.9% from 2013-2014 (Fig. 1). This represents a compounded annual rate of change of 4.0% for the period 2010-2014. This compares to a compounded annual rate of 6.2% from 2007-2010 (6.3%=2007-08, 5.5%=2008-09, 6.9%=2009-10). Over 2,500 employers participated in 2014, reportedly far more than in any other health benefits survey.