Premium Increases under ACA, 2014 to 2015

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, 2014 to 2015 (last updated 11.19.15)

Overview

According to actuary Greg Fann, at Wakely Consulting Group (5.9.14), “While the conclusions have varied across studies, there is unanimous agreement that actuaries faced great uncertainty in the development of premiums for 2014, and that they will continue to face similar uncertainty for several years to come.”

ACA Exchange Plans

Summary Estimates

Figures are reported in reverse chronological order.

  • Heritage Foundation (March 2015). (March 20, 2015). 2015 ACA-Exchange-Premiums Update: Premiums Still Rising. “The appendix to the [Commonwealth Foundation] study revealed that ‘the general pattern of premium increases observed was a regression toward the mean, with the lowest cost plans in 2014 raising their premiums significantly, while higher price plans in 2014 reduced their premiums.’…In sum, exchange-plan pricing in 2015 generally shows reductions in premiums for the expensive plans that few people purchased accompanied by increases in premiums for the lower-cost plans favored by the majority of enrollees. Thus, the real-world effect for most exchange consumers is that the prices they pay further increased in 2015, though not as dramatically as they did in 2014.”
  • Commonwealth Fund (December 2014).  (December 22, 2014). “While average premiums nationwide did not change from 2014 to 2015, there were wide differences across states (Exhibit 1). There were double-digit increases in 10 states plus the District of Columbia (Alaska, the District of Columbia, Iowa, Louisiana, Minnesota, Nebraska, New Hampshire, North Carolina, Pennsylvania, South Carolina, and West Virginia). Average premiums declined in 14 states (Arizona, Colorado, Connecticut, Hawaii, Illinois, Maine, Michigan, Mississippi, New Mexico, Oklahoma, Oregon, South Dakota, Virginia, and Washington).” Interactive by-state map here.
  • Center for Health and Economy (July 2014). Health and Economy Baseline Estimates, July 14, 2014. “Average subsidized premiums are expected to fluctuate between 2014 and 2016, as a result of a growing risk pool and increased participation of the young and healthy. After 2017, average subsidized premiums are expected to increase by 6 to 10 percent annually.”
  • PricewaterhouseCoopers.
    • August 2014. Publicly released premium increases across about 27 states and the District of Columbia vary widely, ranging from a low of -23% in Arizona to a high of 36% in Nevada. The average rate increase across states reporting data is 7.5%, while the average monthly premium (without subsidies) is around $384 (includes interactive map of states for further state-by-state detail).
    • July 2014. Based on publicly reported premiums from 18 states in which insurers have submitted filings for next year (as of 6.30.14), PWC found that in 2015, rates will increase by an average of 7.22%, ranging from a low of -23% in Arizona to a high of 35% in Colorado and Indiana (in six states, reported increases were in double digits). The average monthly premium (without subsidies) is around $373.
  • Avalere (June 2014). This analysis (based on premiums filed as of June 11 in 9 states) finds that many consumers in exchange plans who receive federal assistance to reduce their monthly premiums will face substantial premium increases unless they switch insurance plans in 2015. In six of nine states analyzed by Avalere, the 2014 benchmark silver plan will lose benchmark status in 2015. Further, in seven of the nine states, the lowest cost silver plan will also change in 2015.
  • Morgan Stanley Survey (April 2014). Morgan Stanley’s healthcare analysts conduct a proprietary survey of 148 brokers. Forbes contributor Scott Gottlieb reports (4.8.14): The April survey shows the largest acceleration in small and individual group rates in any of the 12 prior quarterly periods when it has been conducted.
    • Small Group Market (11%). The average increases are in excess of 11% in the small group market. Among the ten states seeing the biggest increases are: Washington 588%, Pennsylvania 66%, California 37%, Indiana 34%, Kentucky 30%, Colorado 29%, Michigan 27%, Maryland 25%, Missouri 25%, and Nevada 23%.
    • Non-Group Market (12%). The average increases are in excess of 12% in the individual market. Among the ten states seeing some of the sharpest average increases are: Delaware at 100%, New Hampshire 90%, Indiana 54%, California 53%, Connecticut 45%, Michigan 36%, Florida 37%, Georgia 29%, Kentucky 29%, and Pennsylvania 28%.
    • ACA Principal Cause. The analysts conclude that the “increases are largely due to changes under the ACA.”

Individual State Estimates

Note that all Affordable Care Act Dashboard estimates reported below are based on proposed premium changes for 2015 filed with state insurance departments. Such rate changes are not final until approved by the states and HHS.

  • CA (7.31.14). Average price increase will be 4.2% consisting of 13% who will see increases of 8% or more, 36% who will have increases of 5-8%, 35% whose increases will be under 5% and 16% with no change (Mother Jones, 8.1.14). According to Wall Street Journal, “California is seen as a bellwether. According to federal statistics released May 1, the state had about 1.4 million of the 8 million total people who selected a marketplace plan during the open-enrollment period for 2014 coverage.”
  • CO (6.23.14). Range of 22% decrease to 35% increase (Affordable Care Act Dashboard, 7.17.14).
  • CT (6.2.14). Range of 8.9% decrease to 12.5% increase (Affordable Care Act Dashboard, 6.10.14).
  • DC (7.9.14). Range of 18% decrease to 19.5% increase  (Affordable Care Act Dashboard, 7.17.14).
  • IN (5.19.14). Range of 9% decrease to 46% increase (Affordable Care Act Dashboard, 6.10.14).
  • KY (5.22.14). Range of 3% decrease to 16.7% increase (Affordable Care Act Dashboard, 6.10.14).
  • MA. Bracing for Medical Inflation. “This week three big insurance companies in Massachusetts announced they lost money in the first quarter, thanks to ObamaCare’s new taxes and fees. Blue Cross Blue Shield of Massachusetts reported a $59.3 million loss after it had to pay $73 million toward financing ObamaCare. Pilgrim Health paid $22.9 million in ObamaCare taxes, leading to a loss of $17.3 million. And the Tufts Health Plan would have broken even if not for ObamaCare. The main cost imposed on these insurers is ObamaCare’s ‘health insurance tax,’ which is based on a company’s market share. This year, the tax will cost the industry a total of $8 billion, and the burden will go up from there…’This is going to be passed on in higher premiums.’” (Investor’s Business Daily, 5.16.14)
  • MD (6.30.14). Range of 12.1% decrease to 30.2% increase  (Affordable Care Act Dashboard, 7.17.14).
  • MI (6.11.14). Range of 21.6% decrease to 17.6% increase (Affordable Care Act Dashboard, 7.17.14).
  • NY (7.2.14). Average increase of 13% (Affordable Care Act Dashboard, 7.17.14).
  • OH (5.19.14). Average increase of 13% (Affordable Care Act Dashboard, 6.10.14).
  • OR (6.10.14). Range of 21% decrease to 28% increase (Affordable Care Act Dashboard, 7.17.14).
  • TN (7.8.14). Range of 7.5% to 19% increase (Affordable Care Act Dashboard, 7.17.14).
  • VA.
    • VA (5.12.14). Range of 3.3% to 14.9% increase  (Affordable Care Act Dashboard, 6.10.14).
    • First Obamacare Premium Notices for 2015 Show Double-Digit Increases. The enrollment-weighted average increase is 11.7%…In Virginia, the highest premium hike is courtesy of Humana, which is proposing to raise its premiums by 22.4% next year. Wellpoint is seeking an increase of 8.5%. Aetna, which also participates in the state’s exchange, hasn’t posted its rates yet. Only two new plans will be entering the Virginia market next year.” Gottlieb, Scott. (American Enterprise Institute, 5.15.14)
  • VT (6.3.14). Range of 9.8% to 15.4% increase  (Affordable Care Act Dashboard, 6.10.14).
  • WA.

Insurance Company Estimates

Listed in order of company size at Fortune 500 2014: UnitedHealthGroup (#14); WellPoint (#38); Aetna (#57); Humana (#73); Cigna (#97). The Blue Cross and Blue Shield Association consists of 37 independent and locally-owned companies that collectively cover 100 million Americans. No figures are available for BCBSA overall, so estimates for one of these companies, HCSC, are reported after Cigna.

  • WellPoint. According to Wall Street Journal (2.7.14), “WellPoint Inc. is projecting profits of 3% to 5% on its exchange business, and it said the demographics of its enrollees largely match what it projected.”
  • Aetna. According to Wall Street Journal (2.7.14), “Aetna has said it is likely to seek rate increases of more than 10% for individual marketplace plans in 2015, according to a note from Citigroup analyst Carl McDonald. An Aetna spokeswoman said that with health-law fees, generally increasing health-care cost trends and other factors, “that level of increase would not be out of the realm of possibility,” but it was too soon to say what it would request.”
  • Cigna. According to Wall Street Journal (2.7.14), “Cigna is now projecting around 50,000 to 60,000 exchange enrollees for 2014, less than half of its original expectation, he said. Cigna is selling marketplace plans in five states, and it is a small part of the company’s overall business. Analysts said the projections raise concerns that insurers may seek large premium hikes.” However, company CEO, David M. Cordani “said it was too early to speak about rates for next year.”
  • Health Care Service Corp. According to Wall Street Journal (2.7.14), “nonprofit Health Care Service Corp., parent of Blue Cross and Blue Shield plans in Texas, Illinois and other markets, said its margins on 2014 individual plans, including those sold through government marketplaces, are likely going to be smaller than expected, but it was too soon to tell if the business would lose money.” The company’s chief actuary, Janice Knight, “said it doesn’t expect its 2014 experience to lead to higher-than-expected rates for 2015.”

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. The ECI for health benefits shows the 12‐month percent change in private employer health benefits costs per hour worked on a quarterly basis. The compound annual change for the first three quarters reported for 2015 was 3.0%. This compares to 2.6% for 2014. The report includes a chart comparing the percent change in ECI for health benefits with the ECI for total benefits: in 2015, the percent change for health benefits rose steadily, whereas it declined for total benefits.
  • KFF/HRET Annual Employer Health Benefits Survey. This survey showed that total premiums for single (family) coverage rose 3.8% (4.2%) between 2014 and 2015; this compares to 2.4% (3.0%) from 2013 to 2014 (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, 3.9% from 2013-2014 and 4.0% from 2014-2015 (Fig. 1).  This represents a compounded annual rate of change of 4.0% for the period 2010-2015. 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.

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