Projected Long-term Premium Increases Under ACA

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  >> Projected Long-Term Premium Increases Under ACA (last updated 3.3.19)

Overview

This section focuses on multi-year projections of the impact of ACA on premiums, including estimates made a) before the law was enacted; b) immediately after enactment; and c) years following enactment.

• National estimates generally to differentiate between the markets for non-group, small group and large group coverage since the expected premium impact was anticipated to be much larger in the former than the latter. The ACA Exchanges that began in 2014 displaced some, but not all of the non-group and small group markets.  On the Exchanges, it is also important to distinguish between the gross impact on premiums and the net impact after accounting for premium subsidies available on a sliding scale to those with incomes up to 400% of poverty.
• All-state estimates entail projections for the full set of U.S. states and Washington, D.C.
• Individual state estimates focus on projections for specified states.

ACA Exchange Plans

National Estimates

The following studies projected the expected increase in premiums in the individual and small group markets based on the anticipated characteristics of individuals expected to enroll in the Exchanges and mandatory changes in eligibility/coverage/pricing in those markets.  These are based on studies released before 2014 premiums on the ACA Exchanges were announced; thus, they are not “measured” increases. See Short-term Premium Increases under ACA for information on measured changes from 2010 to 2014, 2014 to 2015, 2015 to 2016, and 2017 and beyond.
The following studies are listed in reverse chronological order.

• Center for Health and Economy (2014). Health and Economy Baseline Estimates (7.14.14). “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.”
• Parente, Stephen and Michael Ramlet (2014). National and State Impact Analyses of the ACA on Insurance Prices and Enrollment Beyond 2014 (5.20.14).  Using the 2014 enrollment report data and a microsimulation model funded in part by the U.S. Department of Health and Human Services, the authors estimate the national and state impact of the ACA on insurance prices and enrollment from 2015-2024.  Premium estimates are provided for 10 states and nation for Platinum, Gold, Silver, Bronze-narrow networks, Bronze-catastrophic plans. Annual projections are made for each metal tier starting in 2015 through 2024.
  • As one example, the price of Bronze family coverage with narrow networks (the least expensive plan) will rise from $8,640 in 2015 to $12,861 by 2017.
  • Premiums are expected to rise particularly fast between 2016 and 2017 due to the phase-out of various insurer subsidies (reinsurance and risk corridor programs) and phase-in of various insurance taxes.
  • From 2016 to 2017, the cost of single coverage is projected to increase by 96% for Bronze-narrow plans and 111% for Bronze-catastrophic coverage; the companion increases for family coverage would be 46% and 52% respectively.
• Congressional Budget Office. Premium Increases and the Health-Care Law’s Subsidies. (Wall Street Journal Washington Wire, 5.5.14) “‘[M]ost people buying in the exchanges won’t pay much even if their premium cost goes up significantly’ in 2015. But in a few years, many exchange purchasers could face the full brunt of premium increases. An obscure component of the Affordable Care Act, the secondary indexing provision, was added during the budget reconciliation process to help reduce the bill’s costs after the first 10 years. Wonky details can be found in a May 2011 Congressional Budget Office (CBO) analysis, but two points stand out: One, if spending on exchange subsidies exceeds a defined percentage of gross domestic product, beginning in 2019 the subsidies will grow much more slowly in future years. Two, since the 2012 Supreme Court decision made Medicaid expansion optional for states, the CBO projects more individuals will qualify for exchange subsidies—making it highly likely that overall spending on subsidies will exceed the GDP cap established in the health-care law, and triggering the secondary indexing starting in 2019… (and resulting in) increasingly unaffordable health insurance.”
• Society of Actuaries (SOA: 2013). Cost of the Newly Insured Under the Affordable Care Act (March 2013). Research sponsored by the Society of Actuaries (SOA) predicts ACA-driven changes in individual market composition of the individual health care market could drive up underlying claims costs by an average of 32 percent nationally by 2017. At the time of this study, actual premiums in the Exchanges had not yet been announced.
• Congressional Budget Office (2012). Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision (July 2012).
• Oliver Wyman (2009). Impact of the Patient Protection and Affordable Care Act on Costs in the Individual and Small Employer Health Insurance Markets. December 2009. This study examined the national impact on premium rates of adjusted community rating, guaranteed issue and renewal using a database of actual claims covering over 6 million people. The analysis found that small group premium rates will increase by 20% while the national average increase in premiums in the non-group market would be 54%.
• Congressional Budget Office (2009). An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act. Letter to the Honorable Evan Bayh (November 30, 2009). This analysis includes the following projections:
  • Non-group Market. On average, Exchange premiums will be 10–13% higher with reform than in the non-group market absent reform. This is the net result of combining 3 separate effects.
    • Premiums would drop 7–10% due to an improved health mix in the non-group market (due to the individual mandate);
    • Premiums would drop an additional 7–10% due to lower prices arising from enhanced competition and other factors in the non-group market;
    • Premiums would rise by 27–30% due to individuals buying more  generous policies in the Exchanges compared to the current non-group market (but the analysis does not indicate how much is because individuals voluntarily purchase more generous policies because they are subsidized and how much is because individuals were forced by stricter standards to purchase more expensive coverage.
  • Small Group Market. The projected change in premiums ranged from -2% to +1%.
  • Large Group Market. The projected change in premiums ranged from -3% to 0%.
• PriceWaterhouseCoopers (October 2009). Potential Impact of Health Reform on the Cost of Private Health Insurance Coverage. “There are four provisions included in the Senate Finance Committee proposal that could increase private health insurance premiums above the levels projected under current law: Insurance market reforms coupled with a weak coverage requirement; A new tax on high-cost health care plans; cost-shifting as a result of cuts to Medicare; and new taxes on several health care sectors. The overall impact of these provisions will be to increase the cost of private insurance coverage for individuals, families, and businesses above what these costs would be in the absence of reform. On average, the cost of private health insurance coverage will increase:
  • 26 percent between 2009 and 2013 under the current system and by 40 percent during this same period if these four provisions are implemented.
  • 50 percent between 2009 and 2016 under the current system and by 73 percent during this same period if these four provisions are implemented.
  • 79 percent between 2009 and 2019 under the current system and by 111 percent during this same period if these four provisions are implemented.”

All-State Estimates

• Society of Actuaries (SOA: 2013). Cost of the Newly Insured Under the Affordable Care Act (March 2013). Research sponsored by the Society of Actuaries (SOA) predicts ACA-driven changes in individual market composition of the individual health care market could drive up underlying claims costs by an average of 32 percent nationally by 2017. The research also predicts high variability among states, with as many as 43 states experiencing a double-digit claims cost increase; in some states (OH, WI) costs will rise as much as 80 percent. SOA also has released an Excel model used to calculate these results. For every state, the following tablesare reported for a baseline scenario assuming all states expand Medicaid; a no Medicaid expansion scenario in which no states expand Medicaid and a scenario without any Exchange subsidies:
  • Figure 1- Changes in Sources of Coverage under the ACA in 2014. For 11 different groups at baseline [Employer 2-50, Employer 51-100, Employer 101+, High Risk Pool, Other Non-Group, Retiree, TRICARE, Medicare, Dual Eligible, Medicaid/CHIP, Uninsured], this table shows transitions to 7 types of coverage in 2014 [Employer Exchange, Individual Exchange, Private Employer, Private Non-Group, Medicare/TRICARE, Medicaid/CHIP, Uninsured]
  • Figure 1A- Changes in Morbidity under the ACA in Alabama in 2014.  For 11 different groups at baseline, this table provides the pre-ACA baseline per member per month (PMPM) cost of coverage [Costs include total expected health care spending PMPM in 2014 but should not be confused with premium, since important items such as administrative costs, taxes, and premium subsidies are not included (p. 16). It also provides the PMPM costs for each of the 7 types of coverage in 2014 for each transitioning group (e.g., the expected PMPM costs for individuals who acquire individual exchange coverage will be much higher for those transitioning from high risk pools than their counterparts who previously already had non-group coverage).
  • Figure 2- Changes in Sources of Coverage under the ACA for Currently Uninsured in 2014. This is identical to Figure 1 except that it focuses exclusively on those who were uninsured at baseline, broken down by Age [Under 19, 19-24, 25-34, 35-44, 45-54, 55 & over]; Poverty Level [Below 138% FPL, 138%-199% FPL, 200%-299% FPL, 300%-399% FPL, 400% FPL and above]; and Self Reported Health Status [Excellent, Good, Fair, Poor].
  • Figure 3- Change in Cost for Newly Insured under the ACA in 2014. For those projected to attain coverage, this table shows the Number Newly Insured Under ACA, Average Monthly Cost Pre-ACA, Average Monthly Cost Post-ACA, and Percent Change in Average Costs for each sub-category of age, poverty status and health status.
  • Figure 4- Change in Spending for the Uninsured as a Percent of Total Spending (millions) in 2014.  For 7 categories of services (and total) [Hospital Inpatient, Physician, Dental, Other Professional, Prescription Drugs, Medical Equipment, Hospital Outpatient] this table provides Spending Under Current Law by Insured Population (millions), Spending Under Current Law by Uninsured Population (millions), Increase in Spending Under ACA by Newly Insured (millions), and Percent Change in System-Wide Spending. The total population in each major group (insured, uninsured, newly insured) is reported, as is average spending per group.
  • Figure 5- Change in Average Costs in the Non-Group Market under ACA in 2014. For 4 broad categories of individuals ¹ and Total Non-Group under ACA, this table reports Number of Members, Average Cost Per Month, Average Age, and Percent with Chronic Condition.
  • Figure 6- Distribution of Non-Group Coverage Pre- and Post-ACA in 2014. This table compares Non-Group Under Current law to Non-Group Under ACA in terms of Number, Percent Distribution, and Average Monthly Cost (change in Average Monthly Cost also is reported). Figures are reported by age, poverty status and health status.
  • Figure 6A- Distribution of Non-Group Coverage (Exluding High-Risk) Pre- and Post-ACA in 2014. This is equivalent to Figure 6 except that High-Risk individuals are excluded.
  • Figure 7- Distribution of Uninsured Pre- and Post-ACA in 2014. This is identical to Figure 6 except that it compares the Uninsured Under Current Law to Remain Uninsured After ACA.
  • Figure 8- Change in Medicaid Enrollment and Costs under the ACA in 2014. This table reports the number and costs PMPM for 5 broad categories of individuals and various sub-groups: 1. Current Program; 2. Leave Medicaid for other Coverage (subgroups=Children, Parents/Other); 3. Currently Eligible (subgroups=Children, Parents/Other; 4. Newly Eligible (subgroups=Parents/Other,  Non-Custodial Adults); 4. All Newly Eligible and 5. Total Net Change.
  • Figure 9- Distribution of Medicaid Enrollees Pre- and Post-ACA in 2014. This is identical to Figure 6 except that it focuses on Medicaid enrollees.

To provide a range of results, the percentage of uninsured are simulated under two models: a price “elasticity” model and a “utility” function model. The elasticity model simulates the decision to take coverage based upon the change in thenet cost of coverage to the individual under reform, a decision which varies by demographic characteristics of the individual. The utility function models an amount that someone is willing to pay to be protected against the risk of going without insurance; they choose coverage if the cost is less than that figure. The core results are based on the elasticity model, but 3 sets of the 11 tables listed above are reported for various utility models: 1. Standard utility model; 2. Utility model assuming that people are 1/3 less risk averse than assumed in the standard model; and 3. Utility model assuming that people are 2/3 less risk averse than assumed in the standard model.

• PWC, Health Research Institute (2013). ACA State Exchange Premiums. HRI examined unsubsidized monthly exchange premiums for a 27-year-old and a 50-year-old in metropolitan areas across the US (the state premiums were based on the most populous county in each state). The second-lowest-cost silver plans – which are used to determine an individual’s tax credit – were mapped from state-based exchanges and HealthCare.gov to capture a full 50-state snapshot. For each state, the range of premiums for both Bronze and Silver coverage is provided for both age groups, along with the number of insurers offering plans and the number of plans offered in that metropolitan area. The study did not estimate the increase in premiums relative to the pre-ACA market. Key findings:
  • In just over half of states, a 27-year-old will pay between $195 and $250 a month for the second-lowest cost silver plan. In five states, the person will pay more than $320 a month. The most expensive silver premiums for a 27-year-old are clustered along the eastern seaboard, particularly in the Northeast. At the higher end is Vermont, at $413 a month.
  • The 50-year-old will pay more for coverage, typically about 70% more than the 27-year-old. In more than half of states, the second-lowest cost silver plan premium is between $340 and $415 a month. In four states, premiums are more than $490 a month. Alaska tops the list at $605 a month.

Individual State Estimates

• • Parente, Stephen and Michael Ramlet. National and State Impact Analyses of the ACA on Insurance Prices and Enrollment Beyond 2014 (5.20.14). Authors estimate the national and impact in 10 states of the ACA on insurance prices and enrollment from 2015-2024: AR, FL, IA, LA, MI, NC, NH, OH, OR, TX. For each state, annual projections are made for each metal tier starting in 2015 through 2024.
  • Wisconsin (2011). Jennifer Smagula and Jonathan Gruber. The Impact of the ACA on Wisconsin’s Health Insurance Market, July 2011.  This study by Gorman Actuarial and Dr. Jonathan Gruber predicted that the small group market is expected to see relatively small premium rate increase – 1.3%. Fifty-three percent of small group plans, or 63% of the small group employees, will experience a premium rate increase of 15 percent, while 47% of small groups or 37% of employees will experience a 16% decrease. Most of the impact is due to elimination of health status as a rating factor.
  • Maine (2011). Jennifer Smagula and Jonathan Gruber. The Impact of the ACA on Maine’s Health Insurance Markets, May 2011. A study by Gorman Actuarial and Dr. Jonathan Gruber estimated that a large majority (89%) of small employers are expected to experience a premium rate increase of 12% on average, while the remaining 11% will experience an average premium rate decline of 17%. The impact is largely due to the elimination of group size as a rating factor
  • Ohio (2011).  Jeremy Palmer, Jill Herbold and Paul Houchens. Assist with the First Year of Planning for Design and Implementation of a Federally Mandated American Health Benefit Exchange. Milliman: August 31, 2011. This study estimates that before taking into account tax subsidies, small group premium rates will increase by 5 to 15%.

Employer Plans

• Mercer’s National Survey of Employer-Sponsored Health Plans (2015). Employers report that health benefits cost per employee is expected to rise 4.2% in 2016 after they make planned changes such as raising deductibles or switching carriers. This is consistent with actual cost growth in 2014 (3.9%) and the expected cost growth for 2015. These results are based on responses from more than 1,200 employers who submitted the survey by September 1, 2015.

Components of Projected Premium Increases