ACA Premiums Drop in Many States

Premiums for the benchmark silver health insurance plans under the Affordable Care Act will go down 1 percent to 2 percent, on average, in 2019.

This sounds like good news to people scurrying to enroll by the Dec. 15 deadline. But a more accurate characterization is that this slight decline is a break from what had generally been a relentless pace of premium hikes in 2016 through 2018.

Cynthia Cox, director of health reform and private insurance for the Henry J. Kaiser Family Foundation, said insurance companies in many states had previously “raised premiums more than they had to” amid the uncertainty in the program’s early years. These hikes boosted their profits, but they’ve “put the brakes on premium increases,” which they are required to justify to state regulators.

On close inspection, however, the picture is far more complex. Each state regulates its insurers, and individual state markets have gone in many different directions in the five years since the Affordable Care Act (ACA) went into effect, a Kaiser study shows. The unique developments in each state market reflect a combination of state and federal regulatory changes, insurers’ constant repricing to market conditions, and insurers’ entrances into, and exits from, the state insurance exchanges.

Here are a few examples, based on insurance companies’ rate filings with state regulators:

• Tennessee residents will see the biggest decline in 2019 premiums, a drop of 26 percent for the benchmark silver plan, which is the second lowest-cost silver plan. Tennessee insurers initially had set some of the lowest premiums in the country. In a 2018 adjustment, Cox said they overcorrected them to the point that the policies became “particularly overpriced.” Next year, insurers will drop the premiums as they continue their efforts to find the proper pricing for the state’s insurance market.   Somewhat similar stories have played out in New Mexico, New Hampshire, and Pennsylvania.

• North Dakota premiums are going in the opposite situation. Two years ago, Cox said, insurers there were “losing money quickly,” so they raised their 2018 rates by 8 percent. This increase apparently wasn’t enough, and the benchmark silver premium will rise by another 21 percent next year.

• Alaska’s premiums got so high that the state stepped in. In 2017, the federal Centers for Medicare & Medicaid Services granted Alaska’s request for a waiver that allowed it to reinsure its health insurance companies to reduce their risk in hopes they would drop their prices. The reform worked. Between 2017 and 2019, Alaska’s benchmark premium has fallen 25 percent.

• New Jersey’s benchmark price will drop nearly 15 percent as a result of a new state law. Last summer, the state instituted a mandate requiring uninsured residents to purchase coverage to replace the federal mandate, which was eliminated. The state mandate, as expected, put downward pressure on premiums by expanding the pool of healthy people who buy insurance and mitigating the risk facing New Jersey health insurers.

• An unprecedented pricing quirk nationwide has surprised health experts. David Anderson at Duke University said some 2,000 counties will offer at least one gold plan with a lower premium than silver plans, even though gold plans have smaller deductibles than silver plans. In short, some people will pay less for higher-quality insurance. A change in federal regulations caused this discrepancy. In 2018, a subsidy ended for silver plans, which targeted lower-income people – this was on top of the main tax credit. Insurers made up the lost revenue by “artificially increasing” silver plan rates, Anderson said. Although silver rates have fallen slightly, Kaiser estimates they would’ve gone down about 10 percent if this second subsidy were still in place.

The next few years are sure to bring more changes. Health insurance enrollment is currently running below 2018 levels, which could require insurers to recalibrate – again.

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