The Kaiser Family Foundation (KFF) has released a report analyzing the applications submitted by insurers for 2016 and findings show that the average rates are up only 4.4% over 2015.
KFF’s analysis is based on 11 states where they were able to find comprehensive filings about the rates for the lowest-cost plans. Other states have released summary information, but not sufficient detail to view a rate comparison. In many cases, premiums are still under review by insurance departments and may change prior to the start of open enrollment.
The complete 2016 proposed rate increases won’t be published until just before open enrollment begins on November 1, 2015, but on average, costs for the cheapest and second-cheapest silver plans are expected to increase in 2016 by an average of only 4.4 percent, compared to 2015.
Generally, it was found that the 2015 plans with the lowest premiums were no longer one of 2016’s lowest-cost silver plans. This shows why enrollees must actively research their policy options during open enrollment periods. Even the smallest premium cost changes can impact those enrollees receiving subsidies for their Marketplace plans. These tax credits are tied in to the premiums for the second-lowest-costing silver plan in a given year.
And, even if the published rates do increase, that doesn’t necessarily mean you’ll pay higher healthcare costs. By law, insurers have to publish any proposed costs over 10 percent. So, those rates will be the only ones you see. You may even be motivated to switch insurance carriers. But that’s actually a benefit, as switching carriers stimulates competition within the exchange; this is a key element in how the premium tax credits work.
Factors impacting premium changes
These 2016 premiums are not definite, and may increase or decrease, depending on their individual states’ rate review processes. Numerous factors that may influence premium changes include:
- Enrollment growth steadiness
- Competitive forces — average growth in the number of insurers is considered a positive sign
- Insurers’ previous accuracy for predicting 2014 and 2015 rates
- Increases in enrollment among the uninsured (this would bring healthier enrollees into the risk pool)
- The movement of healthier enrollees from “grandmothered” plans into ACA-compliant plans (on- or off- of the exchange). “Grandmothered” (or transitional) plans aren’t grandfathered, but were effective prior to 2014.
- Healthcare cost increases — 2016 premiums should increase due to expected costs increases, such as those for prescription drugs
The proposed 2016 rates represent the first year where insurers can set premiums based on Marketplace enrollees’ actual claims experience. But insurers only have annual data from 2014, which was incomplete, as most enrollees didn’t purchase coverage until mid-year, while deductibles are annual. It may also not be representative, as there was likely a pent-up demand for healthcare services among the previously uninsured.
The ACA’s “3 R’s” program — risk adjustment, reinsurance and risk corridors – may contribute, as well. The “3 R’s” are designed to redistribute risk among insurance carriers. This prevents plans that enroll disproportionately sicker or higher-cost enrollees from having to significantly raise premiums. But the reinsurance and risk corridor programs were intended to be transitional. Also, the reinsurance funding is phasing out, from a maximum of $10 billion in 2014 to $4 billion in 2016.
And while premium caps are increasing for 2016, the poverty guidelines are also changing. This will cause future rates to cancel each other out, with monthly payments for the lowest-cost silver plans remaining very similar from 2015 to 2016. For the cities examined, the average year-to-year premium for the lowest-cost-silver plan should increase by only 4.4 percent.