When the Affordable Care Act (ACA) entered its fifth year of operation in 2018, a staggering 32% jump in premiums triggered speculation of a widespread market disruption. Three years on, all the projections seem to have fallen flat as the Obamacare marketplace has remained calm with a steady decline in premiums.
The fall in premiums surely has not been as steep as the rise recorded in 2017 and 2018. But it clearly indicates that the path for a steady marketplace has been paved with plenty of room for expansion considering an increasing role of health insurers.
The national average benchmark premium has fallen for three years in a row since 2019. A recent report by Washington DC-based think tank Urban Institute shows that premiums fell by an average of 1.2% from 2018 to 2019, 3.2% from 2019 to 2020, and 1.7% from 2020 to 2021.
The figures may not seem too impressive in the first look, but a state-wise analysis presents the true picture as the fall has been in double digits in 11 to 15 states during the last three years. The decline trend assumes greater importance since it’s in contrast with premium increases in the employer-sponsored insurance market over the same period — 4% hike in both 2019 and 2020.
State Policy Matters
A key finding of the report was how state policy decisions play a major role in reducing premium growth. As of 2021, 12 states have implemented reinsurance programs explicitly designed to lower premiums in the first year or two of implementation and to contain growth over time. Five states implemented reinsurance programs before 2019 and as many did it in 2019 and 2020, and three in 2021. It said this “market expansion contributed to premium declines or smaller premium increases in 2021 than would have occurred otherwise”.
Competition Fans Participation
Increasing competition among payers has also been credited with dampening the premium growth. The report found that in 2020 and 2021, health insurance companies increased their participation in Marketplaces (averages of 3.9 and 4.3 insurers participating per rating region in 2020 and 2021), expanding to new states and to new rating areas within states. The participation has been across all categories, from national and regional insurers to Medicaid and startups.
Between 2017 and 2021, Blue Cross Blue Shield plans emerged as the most frequent participant in the Marketplaces in 52 regions in 20 states that were studied.
While the participation of BCBS plans jumped from 35 regions in 2017 to 40 in 2021, that of Anthem declined after 2017 before increasing gradually after 2018. In 2021, it has presence in 13 of the 52 regions. Two more leading payers, Cigna and UnitedHealthcare, exited multiple markets around 2017 before expanding their participation by 2021.
Centene, a major participant in Medicaid managed care, greatly expanded participation, having a presence in 34 regions by 2021. “Centene not only entered new markets but also purchased existing plans, such as Fidelis in New York and Health Net in Arizona and California,” the report states. Molina and CareSource reported a limited growth as they had expanded their participation before the study window. Kaiser participated in 13 markets throughout the period.
Among new insurers, Bright and Oscar left an impressive footprint by participating in 9 and 21 regions, respectively, in 2021.
A couple of important names missing from the list are Humana and Aetna. Both the insurers left all 52 markets in 2017 and are yet to return.
Role of Rescue Plan Act
The declining premiums have set the tone for more participation of insurers in the near future, more so after President Biden signed the sweeping American Rescue Plan Act into law in March this year. The law facilitates historic expansions of the Affordable Care Act that will significantly improve premium affordability and access to marketplace coverage.
Among its many provisions, the new law aims to lower or eliminate health insurance premiums for millions of lower- and middle-income families enrolled in health insurance marketplaces. A family of four making $90,000 could see their monthly premium come down by $200 per month. This will help well over a million uninsured Americans gain coverage. The plan also subsidizes premiums for continuation health coverage (COBRA).
Conclusion: Going by the trend, we can safely conclude that the ACA has been successful to a large extent in meeting one of its primary goals of safeguarding subsidized enrollees from increasing premiums. After facing some volatility in its initial years, it’s now a steady marketplace looking to expand further. A projection by the Congressional Budget Office says the marketplace enrollment will increase by 1.7 million in 2022. Both insurer participation and lower premiums are poised to get a shot in the arm in the coming years with broader reform proposals by the Biden administration.