A new analysis from Avalere finds wide geographic variation in 2017 premiums for individual insurance plans available on market exchanges. The analysis is based on proposed rate filings in nine states where complete data are available. Specifically, average proposed rate increases across all silver plans in the nine states examined range from 19 percent in Virginia to 5 percent in Washington. In 2016, 68 percent of exchange enrollees selected silver plans. Avalere experts suggest that lower-than-expected exchange enrollment, higher healthcare costs among enrollees, and the end of the reinsurance and risk corridor programs are all likely contributors to premium growth in 2017.
According to the data, in most states, proposed premiums for lower cost silver plans increased less dramatically or even went down for 2017, compared to higher-cost plans on the same tier. Lower-cost silver plans tend to be most popular with consumers, making this portion of the market more competitive as plans seek to attract enrollees. Of the states analyzed, only the District of Columbia, Oregon and Maine saw increases of greater than 15 percent for the lowest or second lowest cost silver plans.
“As in years past, proposed premium increases vary dramatically by state and by region within states,” said Elizabeth Carpenter, senior vice president at Avalere. “In most states, premiums for the lowest cost plans appear to be rising less than for the silver metal level as a whole.”
While rates can come down dramatically between proposed and final filings, Avalere analysts say premium increases in 2017 appear to be higher than in 2016. An Avalere analysis conducted at a similar point in the rate filing process in 2016 found much smaller proposed premium increases than the figures included above.
“Despite premiums rising overall, many consumers will be insulated from higher rates due to premium subsidies that limit monthly costs for many exchange enrollees” said Caroline Pearson, senior vice president at Avalere. “Consumers may have to switch plans in order to avoid dramatic rate increases, but competitive options should still be available in most regions in the U.S.”
This initial rate preview provides preliminary information about how the exchange markets will change in 2017, and more information will emerge in the coming months as other states release data. Avalere experts expect rate data for additional states will be available in the coming months. As consumers and other industry stakeholders review 2017 rate filings, Avalere offers the following considerations:
- Final rates will vary from proposed premiums. The analysis released today reflects insurers’ initial proposed rates. Departments of Insurance and insurers will continue to negotiate and revise rates between now and final plan certification in the fall. Final rates are often lower than proposed.
- Many consumers are protected from premium increases. Premium subsidies cap eligible consumers’ premiums at a set percentage of their income based on the second lowest premium plan in their area. Consumers earning less than 400 percent of poverty ($47,520 for an individual in 2016) are eligible for subsidies. As a result, these exchange consumers may avoid significant premium increases, particularly if they are willing to switch plans. Eighty-three percent of exchange consumers in 2016 receive premium subsidies.
- National premium increases do not represent the potential impact on real consumers. Insurance markets are inherently local. 2017 premiums are likely to vary significantly based on geography. As a result, national premium figures are unlikely to represent the experience of actual consumers. Specifically, premium patterns tend to vary widely between urban and rural areas, which means that average statewide rate changes, which are not enrollment weighted, overstate premium increases for the bulk of enrollees.
- Most consumers enroll in the lowest cost plans. Just as national premium data may be misleading, average premium changes by metal level may not capture actual patient experience. Consumers tend to gravitate toward the lowest premium plans. As a result, premium averages for all plans within a metal level may not reflect what most patients experience.
- 2017 marks the end of the risk corridor and reinsurance programs. The two temporary premium stabilization programs created by the Affordable Care Act end in 2016. While payments from the risk corridors program have been significantly lower than expected (only 12.6% of requests), the loss of these programs could lead some insurance companies to raise premiums of exchange plans. Meanwhile, insurance companies will have a one-year moratorium on the health insurer fee in 2017 as a result of legislation approved by Congress at the end of 2015.
- Exchange enrollment is below expectations. Original Congressional Budget Office analyses predicted 21 million individuals would be enrolled in exchanges in 2016. Avalere projects just over 10 million people will have exchange coverage by year-end. As a result, the risk pool is smaller and sicker than many carriers initially assumed. Premium increases may be necessary to account for the population enrolled and make the market sustainable over time.
Note: A previous version of this analysis included errors in some state’s 2017 rates. These corrections resulted in updates to the 9-state average premium increases for average silver, lowest cost silver, and second lowest cost silver.
Analysis includes final 2016 premiums and proposed 2017 premiums in the District of Columbia, Indiana, Maryland, Maine, New York, Oregon, Vermont, Virginia, and Washington. States were selected based on rate filings available and accessible, through Department of Insurance websites or the System for Electronic Rate and Form Filing (SERFF), as of May 23, 2016. For the purposes of this analysis, average premiums are not weighted by exchange enrollment in a given rating region or state. 2016 premium data for federally-facilitated exchange (FFE) states based on the 2016 HHS Individual Market Landscape file, updated as of November 2015. 2016 premium data for DC, MD, NY, OR, VT and VA were collected from each states’ respective exchange website by Avalere Health, updated as of November 2015. 2017 proposed premiums were collected via rate filings that were publicly available as of May 23, 2016. All premiums are for an individual, 50-year-old non-smoker. Proposed 2017 rate filings are currently under review; final approved rates may be different.