In an HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) issue brief, the ASPE found that from 2015 to 2016, roughly 85 percent of the marketplace, or HealthCare.gov, consumers with premium tax credits saw an average monthly net premium increase of $4, or 4 percent. This was in stark contrast to double-digit premium hikes insurers initially proposed for premiums of Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) plans for plan year 2016 (see Signs point to premiums ticking up for 2016, June 17, 2015). Early estimates based on rate filings alone suggested higher premium increases than what Marketplace consumers actually paid In addition, 67 percent of marketplace consumers selected a new plan the following year (ASPE Issue Brief, April 12, 2016).
Health insurance rate information becomes available each spring as issuers file proposed rates with federal and state regulators. The proposed rates undergo review prior to finalization in the fall when the annual health insurance marketplace open enrollment period occurs. The issuer offered rates, however, are not predictors for what a typical consumer on the marketplace will pay the subsequent year. The ASPE cautioned that even after rate announcements begin for the 2017 benefit year, more information will be needed to pinpoint how issuers’ proposed rate changes will impact what consumers ultimately pay for coverage.
Tax credits impact. The vast majority of marketplace consumers (85 percent) receive premium tax credits, which are also not accounted for in the premium changes reported in insurers’ rate filings. For 2016, these tax credits, which average $290, reduced a typical consumer’s premium by 73 percent. As a result, the average net premium, after tax credits, in 2016 among those who qualified for tax credits was $106 per month, an increase of $4 a month from 2015 levels. This was sharply different from the double-digit premium hikes insurers initially proposed for plan year 2016 (see Plans propose dramatic ACA premiums increases, May 27, 2015; Health insurance rate increase requests for 2016 posted, June 3, 2015).
The ASPE noted that the minimal increase in premiums was not coincidental, as the premium tax credit is designed to ensure that affordable options are available to consumers. An eligible consumer’s tax credit amount is based on the premium of the second-lowest cost silver plan available to him or her, and the tax credit amount a consumer is eligible for adjusts if the benchmark plan’s premium changes.
Consumer shopping affects premiums. During the marketplaces’ annual open enrollment period, new consumers select plans and current consumers are given the choice of switching plans. In 2016, 6.4 million individuals (67 percent) of HealthCare.gov consumers selected a new plan for 2016. Breaking down the numbers, 4.0 million were new consumers and 2.4 million (43 percent) were returning consumers. Factoring in this account shopping, the ASPE found that the average premium among all marketplace consumers increased 8 percent from 2015 to 2016.
The consumers who switched plans for 2016, compared to what they would have paid to remain in their 2015 plan, saved an average of $42 per month in premium costs, equivalent to over $500 in annual savings. According to ASPE, shopping by new and returning consumers is important. As the marketplace is dynamic, the lowest priced plan one year is not the price leader the next year (see Exchange consumers may find silver lining to rate increase cloud, June 17, 2015).
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