What Explains the 21 Percent Increase in 2017 Marketplace Premiums, and Why Do Increases Vary Across the Country?

What Explains the 21 Percent Increase in 2017 Marketplace Premiums, and Why Do Increases Vary Across the Country? ACA Implementation—Monitoring and TrackingJohn Holahan, Erik Wengle, Linda J. Blumberg, and Patricia SolleveldJanuary 2017Support for this research was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation. ACA Implementation—Monitoring and Tracking2INTRODUCTIONReports of high premium increases in the Affordable Care Act’s (ACA) nongroup Marketplaces have received considerable attention in recent months.1,2 In October 2016, the Department of Health and Human Services released a report showing an average 25 percent increase in the premiums of second-lowest-cost silver plans in the federally facilitated Marketplaces; the average increase was 22 percent when data from five state-based Marketplaces (the only ones available at that time) were included.1 The report contributed to widespread concerns that many nongroup markets were in danger of collapsing and that ACA reforms were unsustainable. High premium increases have been cited as a strong rationale for ACA repeal.3In this report, we analyze data on premium increases from all rating regions in the 50 states and the District of Columbia. We show that the 2017 weighted average increase in the lowest-cost silver plan premium in each rating region was 21.2 percent (Table 1). The corresponding increase in the second-lowest-cost silver plan premium was also 21.3 percent (Table 2). These increases mask extraordinary variation across states: Between 2016 and 2017, the statewide average change in lowest-cost silver premiums was −6.4 percent in Rhode Island, −4.0 percent in Arkansas, −2.2 percent in Massachusetts, −1.0 percent in Washington, and −0.5 percent in Indiana. At the other extreme, increases were 50.5 percent in Kansas, 51.3 percent in Alabama and 125.0 percent in Arizona. State-by-state variation in second-lowest-cost plan premiums was similar.Between 2014 and 2017, the national average annual increase in lowest-cost silver plan premiums was 10.3 percent. This reflects an increase of 3.4 percent in 2015, 8.1 percent in 2016, and 21.2 percent in 2017 (2015 and 2016 increases not shown). Premium increases have been on the rise in general, but this has not been true everywhere. The average annual change between 2014 and 2017 was −5.7 percent in Indiana, −4.0 percent in Rhode Island, −2.7 percent in New Hampshire, −2.0 percent in Washington, and −0.6 percent in Massachusetts. On the other hand, average annual increases between 2014 and 2017 reached 31.9 percent in Tennessee, 33.4 percent in Alaska, 34.1 percent in Oklahoma, 34.5 percent in Minnesota, and 35.6 percent in Arizona.Nationally, 9.7 percent of Americans live in rating areas where the lowest-cost silver premium decreased in 2017, but large shares of people in some states live in rating areas with these decreases (Table 3). These include 100 percent of Rhode Island’s population, 62.4 percent of Massachusetts’ population, 62.5 percent of Indiana’s population, 64.0 percent of Ohio’s population, and 55.9 percent of Washington’s population. Over 28 percent of the U.S. population lives in rating areas where the lowest-cost silver premium increased by less than 10 percent in 2017. But at the other extreme, large shares of certain states’ populations live in rating regions that experienced increases of over 20 percent in their lowest-cost silver premiums. These include Pennsylvania, Illinois, Minnesota, Alabama, Arkansas, Oklahoma, Tennessee, and Arizona. About 40 percent of the U.S. population resides in these rating areas with the largest premium increases in their lowest-cost silver premiums.These variations suggest that Marketplaces have had very different experiences, with some markets working well and others experiencing catch-up from previous underpricing or struggling with insurer or provider concentration. Some of the 2017 premium increases could stem from the end of the ACA’s reinsurance program, but this shouldn’t have different effects in different states. The ACA’s incentives were geared With support from the Robert Wood Johnson Foundation (RWJF), the Urban Institute is undertaking a comprehensive monitoring and tracking project to examine the implementation and effects of the Patient Protection and Affordable Care Act of 2010 (ACA). The project began in May 2011 and will take place over several years. The Urban Institute will document changes to the implementation of national health reform to help states, researchers and policymakers learn from the process as it unfolds. Reports that have been prepared as part of this ongoing project can be found at www.rwjf.org and www.healthpolicycenter.org. ACA Implementation—Monitoring and Tracking3StateAverage premium, 2016Average premium, 2017Percentage change, 2016-2017Average annual change, 2014-2017National average$283$34221.2%10.3%NortheastRegional average$306$36218