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Health Insurance Premiums With And Without The ACA

Reports explain why ACA premiums rose and why they may go higher without key ACA provisions.

These are challenging times for health insurance actuaries, underwriters, statisticians and risk managers. With the 2017 presidential inauguration just two days away—and with it, the prospect of a full or partial repeal of the Patient Protection and Affordable Care Act—health benefit number-crunchers are hurrying to get out their final assessments of life with and without the ACA.
 
This week has seen two more major reports that explain why premiums for individual health insurance plans sold over state and federal health insurance exchanges rose so high this year and why premiums for individual health plans without key ACA coverage provisions will go higher if the law is repealed.
 
The first, a 33-page report from the Urban Institute funded by the Robert Wood Johnson Foundation, blamed underpricing by issuers over the past two years for the double-digit premium increases for plans being sold over the exchanges this year.
 
In October, HHS’ Office of the Assistant Secretary for Planning and Evaluation said the average monthly premium for a benchmark health plan sold on the exchanges this year will rise more than 20 percent to $296 from $243. A benchmark plan is the second-lowest cost silver-level plan available to a 27-year-old individual.
 
The increase this year “largely reflects the efforts of insurers to price in line with the costs of enrollees,” the Urban Institute report said. “This has contributed to large premium increases in many markets but is likely to be a short-term phenomenon in most markets.”
 
In Minnesota, the average monthly premium for a benchmark health plan jumped 59 percent to $340 in 2017 from $214 this year, according to the October report from HHS. That increase didn’t stop a record 103,500 people in the state from signing up for a health plan through MNSure, the state’s insurance exchange, so far this year, as Twin Cities Business previously reported.
 
The second new report, a four-page brief from the Congressional Budget Office, estimated the impact on premiums for individual health plans if Congress eliminates the individual and employer insurance mandates of the ACA but left the exchanges in operation.
 
The CBO said monthly premiums for individual health plans sold over exchanges or directly to individuals by insurers would increase by 20 percent to 25 percent in the first year without individual and employer insurance mandates. Monthly premiums would increase by 50 percent in the first year after the Medicaid expansion provisions were repealed and federal subsidies to offset the cost of health coverage were eliminated, the CBO said. The premium increases would be driven by younger, healthier people leaving the insurance risk pool, increasing the pool’s percentage of older, less healthy people, according to the agency.
 
“Average health care costs among the people retaining coverage would be higher, and insurers would have to raise premiums in the nongroup market to cover those higher costs,” the CBO said. “Lower participation by insurers in the nongroup market would place further upward pressure on premiums because the market would be less competitive.”
 
By 2026, an estimated 75 percent of the U.S. population would not have access to individual health insurance policies, according to the CBO, and those who do would be facing monthly premiums twice as high as they are today.
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