A new report from the U.S. Department of Health and Human Services demonstrates that proposed premium changes from preliminary rate filings do not capture what Marketplace consumers actually pay. In Oregon, the average Marketplace premium among people with tax credits went from $136 last year to $142 per month in 2016, a modest 4% change despite reports based on preliminary rate filings predicting increases of “more than 25 percent.”
The report debunks the myth—based on last year’s rate filings—that consumers experienced double-digit percentage premium increases for coverage on the Health Insurance Marketplace in 2016. According to the report, averages based on proposed premium changes are not a reliable indicator of what typical consumers will actually pay because tax credits reduce the cost of coverage for the vast majority of people, shopping gives all consumers a chance to find the best deal, and public rate review can bring down proposed increases.
“Our analysis highlights how different the premiums that people actually pay are from the rates that are initially proposed by issuers,” Richard Frank, Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services said. “Consumers’ actual health insurance premiums depend on whether they shop around for the best deal and the availability of tax credits that lower premium costs, both of which changed the picture dramatically in 2016.”
So why did the announced changes differ so dramatically from consumers’ actual experience?
Tax credits go up along with premiums. 71% of Marketplace consumers in Oregon receive tax credits, which are designed to protect consumers from premium increases and help make coverage affordable. Tax credits increase if the cost of the second lowest-cost silver, or benchmark, plan goes up. So if all premiums in a market go up by similar amounts, 71% of Marketplace consumers in that market will not necessarily pay more because their tax credits will go up to compensate.Average rate increases reported with the preliminary rate filings do not account for tax credits.
The ACA Marketplaces help consumers shop around for the best deal. Prior to the ACA, it was nearly impossible for consumers to compare plans and shop around easily – and many Americans went uninsured because they couldn’t afford insurance or had pre-existing conditions. Those who did have insurance in the individual market were often trapped in the plan they had, since people with even small health problems could be denied coverage or charged an exorbitant price if they tried to switch plans or issuers. Today, Marketplace consumers in Oregon can purchase any available plan regardless of health conditions, and tools such as the doctor lookup and out-of-pocket cost calculator help them find the plan that meets their needs. Last year, 47% of returning Marketplace consumers in Oregon switched plans. They saved an average of $432 annually.
In contrast, average rate changes reported in rate filings assume that all consumers stick with their current health insurance plan. In particular, they assume that no consumers enroll in any new plans offered for 2017, even though new plans frequently offer lower prices. This doesn’t reflect reality, given that about 70 percent of Oregon Marketplace consumers – including all new and 47 percent of returning Marketplace consumers - selected a new plan for 2016.
Preliminary rates aren’t final rates. Preliminary rates often change significantly before being finalized. In particular, they are subject to state regulator review, which led to $1.5 billion in savings for consumers in 2015.
Prior to the Affordable Care Act, we lived in a world where double-digit premium increases were the norm, and that was typically for inferior plans that excluded services like maternity care, or even routine services like prescription drugs. Plans also often charged a higher premium, or denied coverage altogether, to consumers due to a pre-existing condition. Now, all consumers have the option to purchase quality, affordable coverage.
This is a big deal for the almost 1.7 million people in Oregon with a pre-existing condition.
Today, consumers in Oregon have options.
For 2016 coverage, 47% of customers in Oregon had the option of selecting a plan with a premium of $75 or less per month after tax credits.
The number of issuers participating in the Marketplace remained strong in 2016 with 10 issuers offering coverage.
On average, consumers in Oregon could choose from 69 plans per county.
Health insurance is clearly something people in Oregon like, want, and need: 147,109 people signed up for 2016 coverage – more than ever before.
Both Marketplace and non-Marketplace consumers continue to benefit from the low health care cost growth of recent years.
Marketplace rates remain well below expectations when the law was passed. Marketplace rates for 2014 came in about 15% below Congressional Budget Office (CBO) projections in 2010. Better-than-expected Marketplace premiums are due in large part to lower-than-expected economy-wide health care cost growth and other efficiencies.
For the half of Americans who obtain health insurance through an employer, premiums for family coverage grew by an average of 5% per year from 2010 to 2015 – compared with about 8% per year from 2000 to 2010. Premiums grew at an even slower 4.2% rate in 2015. If premium growth since 2010 had matched the average growth rate over the prior ten years, the average family premium would have been almost $2,600 higher in 2015.
