Average Obamacare premiums for 2020 should rise no more than 2.5% as insurers expand their presence in the Affordable Care Act markets amid greater stability and profitability.
That’s the assessment of analysts who follow the ACA exchanges, and it comes less a month before the 45-day open enrollment period begins Nov. 1.
The individual market for policies that meet the ACA’s coverage requirements is continuing to display the stability first seen in 2019, with increased insurer offerings and more modest premium hikes. But the number of enrollees—most of whom receive subsidies—is declining gradually, and making coverage affordable for people who don’t receive substantial subsidies remains a major challenge.
In 2019, 10.6 million people were enrolled through the exchanges.
“2020 is shaping up to be generally a positive year with respect to both rates and competition,” Chad Brooker, associate principal at health-care policy consulting firm Avalere Health, said in an interview.
In the early years of the marketplaces, insurers priced premiums too low for an exchange population that was older and sicker than expected. As a result, they experienced heavy losses and many left the markets.
Premiums then rose sharply, with double-digit increases common in 2017 and 2018. But beginning in 2019, monthly premiums for an individual dropped for the first time by 1% on average to $594.17, according to the Centers for Medicare & Medicaid Services.
Now, with six years of data, “insurers have a really good idea about what the risk pool looks like in the individual market,” and how to price for it, Brooker said.
The reinsurance programs that will be in effect in 12 states in 2020, including five new states, are contributing to rate declines in 2020, Brooker said. The programs, in which states reimburse insurers for the costs of covering high-cost claims, typically reduce premiums by nearly 20% on average in the first year they are in place, Avalere reports.
In addition to enjoying a more stable market and improved profits, insurers are expanding into more ACA territories with an eye toward providing a landing place for people who may enter the individual market with health reimbursement arrangement funding from employers, as well as for individuals getting close to the eligibility age for the Medicare Advantage market.
Small Premium Increases
Based on rates from 23 states, the median increase for 2020 is about 2.5%, Kris Haltmeyer, vice president of legislative and regulatory policy for the Blue Cross Blue Shield Association, said at a press briefing Oct. 3. The rates range from a drop of 18% in Colorado, where the state is starting a reinsurance program in 2020, to a 13% increase in New Mexico, he said.
David Dillon, who helped review rates for seven states and the District of Columbia, expects premiums to rise a mere 0.5% to 1% on average in 2020.
Dillon is senior vice president and principal of Allen, Texas-based actuarial consulting firm Lewis & Ellis Inc. and a fellow with the Society of Actuaries.
The steep rate hikes of 2018 are the primary factor driving lower premiums for 2020, Dillon said.
The 2018 increases led to large profits for insurers. As a result, insurers are expected to pay an estimated $1.3 billion in rebates to consumers under the ACA’s medical-loss ratio provision, according to a recent Kaiser Family Foundation report. That provision requires insurers to spend at least 80% of premiums on claims or quality improvements.
The need to limit those rebates is prompting insurers to curb premium increases for 2020, according to Brooker.
Justin Giovannelli, associate research professor at Georgetown University, believes average premiums could even go down in 2020.
But, for people who aren’t receiving substantial financial assistance, “premiums are still awfully high for you, and as a practical matter for many people, unaffordable,” he said.
The CMS reports 87% of the enrollees receive subsidies to help pay their premiums or out-of-pocket costs. The number of unsubsidized people declined 2.5 million, or 40%, between 2016 and 2018.
Expanding Their Footprint
Centene Corp., the largest provider of plans in the marketplaces, is making a large expansion in 2020, as are relative newcomers to the industry Oscar Health and Bright Health, according to the Robert Wood Johnson Foundation.
National carriers Cigna Corp. and Anthem Inc. also are increasing their territory.
In some states Blue Cross Blue Shield plans are expanding their footprint. That marks a reversal from a few years ago when regulators had to cajole them to cover markets that otherwise would have had no carriers.
The number of counties with only a single insurer in the individual market will decline by more than 13% in 2020, Katherine Hempstead, a senior policy adviser at the Robert Wood Johnson Foundation, said in an interview. The foundation is tracking insurer involvement in the marketplaces.
“Some of the worst parts of the individual market have gotten better,” Hempstead said.
Tennessee is a case in point. Several years ago the state faced the possibility of no coverage in some areas. But in 2020, “It’s gotten to be one of the hottest markets in the country,” partly because of interest in the Nashville market, she said.
New Territory for Cigna
Cigna will add coverage in 2020 in Kansas and Utah, as well as in the south Florida exchange market, and in new counties in Tennessee and Virginia, Lisa Lough, general manager of the individual and family plans business, said in an interview. The Bloomfield, Conn.-based company, which has about 250,000 ACA enrollees, is in eight states for 2019.
Cigna expects the average price of its premiums to drop just under 1%, Lough said. Its ACA rates won’t be publicly available until close to the start of open enrollment.
Cigna looks for markets where they can enter into value-based arrangements with doctors and hospitals, in which incentives are aligned with outcomes at an affordable price, Lough said.
The company has primarily focused on larger metropolitan areas in states, such as Salt Lake City in Utah and the Kansas City area of Kansas, she said.
Cigna also is looking ahead to what may happen in the market for health reimbursement arrangements (HRAs), Lough said. Beginning in 2020, under a new Trump administration rule, employers can contribute funds to HRAs that employees can use to buy insurance in the exchanges or pay out-of-pocket costs.
Bright Health, which began offering health plans in 2017 as it entered the ACA markets, is focused on expanding in areas where it can enter into cost-effective partnerships that enhance the brand of the health systems it works with, Jon Watson, president of the Minneapolis-based company’s individual and family plans, said in an interview.
Bright Health, which covers between 60,000 and 80,000 ACA enrollees, will expand from four states in 2019 to nine in 2020. Premiums “on average are pretty flat across the marketplace,” Watson said.
Bright Health also hopes its ACA customers will choose its Medicare Advantage (MA) plans when they reach Medicare age. “It’s a very natural path to continue in MA,” Watson said.