A new analysis of the Affordable Care Act’s health insurance marketplace costs finds that, nationwide, marketplace premiums did not increase at all from 2014 to 2015, though there were substantial average premium increases in some states and declines in others. This weighted analysis is the most comprehensive to date as it examines:
- premiums as well as deductibles in nearly all states and the District of Columbia (data from New York and Idaho are not currently available), and across all the metal tiers,
- differences in premiums between urban, suburban and rural areas within states, and
- insurer participation.
The average premiums for the second lowest-cost silver plan—or benchmark plan for calculating the federal subsidy in a given state—were also unchanged. And the average deductible for a marketplace plan increased by just 1 percent year to year.
The 0 percent change in average premiums is unprecedented when compared with historic trends in both the individual insurance market and employer-based health insurance. Prior to the passage of the Affordable Care Act, from 2008 to 2010, premiums grew an average 10 percent or more per year in state individual insurance markets. Many factors underlie this year’s stability in marketplace premiums, but three important contributors were: an increase in the number of participating insurance carriers; the design of the marketplaces; and the risk stabilization programs for participating insurers.
The premiums presented are for a 40-year-old nonsmoker. Results are weighted to reflect the population distribution across rating regions. The data for single and family premiums are available in an interactive map.
Changes in Premiums
While average premiums nationwide did not change from 2014 to 2015, there were wide differences across states (Exhibit 1). There were double-digit increases in 10 states plus the District of Columbia (Alaska, the District of Columbia, Iowa, Louisiana, Minnesota, Nebraska, New Hampshire, North Carolina, Pennsylvania, South Carolina, and West Virginia). Average premiums declined in 14 states (Arizona, Colorado, Connecticut, Hawaii, Illinois, Maine, Michigan, Mississippi, New Mexico, Oklahoma, Oregon, South Dakota, Virginia, and Washington).
In certain states, those double-digit increases and decreases can be tied to a single insurer decision. In Minnesota, the state with the lowest premiums nationally in 2014, PreferredOne—the carrier with the lowest statewide premiums and largest market share—exited the market, driving up the average cost of a marketplace plan. In Virginia, Optima Health, a carrier charging $2,000 a month for a silver plan, a figure nearly seven times the cost of the average silver plan, dropped this expensive plan, thereby sharply decreasing the average cost for plans in Virginia.
In other states, entry by multiple carriers enhanced price competition, which made shopping around a good approach for consumers in the second enrollment period. In Georgia, Cigna, Coventry, United Healthcare, and Time Insurance entered the market, and the benchmark silver plan increased by 1 percent in the state. In Michigan, UnitedHealth Care, Physicians Health Plan, and Harbor Health Plan entered the market, and the average cost of all plans fell by 1 percent.
For silver plans, which accounted for 65 percent of 2014 enrollment nationwide, the average premium was unchanged from 2014 to 2015. Seven states had double-digit increases in silver plan average premiums (Alaska, Iowa, Louisiana, Minnesota, New Hampshire, North Carolina, and Pennsylvania). By contrast, the average silver plan premium decreased in 17 states (Arizona, Colorado, Connecticut, Georgia, Hawaii, Illinois, Kentucky, Maryland, Michigan, Mississippi, New Jersey, New Mexico, Oregon, Rhode Island, South Dakota, Virginia, and Washington).
Average 2015 monthly premiums nationwide are:
- bronze plan—$256
- silver plan—$314
- gold plan—$369
- platinum plan—$441.
The state with the lowest average premiums for silver plans is Hawaii ($206) while Alaska had the highest average premiums ($583).
Changes in Benchmark Silver Plans
From 2014 to 2015, the nationwide average of premiums for the benchmark plans was also unchanged (Exhibit 2). While two states, Alaska and Minnesota, had double-digit increases in the cost of the benchmark plans, many more states saw decreases. Premiums for the benchmark plan declined in 20 states, with six states having double-digit decreases (Colorado, Connecticut, Mississippi, New Hampshire, New Mexico, and Rhode Island).
Urban, suburban, and rural rating regions experienced similar premium changes. Nationally, the average cost of a benchmark silver plan in 2015 is $257 in urban areas, $268 in suburban areas, and $272 in rural areas.
Changes in Deductibles
Nationally, average deductibles increased by 1 percent from 2014 to 2015, though, again, changes in deductibles varied considerably from state to state (Exhibit 3). Slightly more states saw increases than decreases (26 states versus 19). Massachusetts and Hawaii had the highest rates of increase in the average deductibles, at 32 percent and 28 percent, respectively. Washington, D.C., residents saw the greatest decrease—with average deductibles down by 16 percent. In 2015, bronze plans have average deductibles of $5,203; silver plans, $2,965; gold plans, $1,215; and platinum plans, $552.
Among silver plans, average deductibles increased in 26 states and declined in 20 states. The changes ranged from increases of 31 percent and 30 percent (Maryland and Indiana, respectively) to a decrease of 27 percent (Washington, D.C.). There is substantial variation among states in average deductibles among silver plans, ranging from $4,048 in Florida to $1,775 in Vermont. Much of this variation is because of other aspects of the benefit package, such as copayment or coinsurance levels.
The number of plans offered nationwide increased by 25 percent (not shown). Fifty more carriers offered plans in urban areas—an average of one additional carrier per state in 2015 (Exhibit 4). Georgia, Indiana, New Hampshire, and Ohio saw the largest increase in the number of participating carriers. Increases were seen across all types of geographical areas. For the selected urban rating regions, 29 states had increases in the number of participating carriers, while just three had a decrease, and 17 states experienced no change in the number of carriers. For the selected suburban areas, 23 states had an increase in the number of participating carriers, and only four had a decrease. For selected rural rating regions, 27 had increases and three had decreases.
City dwellers have a few more health plan options than their counterparts in suburban and rural areas. Nationwide, the average number of carriers participating in urban rating regions is 7.17, versus 6.17 in suburban and 5.49 in rural rating regions.
Behind the Numbers
Why are marketplace insurance costs stable at a national level? One factor is the way the Affordable Care Act structured the marketplaces. Greater standardization of benefits through the metal tier structure, premium and cost-sharing subsidies that are tied to the silver plans, the transparency of plan information, and robust enrollment in 2014 are collectively increasing the competitiveness of the market. Sixty-four percent of enrollees in 2014 chose the lowest or second-lowest cost plan in their tier.
In addition, the risk stabilization programs, which include risk adjustment, risk corridors, and reinsurance, diminish insurers’ risk of financial losses and allow them to price their plans more aggressively. The temporary risk corridor program limits both gains and losses of insurers participating in the marketplace and the temporary reinsurance program provides stop-loss coverage when claims expenses for an individual exceed a specified amount. The permanent risk adjustment program transfers funds from insurers with lower-risk patients to those with higher-risk patients.
The appeal of the marketplace structure and risk stabilization programs have, in turn, led to the increase in insurer participation, which also helps to contain costs.
An outstanding question, however, is the long-term sustainability of current trends in premiums. Similar to employer-based insurance, long-run developments in marketplace premiums will follow trends in medical claims expenses per capita. With the exception of the mid-1990s, the era of restrictive managed care, claims expenses have historically increased at 5 percent or more per year (see Appendix). Future price increases of marketplace plans will depend on how effectively America reforms the delivery of care and moves from a system that rewards high volume to one that rewards high-quality care.