ACA Marketplace Premiums Set to Rise Again, Inflation a Key Factor

August 08, 2023 - Even as inflation seems to be plunging from its peak, the ongoing pressure from high medical costs is set to push ACA Marketplace premiums up to an average of 6 percent in 2024, according to preliminary data from KFF.

Out of 320 participating insurers in the ACA Marketplace, proposed premium changes span from a 15 percent decrease to a 100 percent increase.

However, the majority of proposed premium increases are between 2 and 10 percent.

Specifically, about 63 percent of the reviewed ACA marketplace insurers indicated an increase between 0 and 10 percent.

Fewer insurers are opting for premium reductions: out of the 320 submissions, 41 suggested lowered premiums. Within this subset, 30 insurers proposed a drop of up to 5 percent and only 3 suggested a 10 to 15 percent decrease.

At the other extreme, 76 insurers requested premium hikes greater than 10 percent. Although increases exceeding 15 percent were less frequent, 19 insurers suggested hikes of 15 to 20 percent, 13 recommended a 20 to 25 percent increase, and 8 recommended increases greater than 25 percent.

It's crucial to note that these are preliminary figures. The actual premium percentages for 2024 might shift during the rate review process. Final rates are expected to be confirmed by late summer 2023.

The significant growth in premiums is driven mainly by rising prices for medical care and prescription drugs and an increase in healthcare utilization.

“The primary driver of the premium increase is the increases in the cost of healthcare.  The increases are associated with increases in the ‘unit’ cost of services primarily from hospitals, physicians, and pharmaceutical companies, coupled with increases in the consumption of services, or ‘utilization,’ by members,” said officials of Anthem Health Plans of Kentucky.

While the healthcare sector's prices usually grow faster than the rest of the economy, the past two years have been an exception. Medical price growth has aligned with previous patterns, whereas the broader economy's prices have surged at a swifter pace.

“We expect unit cost trends to be higher in 2023 and 2024 due to inflation, supply shortages, and labor shortages. Inpatient hospital cost per day trends will be increasing as hospitals seek to recover from 2022 financial losses,” said officials of Kaiser Foundation Health Plan of Washington.

Contracts between insurers and providers, often negotiated for a year or longer, have contributed to medical inflation lagging behind general economic inflation.

As 2024 approaches, many insurers are preparing for the broader economic inflation to influence the health system, putting upward pressure on premiums. Inflation's effect is also being felt in administrative areas like staffing, driving up insurers' costs.

This year's end of the COVID-19 public health emergency brings another layer of complexity to 2024's premium landscape.

With the termination of this emergency status, many states have resumed processing Medicaid redeterminations, and millions of beneficiaries may be at risk of losing coverage.

Data from RWJF and Urban Institute projected that 18 million beneficiaries will lose Medicaid coverage, with an additional 3.8 million people possibly losing insurance entirely. Despite this, it is anticipated that 2.7 million of those affected will be eligible for ACA marketplace subsidies.

While insurers may see a decrease in costs due to the introduction of cost-sharing for COVID testing, the commercialization of the COVID vaccine will likely offset this, increasing costs on a per-dose basis.

However, a decrease in severe COVID-19 cases could reduce overall spending on related prevention and treatment. Most insurers, taking these factors into account, project a decrease in pandemic-related costs for 2024, which could have a slight downward effect on premiu