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Individual Insurance Premiums to Soar Without Policy Actions

Individual insurance premiums are expected to increase significantly nationwide if state and federal lawmakers do not take action.

Individual insurance premiums to soar by 2021

Source: Thinkstock

By Thomas Beaton

- Individual insurance premiums may rise between 12 and 32 percent nationally by 2019, with cumulative increases of 34 to 94 percent by 2021, according to new research conducted by health plan actuaries and experts at Harvard, UCLA, and UC San Diego.

The report, sponsored by Covered California, found that uncertainty surrounding the ACA and federal healthcare policy will drive individual premium growth. The expansion of association health plan (AHP) sales and lower expected enrollment in ACA-compliant health plans may play a key role in hiking up prices.

Peter V. Lee, executive director of Covered California, the sponsor of the study, said that current the Trump Administration’s challenges to the ACA will create disparities in insurance affordability and health equity.

"The challenges to our health care system are threatening to have real consequences for millions of Americans," Lee said. "The prospect of 30 percent premium increases in 2019 and hikes of over 90 percent over the next three years will threaten the access to coverage for millions of Americans."

Eliminating the individual mandate is expected to drive premium increases of 7 to 15 percent, while increased availability of AHPs could drive premium increases of 0.3 percent to 1.3 percent by 2019. Soaring medical costs for individual health plan members is expected to raise premium rates by 7 percent each year from 2019 to 2021. The cumulative effects of these factors may double the costs of individual premiums within three years.

The authors of the report presented several policy suggestions that could stabilize individual insurance premiums.

A national reinsurance program is likely to reduce potential premium increases, the team stated. The report cited Milliman research that suggests a reinsurance program funded with $15 billion could reduce premium growth by 10 or 20 percent.

“Previous Covered California analysis had shown that, because reinsurance programs result in lower premiums and lower expenditures for premium subsidies, the net cost to the federal government would be only $5 billion after the offset for reduced Advanced Premium Tax Credit spending,” the team added.

Funding the federal cost-sharing reductions (CSRs) would not immediately lower premium growth but could create payer confidence to participate in individual markets while reducing spending on advanced premium tax credits (APTCs).

Additionally, authors of the report believe that increasing the number of consumers that qualify for APTCs could also limit premium increases by strengthening individual risk pools. Payers and state governments that expand APTC availability could increase enrollment and balanced risk pools if more people can afford insurance, the authors argued.

State-based mandates for individual insurance could reduce potential premium increases by 7 to 15 percent to counteract the repeal of the federal individual mandate. The authors also suggested that states should prohibit the sale of AHPs and promote automatic enrollment for ACA health plans to strengthen ACA-compliant health plan markets.

The analysis found that stabilizing policies for individual insurance markets can help control the most turbulent individual health plan markets. Seventeen states are expected to face premium increases of 90 percent by 2021 and 15 more states are likely to see individual health plan premiums grow by more than 50 percent in the same year.

“These are states that reflect historic enrollment or market characteristics that indicate their individual markets are likely to be subject to higher premium increases or instability in the form of risk of market exit by carriers.” the report said. “Given the range of premium increases forecast for 2019 and beyond, these states are likely to have a cumulative increase over the next three years of 90 percent.”

Lee warned lawmakers that a lack of policy action is just as bad as decision-making that weakens the ACA.

"Healthcare is local and the impacts of the changes in federal policy will play out differently across the nation," Lee concluded. "The conclusion is that there are no 'winners' — rather the range of impacts is from bad to very bad."

"Lower income Americans will be largely shielded from these price hikes, but the real-world consequences for middle-class Americans who do not receive any financial assistance in the form of tax credits, is that many will be priced out of having health insurance," he added.

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