Implementing Health Reform. On October 26, 2015, the Centers for Medicare and Medicaid Services (CMS) released its first snapshot of 2016 federally facilitated marketplace (FFM) plan premiums. CMS announced that premiums are up for benchmark second-lowest cost silver plans an average of 6.3 percent before the application of premium tax credits in thirty of the largest cities covered by the FFM, where 60 percent of marketplace enrollees live.
Overall, in 37 states covered by the FFM benchmark premiums are up 7.5 percent. (Hawaii, which switched to the FFM this year, was not included.) Average premium increases are higher than they were for 2015 (when benchmark second-lowest cost silver plans increased only 2 percent) but are much lower than individual market premium increases in the three years immediately preceding the adoption of the Affordable Care Act (ACA), which averaged over 10 percent per year.
For most consumers cost increases for 2016 will be in the single digits. But premium increases—and decreases—vary considerably from market to market. In Oklahoma City second-lowest cost silver benchmark plan premiums increased 35.1 percent, in Nashville benchmark premiums increased 22 percent, and in Charlotte, 21.7 percent. In Cleveland, Ohio, on the other hand, benchmark premiums decreased on average 6.3 percent, while in Indianapolis they dropped 11.8 percent. Statewide the greatest increases were in Montana, where benchmark premiums went up 34.5 percent and Oklahoma where they went up 34.7 percent, but in Mississippi benchmark premiums dropped 8.2 percent and in Indiana 12.6 percent.
Most markets continue to be competitive. For 2016, consumers in two thirds of counties will have three or more insurers to choose from.
A number of factors likely account for increases in 2016 premiums, the most important of which are probably increases in health care costs and continued concerns about the risk profile of enrollees in the market, given that many potential healthy enrollees remain outside the marketplace in grandfathered and transitional plans. Also the reinsurance program which played a major role in the individual market in 2014 is phasing out and the risk corridor program paid out far less than expected for 2014 and is unlikely to pay more for 2015 or 2016. Insurers averaged medical loss ratios of 92 percent in state individual markets in 2014 and in a number of states averages exceeded 100 percent. Despite these factors, benchmark premiums dropped in several markets.
The announced premium increases are before Advance Premium Tax Credits (APTC) are applied. Since marketplace enrollees who are eligible for APTC do not have to pay more than a specific percentage of their modified adjusted gross household income for premiums—with the percentage depending on their income—most individuals and families receiving APTC will experience only a nominal increase in their premium as long as they do not enroll in a plan costing more than the second-lowest cost silver plan. In fact, nearly eight in 10 returning marketplace consumers will be able to find a plan for $100 or less after the application of tax credits—the same as last year—while about seven in 10 will be able to find a plan for $75 or less.
The APTC, however, are set based on the benchmark second-lowest cost silver plan. Say an individual was enrolled in a plan that was the lowest-cost or second-lowest cost silver plan in 2015 and remains with that plan for 2016. If the premiums for that plan have increased—or the premiums for other plans have decreased—such that for 2016 the plan the consumer had enrolled in for 2015 now costs more than the second lowest-cost silver plan for 2016, the enrollee will bear the cost of the difference between the new plan premium and the cost of the new second-lowest cost silver plan.
CMS had at one point considered passively reenrolling individuals in lower cost plans, but rejected that idea, leaving individuals to find lower cost coverage themselves. An analysis of 2015 data found that those who switched plans for 2015 within the same metal tier saved on average $400 after tax credits compared to those who stayed with the same plan. Almost 53 percent of consumers who reenrolled for coverage for 2015 did shop around, and of those almost half chose a new plan.
Of course, it could be that taking into account cost sharing, networks, formularies, and other factors, the 2015 plan may still be the more appropriate for an enrollee, even if it costs more. But all 2015 enrollees should return to the marketplace and shop for coverage to make sure that they are getting the best deal they can given their situation. The new cost calculator that has just been added to the FFM should help them do that.
Healthcare.gov, the FFM website, opened for window shopping on October 25 and will open for actual eligibility determinations and enrollment on November 1.
from Health Affairs Blog http://ift.tt/1PQFL2j
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