2021 ACA marketplace affordability and competition in the midst of Covid-19 and November 10th at the Supreme Court

We are celebrating the life, and grieving the loss, of Supreme Court Justice Ruth Bader Ginsburg in so many ways. Amongst her countless accomplishments, she has inspired generations of women – and men – to "Fight for the things that you care about, but do it in a way that will lead others to join you."

One of the fights the healthcare industry is tracking closely centers around the ACA, with the Court scheduled to hear California v. Texas on November 10th. Justice Ginsburg’s death puts the ACA on shakier ground, at a time when estimates of the number of Americans who have lost employer sponsored health insurance continue to rise. Has there ever been a greater need for an alternate, affordable source of health insurance than in the midst of Covid-19 and a recession?

Over two-thirds of the country’s ACA marketplaces have released preliminary rate filings for the 2021 plan year, and a number of states have now released approved rates. Since our last look at the first 10 individual marketplaces to release rate filings for 2021, some previously observed trends have continued and new insights have emerged:

1. Covid-19 is impacting rates. Higher proposed rate change requests have tended to be seen in geographies with higher Covid-19 case rates, with some exceptions.
2. In the wake of surging insurer profits during the pandemic, states’ insurance rate review programs may move to limit large rate increases for 2021, as illustrated by significant decreases from proposed to approved weighted average rates.
3. Market stabilization measures appear to be working. The majority of states with modest or decreasing rate changes proposed or finalized for 2021 have at least one market stabilization measure in place beyond federal levels.
4. Plan competition is increasing as insurers continue to expand into additional geographies.

Covid-19 is impacting rates. Higher proposed rate change requests have tended to be seen in geographies with higher Covid-19 case rates, with some exceptions. 

While the indicated impact of Covid-19 on rates has, on average, continued to be minor in the current sample of 321 markets that have released proposed rates for 2021, we’ve observed a trend of higher proposed rate increases coming from states with higher recent rates of confirmed Covid-19 cases per capita.2

While insurers have reported significant uncertainty regarding their projections for Covid-19-related costs going forward, recent reports indicate that cumulative cases have been tracking at the low end of actuarial scenarios and recent data shows Covid-19 increasing in some states, but declining month-to-month at a national level . At the same time, insurers saw healthcare utilization decreases of 30-40% in the second quarter as a result of lockdown and social distancing measures. In the wake of significant claims spending decreases, a number of insurers have moved to issue premium credits as a means to return some of their 2020 operating surpluses to customers.

If this trend continues, and surge-related costs are largely mitigated, will insurers’ premium rates for 2021 also reflect the lower end of Covid-19 actuarial scenarios, particularly if insurers, employers and TPAs implement strategies to mitigate the 2021 cost impact of delayed care?    

In the wake of surging insurer profits during the pandemic, states’ insurance rate review programs may move to limit large rate increases for 2021, as illustrated by significant decreases from proposed to approved weighted average rates.

Back in June, New York released a proposed weighted average increase of 11.7% for individual ACA plans, a more than 3% year-over-year increase from its 2020 proposed rate change, due in large part to high morbidity factors attributed to Covid-19 from a number of the participating marketplace insurers. This was the highest weighted average rate change seen from any state who released proposed rates this summer until New York announced an approved rate change of only 1.8% in mid-August, the state’s lowest weighted average rate change for individual plans since the ACA’s inception. In May, Vermont posted a proposed weighted average increase for its ACA individual and small-group plans of 6.8%, which was the fifth highest proposed rate change of the current 32 marketplace reporting sample. In mid-August, Vermont posted an approved 2021 weighted average rate change of 3.5%, a nearly 50% reduction from proposed rates. In July, Connecticut posted a preliminary weighted average rate increase for its two on-exchange individual carriers of 6.5% and in September the Connecticut Insurance Department announced a nearly flat final weighted average rate change for on-exchange plans of 0.4%.

Insurers in New York, Vermont and Connecticut operate in very different market environments. While New York has flattened its curve, it still has the highest number of total Covid-19 deaths in the U.S. to date and was just emerging from a devastating surge this past spring when proposed rates were filed. Connecticut also saw a spring surge, but with case counts low throughout the summer. Vermont, on the other hand, has held one of the lowest case rates throughout the pandemic. New York and Connecticut have denser urban populations, while Vermont has a largely rural population. New York has a competitive ACA payor marketplace, with 13 participating insurers, while Vermont and Connecticut only have two. However, in the case of all three states, the insurance rate review programs found the reasoning for insurers’ proposed 2021 rate hikes unfounded given the realities of lower than projected Covid-related costs, decreased utilization of non-Covid-related healthcare services and record-level insurer profits, while consumers face financial hardship and loss of employer-based insurance.

Maine’s rate review program resulted in a significant rate drop as well, though its proposed rates released back in June were already resulting in a 4.1% weighted average rate decrease. Maine’s approved weighted average rate release announced in August, dropped another 9.0% to a 13.1% weighted average decrease. The Maine Bureau of Insurance and the three participating marketplace carriers largely credit this to more accurate accounting for the state’s reinsurance program, which was reintroduced in 2019. Montana, Nevada and Orgeon’s rate review processes also resulted in decreases, albeit more modest, with Montana going from a proposed 3.3% to an approved 1.4% weighted average rate increase, Nevada moving from a proposed 7.5% to an approved 4.2% weighted average rate increase, and Oregon moving from a proposed 2.2% to an approved 2.1% weighted average. 

By contrast, Georgia’s weighted average individual market rate went from a 1.3% proposed decrease to a 4.8% proposed increase. On a carrier by carrier basis, some insurers had significant rate increases from proposed to final filings, in part attributable to additional Covid-19 morbidity factors, while others had significant decreases and removed the Covid-19 morbidity factors that had been included in preliminary filings. Unlike the other states with weighted average rate reductions from proposed to final filings, Georgia saw a mid-summer surge in Covid-19 cases. This may have impacted marketplace carrier’s views on potential Covid-19-related costs, though those actuarial viewpoints continue to vary widely even within the same state. Florida, whose surge occurred in July, also increased from a proposed weighted average increase of 1.8% in late July to an approved weighted average increase of 3.1% announced in late September. According to Florida’s Office of Insurance Regulation, the proposed rates did not include any additional factor for Covid-19, while the approved rates all include an approved Covid-19 factor of 2%.

As more final rate filings are released over the next month, will other states’ rate review programs move to limit significant rate increases, or will continued uncertainty cause more carriers to raise rates in their final filings as the summer comes to a close?              

The majority of states with modest or decreasing rates changes proposed or finalized for 2021 have at least one market stabilization measure in place beyond federal levels.

State-level ACA market stabilization measures, including reinsurance programs, short-term plan limitations, state-based individual mandates, state-based premium subsidies, and/or public coverage options, make the on-exchange individual market more affordable and more attractive to health insurers. In our previous analysis of the 10 states that had released proposed rates by early July, all had existing state-level market stabilization measures in place. Of the 22 marketplaces that have released proposed rates since then, half have no existing state-level market stabilization measures.  So far, nine states have released a weighted average proposed or final rate decrease - of those, all have market stabilization measures in place except for Ohio[1] and Virginia, which has announced pending plans for a future reinsurance program. Of the seven states with very modest weighted average rate increases less than 2%, only one lacks state-level market stabilization measures (Idaho). By contrast, the three states with double-digit weighted-average increases (Kentucky, Indiana and Tennessee) have no state-level market stabilization measures.

Not surprisingly, these rate changes also appear to be trending along political lines with the highest[2] proposed rate changes tending to come from politically “red” states3, which are more likely to have limited market stabilization measures in place and have a federally-run exchange, and the lowest coming from “blue” states, most of which have market stabilization measures in place and are more likely to have a state-based exchange. The tide may shift in the future, however, as a number of states from across the political spectrum are recognizing the cost containment and enrollment growth benefits of state-run exchanges, and are making plans to move away from a federally-run to a state-based exchange. In addition, several “red” and “gray” states have recently approved and pending plans for the implementation of a reinsurance program. New Hampshire (gray state) recently announced a whopping 11.5% weighted average proposed rate decrease on the heels of its August 5, 2020 approval of a state-based reinsurance program. Virginia (gray state) also recently announced a weighted average proposed rate decrease of 7.2% and has pending legislation for a reinsurance program and formation of a state-based exchange. Will these announced future plans attract more insurers to these marketplaces for 2021, potentially lowering rates ahead of actual implementation?

Plan competition is increasing as insurers continue to expand into new markets.

Since the time of our July post when four states had added new on-exchange insurers, 10 more states have announced the addition of new exchange entrants including North Carolina, Arkansas, Tennessee, Virginia, Nevada, Missouri, Indiana, Oklahoma, Florida and Idaho. North Carolina, Arkansas and Oklahoma saw the addition of Oscar Health, which is expanding into 4 new states for the 2021 plan year. Arkansas also added Health Advantage, a Blue Cross Blue Shield plan. Tennessee, Virginia and Oklahoma added subsidiary plans of UnitedHealth Group, which has joined at least five new individual ACA marketplaces so far for 2021. Nevada added two new insurers, Friday Health Plans and Select Health (part of Intermountain Healthcare). In addition to Oscar Health and UnitedHealth Group, Oklahoma added locally-owned Community Care Oklahoma. Missouri saw the addition of Blue Cross and Blue Shield of Kansas City.  Three states have seen carriers move from previously offering off-exchange only to on-exchange plans for 2021 including Anthem in Indiana, AvMed in Florida and Regence in Idaho.   

Will mounting competition in these marketplaces lead to further decreases for final 2021 rate submissions and improve future ACA premium rate affordability?

Looking ahead

A recent survey by the Commonwealth Fund found that 43% of Americans are inadequately insured, and 42% of non-elderly adults who looked for an individual market plan in the past 3 years did not end up buying one - 71% of the time this was due to plan cost. As ACA rates for 2021 take their final shape, estimates for the number of Americans who have lost employer sponsored health insurance continue to rise. Will the confluence of pandemic, competitive, and ACA stabilization-related factors above lead to greater ACA plan choice and affordability entering 2021 for those looking for stable healthcare coverage in these vulnerable times? We will continue to monitor these trends as the November 1st Open Enrollment date approaches.  

This article and analysis was a team effort with Shift Health Advisory, LLC's Susan Asby, RN.