June 26, 2014:
Health insurance premiums for people with subsidies could increase substantially in some markets – but consumers who shop around may not end up paying more, a new report out Thursday says.
Shopping around may not be as likely, however, under proposed rules also released Thursday by the Obama administration which will automatically re-enroll the vast majority of those who are signed up for plans through the online marketplaces. Automatic re-enrollments might ease the experience, but will also make it less likely consumers will check out other options.
Consumers who choose to would still be able to shop around, the administration said. And the Avalere study shows they should.
The analysis of rates filed in nine states found that as insurers battle for a share of the individual market, some plans that were the low-priced leaders this year are not the least expensive options next year.
Because subsidies through the Affordable Care Act are tied to “benchmark” plans, which are the second lowest-cost silver-tier plans in each market, even those with subsidies could see the monthly amounts they pay change. In most of the states studied, the second lowest-cost plan is changing.
“If you are a savvy buyer, you could pick a low-cost plan and probably avoid a significant rate increase,” said Caroline Pearson, vice president at Avalere. But those who do nothing may end up paying more.
Here’s how it works: Subsidy-eligible individuals – those who earn between about $11,480 and $45,960 – can enroll in any plan they like. But those who choose plans other than the benchmark silver plans would pay the difference in monthly premium cost, dollar for dollar.
In a hypothetical example cited by Avalere, a 40-year-old consumer who enrolled this year in a $214-a-month benchmark plan paid $58 of her own money toward the premium after the subsidy. But now her insurer plans to raise rates next year to $267 a month. Because other plans have come in lower, her plan is no longer the benchmark. That benchmark plan is now a different one, whose price is $231 a month.
Unless she switches plans, the consumer must now pay the difference. Her income has stayed the same, so her subsidy of $173 a month remains unchanged. But, because her plan is now $36 more than the benchmark plan, her monthly payment rises to $94 for the premium – unless she switches to the lower-cost plan.
Instead of narrowing, as might be expected, the range in premium prices widened from 2014 to 2015, Pearson said.
Reasons varied. In some markets, new insurers are entering with low rates, possibly to try to wrest market share. At the same time, the low-priced plans in some markets are raising rates because they won significant market share the first year – and are hoping to keep their new customers even with a price increase.
The Avalere study looked at rate filings in Connecticut, Indiana, Maine, Maryland, Oregon, Rhode Island, Vermont, Virginia and Washington. The filings have not yet been approved by regulators, so the rates might change before the fall open enrollment season begins.