A report examines changes in marketplace premiums and insurer participation between 2022 and 2023.
Health insurer competition, as well as economic growth and inflationary pressures, contributed to the Affordable Care Act (ACA) benchmark premium rising 3.4% in 2023, according to analysis by the Urban Institute.
The research, which looks at data from Healthcare.gov and state-based marketplace websites, analyzed marketplace premiums and insurer participation in each state and tracked changes between 2022 and 2023.
After average annual premium reductions of 2.2% from 2019 to 2022, the report found that the marketplace benchmark premium increased nationally by an average of 3.4% in 2023.
The increase is likely due to the strong economy and rising inflation, with the latter contributing to labor costs in the healthcare industry, the researchers stated.
"There may also be expectations that the risk pool will improve following the end of the COVID-19 public health emergency," the report said. "Individuals losing Medicaid and becoming eligible for Marketplace coverage are likely to be low-income workers and healthier than those who remain unemployed or out of the labor force."
The variation in premiums across states is also attributable to insurer competition, with premiums lower in areas with a large number of insurers.
In the report, 12 states had monthly benchmarks above $500: Alabama, Alaska, Connecticut, Delaware, Louisiana, Nebraska, New York, North Carolina, South Dakota, Vermont, West Virginia, and Wyoming. Many of these states have one or two insurers in most rating regions and higher concentration of hospitals.
Meanwhile, 10 states had premiums below $400: Colorado, Indiana, Maryland, Michigan, Minnesota, Nevada, new Hampshire, Rhode Island, Virginia, and Washington. Most of these states have strong competition, a Medicaid insurer, or both.
The analysis revealed that for 2023, if only one insurer was in the market, premiums were higher by $128 relative to a market with five or more insurers. When there were two insurers in the market, the benchmark premiums were higher by $119.
"Premiums have been kept low in part because insurers have developed narrow network plans with providers willing to accept lower payment rates," the researchers wrote. "Narrow networks are not necessarily a problem. But the looming issue is whether the low premiums that have been achieved are also associated with provider networks that are in some ways inadequate."
Lastly, the report examined changes in insurer participation and found that the number of payers grew from 227 in 2022 to 232 in 2023. The modest rise came after a large growth between 2020 and 2022, when insurers expanded from 185 to 227.
Researchers posited if introducing a public option plan into the marketplace would significantly affect premiums. While a public option wouldn't change much in markets with relatively low premiums because most of the feasible savings are already captured, it could theoretically bring down benchmark premiums in markets with little competition, they said.
"But the public option is likely to face the same problems existing insurers face. That is, it is difficult to negotiate provider payment rates because the number of providers is limited," the researchers concluded. "The risk of providers refusing to participate is great and the political power of these providers is considerable."
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
Research by the Urban Institute, funded by the Robert Wood Johnson Foundation, found that Affordable Care Act benchmark premium increased by 3.4% in 2023 after average annual reductions of 2.2% from 2019 to 2022.
The increase in benchmark premium was attributable to a robust economy and rising inflation, as well as insurer competition, with premiums lower in states with a large number of insurers.
The analysis also found that payer participation grew from 227 in 2022 to 232 in 2023, following growth of 185 to 227 between 2020 to 2022, respectively.