The expiration of the American Rescue Plan Act (ARPA) premium subsidies and the return of Medicaid redeterminations will likely result in 2023 premium rate changes for individual and small group health insurance plans, according to an issue brief from the American Academy of Actuaries.
As payers begin their premium rate filing process, they must consider projected medical claims and administrative costs for their member populations. Healthcare utilization rates and risk pool composition are key factors that influence prices.
The potential end of pandemic-era policies may significantly impact healthcare spending and risk pools, indicating that the status of these regulations will likely drive 2023 premium changes.
“Proposed health insurance premium rates reflect many factors, which can include the effects of legislative and regulatory changes,” Cori Uccello, Academy Senior Health Fellow, said in a press release.
“This is especially true for 2023 rates, due to the possible expiration later this year of enhanced Affordable Care Act (ACA) premium subsidies and of a key support of Medicaid coverage during the pandemic.”
Fewer premium subsidies and Medicaid eligibility redeterminations could impact the individual market’s risk pool composition.
ARPA increased ACA premium subsidies and extended eligibility to all income brackets. Between January 2021 and January 2022, individual market enrollment rose by 21 percent. However, these extended premiums are set to expire on January 1, 2023.
If policymakers let the ARPA premiums expire, 2023 enrollment will likely decline, as access to affordable coverage will dwindle. This enrollment change will negatively impact the risk pool, leading to higher premiums, the brief stated.
The Families First Coronavirus Response Act (FFCRA) helped expand Medicaid coverage during the pandemic by increasing federal aid for states that suspended their Medicaid redetermination process during the public health emergency (PHE).
HHS has extended the PHE until at least mid-July, with another 90-day renewal expected. However, once the PHE ends, states can resume their usual Medicaid redetermination process, which may result in people losing their Medicaid coverage.
Following this coverage loss, individuals may shift to the individual market, employer group markets, or become uninsured. This transition will likely happen over six months to a year, resulting in a slower change in health coverage statuses and a higher prevalence of partial-year enrollments, the brief stated.
The potential influx of new enrollees to the individual and group markets could improve the risk pools and lower premiums, but these changes would have a smaller impact compared to the increases from the ARPA subsidies’ expiration.
Fixing the family glitch could also help improve the individual market’s risk pool. The current ACA rule states that families cannot receive individual market premium subsidies if one member has access to affordable employer-sponsored coverage. Coverage is deemed affordable if the cost for only the employee is below 9.5 percent of a family’s income.
Amending this regulation to base the affordability on family coverage rather than self-only coverage would allow dependents to qualify for individual market subsidies and transition from group coverage to individual coverage. This shift may improve the risk pool but would likely not impact premiums, according to the brief.
As policymakers weigh legislation that would impact individual market enrollment, such as extending ARPA subsidies, some states have requested two sets of premium rates, the researchers noted.
The risk pool composition in the small group market is likely to be impacted the most by inflation. As employers increase worker wages and service prices, they may need to cut back on coverage levels and contributions. This could push small employers to shift to self-funded or level-funded coverage or leave the market altogether.
Premium rates for 2023 may also increase due to the high medical loss ratio rebates payers are expected to issue at the end of 2022.
Meanwhile, COVID-19-related costs for treatment, testing, and vaccines have stabilized and will likely not impact 2023 premiums. However, this is dependent on whether health plans account for future variants and surges, the brief added.