Dive Brief:
- Despite uproar over ACA plan premium increases slated for 2017, a new study by the Urban Institute shows that premiums for these plans actually compare favorably – at 10% lower – than premiums for the average employer-sponsored plans.
- That finding is based on an apples-to-apples comparison of unsubsidized nongroup premiums against the average premiums for employer-sponsored plans, according to state and metropolitan area, and factoring in adjustments for differences in actuarial value and age distribution.
- While variation was observed based on location, more than 75% of states and more than 80% of metropolitan areas had lower marketplace premiums than employer premiums.
Dive Insight:
The favorable comparison to employer-sponsored plan premiums notably comes at a time when employer plans are being heralded for slowing down their premium increases to "historically low rates," with a recent Kaiser/HRET survey showing that since 2011 the average family premium under employer plans has increased just 20%, compared to 31% from 2006 and 2011, and 63% from 2001 to 2006.
So, if employer-sponsored plans are considered to be holding down premiums effectively, and ACA plans are holding them down even lower, that would suggest ACA premiums to be a pretty good deal. Both employer and ACA plans are noted to be keeping their premiums down via the trend toward high deductibles.
Much of the national discourse on next year's anticipated ACA premium hikes stems from the sticker shock, though most people don't pay full price thanks to subsidies, just as people with employer-sponsored coverage get part of their costs covered by their employer. HHS has worked to inform people that the "overwhelming majority" of ACA consumers will still be able to find coverage for under $75 per month, just as in 2016. The sticker price does matter, however, to those who don't receive subsidies and do pay full price.
The report noted the specific locations that were exceptions to the rule, and did not have ACA nongroup premiums lower than the average employer-sponsored single premium. The states were Alaska, Arkansas, Delaware, Georgia, Louisiana, Missouri, Nebraska, North Carolina, South Dakota, Vermont, West Virginia and Wyoming.
Of the 32 metropolitan areas studied, four proved exceptions: San Francisco, Atlanta, New Orleans and Charlotte, North Carolina.
Possible reasons the majority of states and metropolitan areas do have relatively low ACA plan premiums compared to employer plans may include narrower networks, market characteristics including transparency and comparability, and the underpricing noted by plans in some markets.
The researchers conclude the level and growth of nongroup marketplace premiums should not be interpreted as evidence of market weakness. "Nongroup insurance, when adjusted to make its premiums comparable to employer premiums, is much more often than not lower cost than the average coverage offered through employers," they wrote. "But the persistent, uncomfortable truth is that healthcare is an expensive commodity, regardless of the market in which one purchases it."