Individual Markets Nationally Face High Premium Increases in Coming Years Absent Federal or State Action, With Wide Variation Among States

Covered California, March 8, 2018

Every state is at risk of significant cumulative premium increases in 2019-2021 due to continued federal uncertainty in the individual market. The uneasy conditions in many states have been exacerbated by recent decisions made at the national level, such as the removal of the federal penalty for being uninsured; the introduction of association health plans and short-term, limited-duration plans that could promote higher costs and the siphoning of healthy consumers; and the potential of continued underinvestment in marketing and outreach to consumers eligible for coverage in those states that rely on federal marketplace.


• All states’ individual markets risk higher than normal premium increases — ranging from 35 to 90 percent over three years — due to continued uncertainty at the federal level, but state variation informs understanding of local risks.

• Premium increases in the individual markets will likely range from 12 to 32 percent in 2019, and cumulative increases from 2019-2021 will range from 35 percent to more than 90 percent.

• Increases are on average more than double the rate of medical inflation as a result of healthier consumers leaving the individual market.

• The report identifies 17 states that are more likely — because of their historic risk mix and enrollment — to have cumulative premium increases of 90 percent or more and 19 additional states are at a higher risk of experiencing hikes of 50 percent.

• Policy actions could both lower premiums and promote more plan competition by reducing uncertainty — with independent actuarial analysis finding that reinsurance or similar programs could cut premium increases in half, bringing them to single digits in many states.

Federal and State Policies That Could Affect Premiums and Promote Stability:

• Institute a Reinsurance Program

• Directly Fund Cost-Sharing Reduction (CSR) Subsidies

• Provide Additional Subsidies to Consumers to Purchase Insurance

• Increase Marketing and Outreach

• State-Based Penalties for Non-Coverage

• State Regulations on Association Health Plans or Short-Term, Limited-Duration Plans

• Auto-Enrollment…

This Covered California analysis of the individual insurance market in each state reveals that, in the absence of any federal policy action, premiums could increase between 35 and 90 percent over the next three years, on average more than twice the rate of medical inflation. The report also discusses various potential federal and state policies that could reduce this impact.

It is understandable that Covered California, one of the more successful programs under the Affordable Care Act, would support this study and try to suggest policies that would improve the functioning of the individual insurance market. But it is important to understand why this instability even exists, and that is because of the fragmented, dysfunctional financing infrastructure that we continue to tolerate. When you read through the report you can see a multitude of interactions that take place over which various individuals, institutions and states may have little control. As an obvious example, a private insurance risk pool heavily burdened with sick people is not able to attract the healthy in order to dilute individual risk.

This fragmentation intuitively leads to the various federal and state policies that they suggest might slow the rate of premium increases. But look at the list. These measures are not so much for the direct provision of health care, but rather they add more administrative excesses that result in still higher total health care costs. The patient they are treating is the private health insurer who wants lower insurance premiums that are more competitive in the marketplace. Not only do most of the actual patients in our global health care system fail to benefit, they face higher costs collectively because of these administrative excesses.

Now think of what it would be like if we had a well designed single payer national health program – an improved Medicare for all. Look again at the list of recommended policies. None of them would be even remotely considered to be necessary in a single payer system, that is except one – auto-enrollment – at birth, for life. Everybody in, nobody out.

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