Competition among health insurance companies requesting to sell plans on the Affordable Care Act exchange in Florida next year should help keep premiums in check for consumers despite an early estimate by state regulators of an average double digit increase, according to an analysis released Tuesday by the nonprofit Urban Institute and funded by the Robert Wood Johnson Foundation.
The study, subtitled “There Is No Meaningful Average,” examined 2016 rates for ACA plans and found that most consumers’ actual experience varied depending on their eligibility for federal financial aid to pay their premiums, their health plan of choice and their state and county of residence.
State and local competition among insurers was key, said John Holahan, a researcher with the nonprofit Urban Institute and lead author of the study.
Of the 1.1 million Floridians enrolled in an ACA plan as of Dec. 31, 92 percent or slightly more than 1 million received a tax credit to help lower their premiums, at an average of $300 a month.
In Florida, 15 insurance companies have filed requests to sell individual coverage plans that meet the ACA’s minimum benefit requirements, including 11 insurers that requested to sell plans on the exchange, also known as Obamacare.
Florida’s Office of Insurance Regulation said this month that those health insurers have requested an average 17.7 percent increase in premiums for 2017.
“That kind of surprises me,” Holahan said.
Most ACA consumers migrate to lower-cost plans, he said, making insurance companies wary of losing market share by raising their rates higher than a competitor. And because the financial aid that helps eligible consumers pay their premiums is tied to the second-lowest-cost plan in the standard “silver” tier, it can be difficult for insurers to get customers if their premiums rise too high.
“People do switch plans,” Holahan said, “and we know they are switching plans a lot.”
Florida regulators did not identify the individual rates requested by insurance companies, though the initial filings, which are subject to change, are posted on healthcare.gov. Nor have state or federal regulators said how many insurers will offer plans in each of Florida’s 67 counties.
To be sure, Holahan and other health insurance experts said, there are many factors that influence premiums.
“The biggest factor always in premium increases is growth in the underlying cost of healthcare, which insurers pass on to consumers,” said Larry Levitt, senior vice president for special initiatives at the nonprofit health policy think tank, Kaiser Family Foundation.
The biggest factor always in premium increases is growth in the underlying cost of healthcare.
Larry Levitt, senior vice president for Kaiser Family Foundation
Audrey Brown, president of the Florida Association of Health Plans, an industry group, said one of the fastest growing healthcare costs for insurers is specialty drugs.
She said the Food and Drug Administration has been approving new specialty drugs for consumers “at a very rapid pace.” Those drugs, which typically are used by a small group of people but carry a high cost, are often covered by health insurers.
“If we continue to see new specialty drugs flood the marketplace,” Brown said, “then we're going to continue to see medical trend pushed upward by the cost of pharmacy.”
About 12.7 million people nationwide, including 1.7 million in Florida — more than any state — get their health coverage through the ACA exchange, according to the Department of Health and Human Services.
During the first two years of the ACA exchange, 2014 and 2015, insurers were gaining valuable experience in the healthcare needs and costs of those consumers, many of whom had been uninsured before.
Many insurers may not have priced their plans adequately, Levitt said, either because they were unfamiliar with the population or because they low-balled premiums to try to gain market share.
“It's pretty clear that many insurers miscalculated in estimating how many sick people would enroll and how many healthy people would sign up,” said Levitt, who co-authored a policy brief this month about premium changes for ACA plans in 2017.
In that context, he said, premium increases could represent a correction as insurers try to catch up. Holahan said that markets where premiums have been comparably low, such as Florida, are more likely to see premiums rise — but not too high.
“It's a balancing act,” Holahan said. “That’s what’s happening all over the country. Insurers are really trying to find the sweet spot that allows them to compete for market share and at the same time not lose money.”