Author: Abby Grunewald

Veristat: A Data-Driven Look at Today’s Insurance Markets

During the early years of the ACA individual plan, premiums rose steadily and often steeply, not least because of carriers’ decisions to exit various markets. But now that uncertainty has receded and the risk pool is better understood, carriers are changing course. Bright, Oscar, Centene (Ambetter) and Cigna have all aggressively expanded their footprints, and in 2021 UHC re-entered the individual market in five states.  

To evaluate the impact of this increased competition we looked at premium changes in individual ACA plans over a three-year period, from plan year 2019 to plan year 2021.  

Over that time, state-average, lowest-cost Bronze plan premiums fell in real dollar terms in 94% of states with increased competition (from new entrants), compared with 54% of states without such an increase. State-average, lowest-cost Silver plan premiums fell in 88% of states with increased competition, compared with 54% of states without. And state-average, lowest-cost Gold plan premiums fell in 81% of states with increased competition, compared with 60% of states without. In all, 16 states welcomed new entrants or increased competition; of these, only Louisiana failed to realize real-dollar reductions in Bronze plans over the past three years.

Premiums dropped in the nation as a whole during the same period—with or without increased competition. The nationwide average of each state’s average lowest-cost Bronze plan dropped by 9.4% in states where competition increased, and by 2.7% in those where it didn’t. Similarly, the nationwide average of each state’s average lowest-cost Silver plan dropped by 12% in states where competition increased, and by 5.2% in those where it didn’t. And the nationwide average of each state’s average lowest-cost Gold plan dropped by 25% in states where competition increased, and by 6% in those where it didn’t. 

In short, the news is good. Not only is increased competition expanding consumer choice. It’s accelerating a decrease in individual premiums, too.

**Ideon is the company formerly known as Vericred. Vericred began operating as Ideon on May 18, 2022.**

ICHRAs are the hottest topic in employer-sponsored healthcare. We at Vericred are tracking a number of plan attributes that could accelerate or retard this shift from small group coverage to the individual market. Here, we look at one of them: premium changes between 2020 and 2021.

In 2021, there are five new states (Maryland, Maine, Mississippi, New Hampshire and Washington) where individual plan premiums are equal to or less expensive than small group premiums. Interestingly, increased competition was not the driver of these lower individual premiums: only one of the states, Maryland, welcomed a new carrier to its individual market. (Note: Two states—New Jersey and North Dakota—saw small group premiums become less expensive than individual plan premiums.)

In aggregate, the average (across all of a state’s counties) lowest-cost Bronze individual plan premium was equal to or lower than the small group equivalent in 19 states; that’s up from 16 in 2020 and 11 in 2019. The average lowest-cost Silver individual plan premium was equal to or lower than the small group equivalent in 13 states, up from 11 in 2020 and six in 2019. And, the average lowest-cost Gold individual plan premium was equal to or lower than the small group equivalent in 12 states, up from seven in 2020 and five in 2019. Overall, the number of ICHRA premium-friendly states has roughly doubled over the past two years.

More broadly, the disparity between small group and individual rates has attenuated over the same period. In 2021, the average Bronze plan premium differential between individual and small group markets across all states is down to just 10%, from 15% in 2020 and 25% in 2019. Similarly, the average Silver plan premium differential is down to 23%, from 28% in 2020 and 42% in 2019. And, the average Gold plan premium differential is down to 25%, from 32% in 2020 and 45% in 2019.

Since the launch of the ACA, much has been made about the annual rate increases, particularly in the individual market. More recently, though, the opposite appears to be the case. From 2019 to 2021, state-average individual plan premiums actually went down in real dollar terms in two thirds (67%) of the country. Small group rates, on the other hand, fell in only 12-20% of the states, depending on metal level. The data has spoken: Individual rates are falling.

Predictable employer costs and coverage transportability are just the tip of the iceberg.

Change is afoot in the insurance world. Rules enacted in 2019 spawned a new iteration of employer-sponsored health insurance: Individual Coverage Health Reimbursement Arrangements (ICHRAs).

You can think of ICHRAs as the health insurance equivalent of 401(k) plans (which transformed employer-sponsored retirement savings). That is to say, with this new offering employers can reimburse employees for their insurance costs rather than purchasing policies for them.

The process typically looks like this: 1. An employer designs an ICHRA, with a range of options tailored to meet its needs and those of its employees; 2. employees choose a plan; and 3. employees submit paid expenses to employers for reimbursement. (Expenses might include premiums, claims or both, depending on the design of the ICHRA.)

Whether the shift toward ICHRAs will be as tectonic as the shift to 401(k)s remains to be seen. But there are many reasons to think it might. From an employer’s perspective, the main benefits of ICHRAs include:

• Reduced and predictable costs: ICHRAs allow employers to set a reimbursement rate that means they never have to pay more.
• No minimum participation rates: Fully insured plans often require 50% or 75% participation; ICHRAs do not.
• Less onerous benefit administration: ICHRAs shift the burden of managing benefits to the employee.
• Something rather than nothing: Some small employers would like to contribute to employees’ health insurance costs but can’t afford traditional fully insured plans. ICHRAs provide a way to provide some help.
• Different solutions for different classes: ICHRAs allow an employer to move certain classes of employees into the individual market. This may allow the employer to provide coverage, or better coverage, to certain classes.

Likewise, employees will find a lot to like about ICHRAs, such as:

• Choice: A healthy, single 25 year old has different needs than a 45 year old with children or someone with a chronic condition. ICHRAs give employees the choice of tens, or even hundreds, of health plans, allowing them to find one that best matches their needs.
• Transportability: ICHRAs make it possible for individuals to leave an employer and still keep their plan. The more ubiquitous ICHRAs become, the more likely it will be that an employee could keep their plan over time.
• Broader range of covered costs: ICHRAs can be used to pay for certain approved medical expenses in addition to premiums.

Of course, the extent to which ICHRAs become the common currency of employer-sponsored health insurance will dictate their effect on carriers, brokers, insurtech operators and other interested stakeholders.

For a deeper dive into the subject—including potential obstacles to widespread ICHRA adoption—download our latest Ideon Report: The ICHRA Revolution—A New Model for Employer-Sponsored Health Insurance