There are many contributing factors to the ebb and flow of insurance premiums, especially in the commercial market. The economy, the pulse of the country, and the slightest change in congress can shoot cause premiums to skyrocket or drop them.
A recent report from AHIP, Factors Influencing 2023 Individual Market Premiums, provides some insight into the market, government, and economic climate that will affect 2023 individual market premiums.
In this blog, we’re going to cover some of the most interesting points that were made in their report and review some of their recommendations.
American Rescue Plan Act
There is a growing number of Americans who fall in the middle ground of those that make too much to qualify for government programs but don’t get insurance through their employers. These folks are likely sole proprietors who live in the gig economy or new business owners.
This population is what you’re likely to find on the Affordable Care Act (ACA) health insurance marketplaces. They are currently eligible to lower their monthly premiums via financial assistance provided by the American Rescue Plan Act (ARPA).
But not for long. ARPA was passed in 2021 and allowed Americans to access affordable premiums which resulted in record-high marketplace enrollment rates. Unfortunately, ARPA is set to expire at the end of 2022. According to AHIP, this will be the single largest contributor to the affordability of out-of-pocket premiums in 2023.
The expiration of ARPA subsidies coupled with the impact of Covid-19, inflation, and the recession are all contributing factors to the changing prices of healthcare premiums.
Inflation
Rising inflation will greatly contribute to the rising cost of healthcare premiums. The United States has already hit a record high of 9.1%, and it’s only a matter of time before that bleeds into various branches of the economy, including healthcare.
According to the brief by AHIP, there could be a lag before high inflation rates are fully reflected in healthcare prices because reimbursement rates are set in advance. Some areas where we will be seeing an impact are in the healthcare supply chain and labor costs.
The impact of COVID-19
Despite the pandemic’s welcome plateau, in the healthcare space, we are still feeling the repercussions of Covid-related costs. From treatment to testing and vaccinations, the deferred care from 2020 and the subsequent waves are what could drive costs up.
It isn’t just the hands-on aspect of the pandemic but also the worker shortages as a result. This is bound to drive costs up because there simply aren’t enough workers to cover the current demand. We are seeing rate increases of as much as 15% from hospitals.
Because of the rate increases due to the worker shortage, insurance premiums are likely to increase as a result. Insurance premiums are expected to increase by 5% in certain concentrated areas.
Also due to the pandemic, 85 million Americans are at risk of losing their Medicaid and CHIP coverage as states will redetermine eligibility. It is estimated that 15 million people will lose Medicaid eligibility during this process.
ARPA and Medicaid Coverage
One important thing to note is that many of the people who will be deemed ineligible for Medicaid coverage would have qualified for ARPA, including 10% of children. Now, if ARPA isn’t continued by congress in 2023, millions of people will be left without an affordable healthcare option.
The impact of redetermining Medicaid eligibility on insurance premiums won’t be known until it actually comes to fruition.
The way forward in 2023
AHIP reinforces that Congress should act quickly to extend APRA subsidies because it gives both consumers and health plans a level of certainty as we move into 2023.
They also state that action is absolutely needed to address rising healthcare costs, especially as millions of Americans are facing losing their Medicaid coverage.