Rising premiums in Affordable Care Act exchanges—an oft-cited reason Republican lawmakers are pushing for a quick repeal of the law—can be attributed largely to initial plan underpricing, according to a new report.
The analysis (PDF), from the Urban Institute and Robert Wood Johnson Foundation, also found that the states with more competition in their marketplaces tended to have the lowest premiums.
Looking at all 50 states and the District of Columbia, the report found that weighted average increases in the lowest and second lowest-cost silver plans were about 21% in 2017. That's up from an average increase of 7.5% in 2016. The report also found significant variation in premium increases between states. For instance, in Rhode Island, the least expensive state, 2017 premiums decreased on average by 6.4%, while in Arizona, premiums increased by 125%.
States that recorded decreases in premiums or that had the lowest increases saw more payers participating in the exchanges, with many offering narrow network plans to keep costs low. In the states with the highest premium increases, low levels of competition drive costs much higher, according to the report. Nationally, about 31% of counties have just one insurer this year, and concerns about the impact of such monopolies have sparked conversation on a public option.
The variation in premium increases also suggests that some payers are playing catch-up with their prices after underpricing their marketplace offerings in the early days of the ACA, according to the report. The report concludes that underpricing was extremely common when the marketplaces first launched, and increases now reflect efforts from payers to better align the costs of their plans to consumers with the cost of consumers’ healthcare.
A recent White House report echoed this analysis, saying the increases show an “ordinary process” of payers adjusting to the new marketplaces.