ACA benchmark premiums rise 3.4% for 2023 as rate of new insurers slowed: study

Premiums for the average Affordable Care Act benchmark increased by 3.4% for the 2023 coverage year, while the number of insurers entering the exchanges has slowed compared to prior years, a new analysis finds. 

The analysis, released Monday by the Robert Wood Johnson Foundation and conducted by the think tank Urban Institute, comes amid record-breaking enrollment on the exchanges this year thanks to enhanced subsidies. Researchers pegged the slight premium hike on economic factors. 

“The national increase in marketplace benchmark premiums was mainly due to the strong economy and related inflationary pressures, the overall increase in healthcare costs and potential uncertainty about a changing risk pool,” said John Holahan, an institute fellow with the Urban Institute, in a statement. 

Urban researchers looked at changes in benchmark growth from 2022 to 2023 in 33 states and insurer participation across 28 states. 

“We found that premiums are greatly affected by the number of insurers competing in the rating region: the more insurers, the lower the benchmark premiums and vice versa,” the analysis said. 

A region with one or two carriers averaged $128 and $119 higher premiums compared to a region that had five or more. 

The bump in premiums comes amid relative stability over the past several years for the exchanges. Average annual premiums dipped 2.2% from 2019 through 2022. 

Several other reasons factored into the change in premiums, including:

  • The high rate of inflation in 2022 both overall and in healthcare costs.
  • Uncertainty over whether enhanced income-based subsidies would be extended. The Inflation Reduction Act eventually extended the subsidies through 2025, but by then it further complicated insurer decision-making, the analysis said. Extending the subsidies should lead to a healthier risk pool and with it lower premiums, the analysis predicted.
  • Concerns over the impact of ending Medicaid’s continuous coverage requirement on the risk pool. Starting April 1, states can start to redetermine eligibility for Medicaid recipients. The end of the continuous coverage requirement—in place since the start of the pandemic—could bring with it uncertainty to the risk pool.
  • Uncertainty surrounding the lingering effects of the COVID-19 pandemic and its impact on healthcare.
  • “On the one hand, service use could increase because medical care was deferred during the pandemic,” the analysis said. “On the other hand, projected healthcare costs could fall because fewer people will be sick. Insurers must also account for health consequences as new variants of the COVID-19 virus emerge.”

Urban researchers also found that the number of insurers in the marketplace grew from 227 last year to 232 for the current year in the 28 states it reviewed. 

However, there was a larger increase from 2020, when there was 185 carriers, to 2022 with 227 insurers. Urban predicted part of the reason may be intense competition, as evidenced by the withdrawal of the insurer Bright Health.