KFF: Why insurers are weighing double-digit ACA premium hikes for 2023

Some insurers are seeking an average 10% hike to their Affordable Care Act (ACA) plan premiums next year, and the reason may not be what you think.

The Kaiser Family Foundation released an analysis Monday of early rates submitted by insurers for the ACA’s exchanges. It found that inflation and greater healthcare utilization were major drivers behind the premium spikes as well as the potential loss of enhanced ACA subsidies.

“After a few years of virtually flat premiums in the ACA marketplaces, it appears 2023 rates may rise significantly,” the analysis said. 

Kaiser looked at the rates filed by 72 insurers across 13 states and the District of Columbia for the 2023 coverage year, open enrollment for which starts Nov. 1. 

On average, plans are seeking a 10% hike to premiums, with some requests ranging from 5% to 14%. Unlike in recent years, only four of the 72 issuers are lowering their premiums.

The biggest drivers behind the premium hikes are:

  • Inflation and healthcare utilization trends

Across the 2023 filings, many insurers are expecting to see a health cost trend of 4% to 8%. The cost trend reflects the rising prices paid to hospitals, doctors and drugmakers due to inflation and how much healthcare plans believe patients will use in the coming year.

Several insurers are also planning for healthcare use to rebound to pre-pandemic levels after being suppressed due to COVID-19. Plans may have to shoulder costs that have previously been picked up by the federal government, including more costs for vaccines and boosters due to fewer massive vaccination efforts, Kaiser said.

  • Uncertainty over the fate of enhanced ACA subsidies

The American Rescue Plan Act boosted subsidies for 2021 and 2022, helping drive a massive 14.5 million people to sign up for coverage this year. But those enhancements are now set to expire after this year unless Congress acts. While the Senate inched toward a deal on a two-year extension, a little less than half of the insurers examined are planning in case the deal falls apart.

Of the insurers that quantified an impact, roughly half said the expiration will have a neutral impact and the rest at least a 1% spike in costs.

  • COVID-19

Even though the pandemic is in its third year, insurers believe it will have a slight impact on their rates. Previously, insurers had not wanted to quantify the impact the pandemic would have on premiums because of major uncertainty. Now, about half of the insurers surveyed by Kaiser believe the premiums will have an effect, albeit a slight one.

“Of the insurers that quantified the effect of the pandemic, most said it would have only a small impact on premiums (commonly plus or minus 1-2%),” Kaiser said.

The rates are subject to change and won’t become final until this fall. 

A rise in premiums would be a major reversal for the Biden administration right before the November midterm elections. The Department of Health and Human Services previously touted a 22% drop in average monthly premiums for all sign-ups on HealthCare.gov for 2022.