The lingering effects of COVID-19, the end of enhanced subsidies for exchange plans and global inflation are among the key trends impacting premiums in 2023, according to a new report.
The American Academy of Actuaries issued its annual look (PDF) at the landscape for premiums on the individual and small group markets, and analysts said the enhanced subsidies and record enrollment that followed changed the risk pool for plans on the Affordable Care Act's exchanges, and the end of those tax breaks likely portends a hike in premiums.
Should the subsidies, which were bolstered as part of the American Rescue Plan, fall off, people will leave the market, the actuaries said. Many of those who were lured into the market due to the expanded subsidies were healthier, and if they leave the risk pool costs will go up.
Barb Klever, vice chairperson of the academy's Health Practice Council, said during a webinar that the timing around the subsidies' expiration makes it hard for insurers to account for them in rate filing should they be renewed. Some states, she said, are asking plans to submit rate documents that reflect both scenarios.
Other states are asking insurers to include the potential impact of these subsidies on premiums, which could make updates to rates easier, Klever said. However, accounting for the subsidies is not universal across the country, she said.
"Improvement in the risk pool leads to lower gross premiums," Klever said. "The impact on gross premiums is more incremental, and is directly tied to the health of the risk pool as a whole."
In addition, Medicaid eligibility redeterminations, which will resume when the public health emergency ends, could also impact the risk pool by bringing in healthier people. This could drive premiums down overall, according to the report, but the effects will vary state by state depending on how quickly they begin the redetermination process.
Inflation's impact on the healthcare industry is likely to extend to individual and small group premiums as well, the actuaries said. Inflation impacts providers in particular in their supply chain needs, and those challenges will likely bleed into negotiations over rate agreements with health plans.
Of note, the actuaries said, is that these reimbursement deals are usually negotiated over the course of several years, so that impact of inflation may be felt for some time.
At the beginning of this year, the Biden administration mandated that insurers cover home COVID-19 testing with no cost-sharing for the plan member, which had the potential to significantly impact premium rates down the line. However, the financial impact of that requirement was more muted than was initially expected.
For one, at the time that the requirement came down, home tests were hard to come by, the analysts said. And shortly thereafter, the federal government made free tests available to people across the country, which reduced demand for store-bought tests.
Plus, few members realized they had access to coverage for these tests in the first place, according to the report.
"A couple of things happened that kind of saved the industry," said Juan Herrera, a member of the academy's Individual and Small Group Markets Committee, during the webinar.