As the industry gears up for open enrollment to begin this fall, a new report offers a look into the major factors that could impact premium changes in the individual and small group markets.
The top issues to watch over the next several months include ongoing inflation, the end of the COVID-19 public health emergency and shifts in coverage provided by small employers, according to the analysis (PDF) from the American Academy of Actuaries.
For one, the actuaries noted that healthcare costs have grown at a rate faster than inflation, and contract renewals with providers are expected to reflect this, leading to higher reimbursement rates.
"While there are some recent signs that the top-line inflation that consumers hear about in the news is moderating, higher healthcare and provider costs are putting upward pressure on premium rates for next year—maybe even more so than when this year's premium rates were developed in 2022," said Joyce Bohl, chairperson of the academy's Individual and Small Group Markets Committee, in a press release.
Given the trends at the center of the report are national issues, the actuaries said the full impacts can vary geographically. For example, Medicaid eligibility determinations are likely to drive additional people to the Affordable Care Act's (ACA's) exchanges, which could change the risk pool.
However, the extent to which this will drive up premiums will differ between states, based on current dynamics in the risk pool and shifts in enrollment, according to the report.
In addition, the end of the public health emergency means insurers are now responsible for the cost of COVID-19 and testing, which could lead them to increase premiums. That said, the fact that their responsibilities related to at-home tests are lessened may offset these costs, according to the report.
Lingering effects of COVID-19 infection, or long COVID, are also likely to be a consideration on costs.
"One of the biggest uncertainties about long COVID is its impact on ongoing medical costs and future premiums," the actuaries wrote. "There is little known about how many people are affected by long COVID, how long it will last for those affected, and how it will impact their personal health."
Small employers in particular are feeling the squeeze as costs rise, and they are weighing potential shifts in their approach to coverage that could impact small-group market premiums. Smaller firms are moving toward level-funded plans, self-funded plans, multiple employer welfare arrangements and association health plans, according to the report.
"If this trend continues, the morbidity of the remaining ACA-compliant small group risk pools would be expected to deteriorate," according to the release.
The report also identifies trends that are likely to play a role but on a smaller scale, such as new federal regulations taking effect next year that standardize ACA plan requirements and limit nonstandard options. Trends in telehealth use as well as state-level policies including new public option plans are also in the mix, according to the report.