Urban Institute: ACA benchmark rates fell for 3rd straight year. Here's why

The average premium on the Affordable Care Act’s exchanges fell by 1.8% in 2022, declining for the third straight year, a new report finds. 

A report released Tuesday by the Urban Institute found more insurers joining the exchanges if the state expanded Medicaid or had a state-run exchange. The exchanges saw record enrollment of 14.5 million in 2022 thanks largely to enhanced subsidies that lowered insurance costs. 

Urban looked at the average benchmark premium, which is the second-cheapest silver tier plan and the plan tied to eligibility for premium tax credits. 

The premium fell by 1.8% compared to the year before, roughly the same decline as 1.7% in 2021. But premiums in 2020 declined by 3.2%. 

“In contrast, premiums for employer-sponsored increased by 3.9% in 2020 and 3.6% in 2021,” the analysis said. 

There were wide variations in the declines in premiums. Urban saw that 11 states had benchmark premiums above $500 a month for a 40-year-old nonsmoker, while six states had premiums below $365 a month. 

Which insurer participated in a rating region was a key indicator of the variation in the premiums. For instance, Blue Cross Blue Shield, national or regional insurers and provider-sponsored payers were associated with “greater than average benchmark premiums.”

On the other hand, a Medicaid insurer in the rating region led to lower benchmark premiums. 

“The number of competing insurers was important; the presence of one insurer meant premiums would be $189.50 per month higher, on average, relative to a market with five or more insurers,” the analysis said. But premiums were also lower if the state had expanded Medicaid, offered a reinsurance policy or ran its own exchange.

Urban pinpointed increases in benchmark premiums in different areas than other factors, chief among them higher unemployment rates that Urban used “as a proxy for the severity of COVID-19 outbreaks in the rating region, led to higher premium increases (we assumed more COVID-19 cases led to more job losses),” the analysis said.






Another key factor was an increase in the number of insurers participating in the exchanges this year. Urban looked at insurers across 58 regions and found there were 288 plan issuers this year compared with 198 in 2020.

“All types of insurers increased their participation in Affordable Care Act marketplaces, but the most striking development was the substantial premium increases by national commercial insurers UnitedHealthcare and Cigna, and Aetna,” the analysis added. 

The analysis comes on the heels of major enrollment gains on the exchanges this year. The Biden administration recently announced that 14.5 million people signed up for ACA coverage during the most recent open enrollment period, with the monthly premium falling by 22% to $111.

However, a major driver of those sign-ups was a boost to income-based subsidies passed under the American Rescue Plan Act last year. The increased subsidies ensured that people who earned more than 400% of the federal poverty level—previously the cutoff for eligibility for subsidies—would not pay more than 8.5% of their annual income on healthcare costs.

The subsidies are expected to expire after this year, but advocates are pressing Congress to extend them.