Exchange premiums still lower than employer-sponsored plans without subsidies

Rising premiums for coverage on the Affordable Care Act’s insurance exchanges have been labeled as a sign of the “death spiral” of the post-ACA market, but a report from the Urban Institute said those plans still offer lower premiums than employer-sponsored insurance.

The study said the average monthly premium for an employer-sponsored plan was $516 nationally, compared to the marketplace average of $464 per month for the second-lowest-cost silver plan (called the ACA’s “benchmark premium”) without federal subsidies. The researchers adjusted marketplace premiums to account for differences in actuarial value, utilization and the age distribution of enrollees.

“Thus, with few exceptions, the level and growth of nongroup premiums in the marketplaces should not be interpreted as evidence that these new markets are weak,” wrote researchers Linda Blumberg, John Holahan and Erik Wengle of the Urban Institute’s Health Policy Center. “Nongroup insurance, when adjusted to make its premiums comparable to employer premiums, is much more often than not lower cost than the average coverage offered through employers. But the persistent, uncomfortable truth is that healthcare is an expensive commodity, regardless of the market in which one purchases it.”

There were exceptions, however, as the benchmark premium for exchange plans was higher than employer coverage in 12 states: Alaska, Arkansas, Delaware, Georgia, Louisiana, Missouri, Nebraska, North Carolina, South Dakota, Vermont, West Virginia and Wyoming. Those differences could sometimes be explained by states having small nongroup markets making high utilizer costs more difficult (such as in Alaska or Wyoming) or by having low insurer participation in the marketplace (North Carolina).

The study also compared premiums in 32 metropolitan areas and found four where marketplace premiums were higher than employer-sponsored plans: San Francisco, Atlanta, New Orleans and Charlotte.

Researchers said the difference in marketplace and employer-sponsored plans may be due to greater use of narrow-network plans on the exchanges (one analysis said 75 percent of 2017 offerings will use some sort of managed plan design) or the ability for individuals to compare premiums before purchasing coverage. Another explanation echoed arguments made by ACA supporters within the Obama administration.

“The large differentials between nongroup and employer premiums in many areas also may indicate that nongroup premiums continue to be underpriced in some areas; the large premium increases seen in several states may be part of the process through which these markets will reach a stable equilibrium,” the study said.

CMS Acting Administrator Andy Slavitt said at a Sept. 14 congressional hearing that the premium increases may be the result of a one-time effect caused by the end of temporary risk adjustment mechanisms for insurers.