Premiums for Affordable Care Act plans next year could be all over the map for a number of reasons, according to the American Academy of Actuaries' issue brief, “Drivers of 2020 Health Insurance Premium Changes.”

The brief provides an actuarial perspective on key factors involved in setting 2020 health insurance premiums for the individual market, though many of the factors are also relevant to the small group market, according to the authors

The top factor that will likely impact premiums: continued growth in health care costs. The medical trend is projected to be consistent with that for 2019, which ranged from about 5 percent to 8 percent.

“Although the growth in spending for specialty drugs is expected to remain high, spending growth for prescription drugs overall has leveled off and is expected to be similar to or slightly higher than medical spending growth,” the authors write.

Another key factor: if healthier individuals and groups opt for now available short-term limited duration insurance and association health plans, which could then drive up premiums for ACA plans. This could increase in 2020 when employers will be able to offer workers health reimbursement arrangements to buy STLDI coverage.

“The impact of these rules on the individual market will depend on how effectively the guardrails prevent employers from transferring their most expensive employees to the individual market,” the authors write. “An influx to the individual market of a balanced cohort of workers could help stabilize the individual market. However, if employers with less-healthy workers shift to offering individual market HRAs, the premiums in the individual market will increase.”

The impact of the elimination of the individual mandate penalty will actually vary from state to state, according to the issue paper.

“Most insurers already incorporated the expected effects of eliminating the mandate penalty into their 2018 and/or 2019 rates, under the assumption that healthier enrollees would leave individual market ACA plans,” the authors write. “In many cases, these premium loads overstated the impact. As a result, depending on the characteristics of the state, some insurers may reduce 2020 premium loads for the elimination of the mandate penalty.”

Other key factors shaping 2020 individual market premiums include:

The possibility of issuers incorporating extra conservatism in their premiums based on uncertainties regarding expected risk adjustment transfers.
Adjustments to assumptions used to build the cost of cost-sharing reduction subsidies into premiums.
State actions to implement reinsurance programs, impose individual mandate penalties, or enact rules that would facilitate or prohibit the availability of alternative coverage options.
The reinstatement of the health insurance provider fee.

Other potential drivers of premium changes include benefit package changes; market competition; changes in provider competition and reimbursement structures; changes in administrative costs and risk charges and changes in geographic factors, according to the issue brief.

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Instant Insights /

Key factors driving 2020 ACA premium increases

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