American flag and medical symbolIf healthier individuals and groups opt for now availableshort-term limited duration insurance and association health plans,it would then up premiums for ACA plans.

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Premiums for Affordable Care Act plans next year could be allover the map for a number of reasons, according to the AmericanAcademy of Actuaries' issue brief, “Drivers of 2020 Health Insurance PremiumChanges.”

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

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The top factor that will likely impact premiums: continuedgrowth in health care costs. The medical trend isprojected to be consistent with that for 2019, which ranged fromabout 5 percent to 8 percent.

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Related: Most states saw price hikes in ACA premiums in2018

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

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Another key factor: if healthier individuals and groups opt fornow available short-term limited duration insurance andassociation health plans, which could then drive up premiums forACA plans. This could increase in 2020 when employers will be ableto offer workers health reimbursement arrangements to buy STLDIcoverage.

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

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

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

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Other key factors shaping 2020 individual market premiumsinclude:

  • The possibility of issuers incorporating extra conservatism intheir premiums based on uncertainties regarding expected riskadjustment transfers.
  • Adjustments to assumptions used to build the cost ofcost-sharing reduction subsidies into premiums.
  • State actions to implement reinsurance programs, imposeindividual mandate penalties, or enact rules that would facilitateor prohibit the availability of alternative coverage options.
  • The reinstatement of the health insurance provider fee.

Other potential drivers of premium changes include benefitpackage changes; market competition; changes in providercompetition and reimbursement structures; changes in administrativecosts and risk charges and changes in geographic factors, accordingto the issue brief.

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Katie Kuehner-Hebert

Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.