When it comes to health insurance, you want to know what you’re paying for – especially if prices are changing. As District businesses and residents look ahead to the upcoming health insurance enrollment season, understanding the factors that affect rates is helpful for anticipating costs and selecting appropriate plans.
Recently, we wrote about the changes ahead for health insurance sold on DC Health Link, the District’s insurance marketplace established by the Affordable Care Act (ACA). The final rates approved by DC’s Department of Insurance and Banking include plans with an average decrease of 2.2 percent to plans with an average increase of 22.8 percent – and some plans with premium increases of as much as 75 percent.
There are many reasons DISB has identified to explain rising health insurance costs, including basic inflation in health care, changes in the level of health services used, and the expiration of some ACA provisions that helped limit rate increases:
- Updated membership assumptions. Prior to the ACA, insurers could use beneficiaries’ health information to set the price of premiums or determine what coverage could be offered. This practice has been largely abolished, and insurers must now perform rigorous analyses to estimate the health of beneficiaries and the amount of services they’ll use, and price premiums accordingly. As insurers get a better understanding of their consumers, they can price more accurately.
- Changes in cost and utilization of health services. Although insurers do their best to price plans, these assumptions may change – especially if consumers are incurring costs or utilizing services more or less than expected, like if beneficiaries are going to their doctor’s office more frequently, or if the cost of their prescription drugs have increased.
- Completion of the transitional reinsurance program. This program, which was meant to help stabilize the insurance market in the ACA’s first years, will expire at the end of 2016. It has imposed a tax on most insurance plans, and uses the funds to subsidize insurers for their consumers with higher costs.
- Change in expected risk adjustment transfer payments. This program is another feature of the ACA that will expire. It provides payments to health insurers that attract high-risk enrollees, like those with expensive chronic conditions, to lessen the incentive for insurers to avoid those consumers or charge higher premiums.
- Changes in utilization of health services when switching tiers. All marketplace health plans are organized by tiers: Bronze, Silver, Gold, and Platinum. Bronze plans tend to have the least expensive monthly premiums but more out-of-pocket costs, while Platinum plans typically have the most expensive premiums, but fewer out-of-pocket costs. If consumers switch from one tier to another (like Bronze to Platinum), insurers anticipate that consumers will change the amount of services they use based on what is now covered under their new health plan.
Open enrollment for DC Health Link begins on November 1 and runs through January 31, 2017. For more information on selecting the right plan for your budget and health needs, check out DC Health Link’s Plan Comparison Tool for Individuals and Families.
