Analysis

The 10 percent problem:

Future health insurance marketplace premium increases likely to reach double digits

How might expiration of the risk corridors and reinsurance programs after 2016 influence health plans’ strategies for setting their health insurance marketplace premiums? Deloitte’s modeling estimates increases of 10 percent or more could be likely over the next three years in order for plans to reach or maintain profitability in 2017.

Health plans setting their premiums for the public health insurance marketplaces have faced one of the most challenging pricing scenarios in recent history. A new set of rating rules, a competitive environment, and ambiguity around enrollee populations collided to create unprecedented uncertainty.

While the Affordable Care Act (ACA) established three programs – risk adjustment, risk corridors, and reinsurance – to address some of this uncertainty, two of the programs will expire after 2016. How might these expirations and other policy levers influence health plans’ strategies for setting their marketplace premiums?

This report presents a forward-looking view for health plans participating in the marketplaces, with modeling by Deloitte Consulting LLP’s health actuarial practice estimating the effect of the risk corridors and reinsurance program expirations on health plan premiums. Among key observations:

  • Premium increases of 10 percent or more could be likely over the next three years as health plans prepare for the end of the risk corridors and reinsurance programs and try to reach or maintain profitability in 2017.
  • Certain policy levers are influencing health plans’ options for premium increases and their decisions around insurance marketplace participation. Among these are pressures to not exceed the 10 percent rate increase threshold, to offer broader networks, and to discontinue other strategies to keep prices down.
  • Health plans should consider a multi-year strategy for setting their marketplace premiums and test its execution by modeling different scenarios.  
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