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Prices for the average health-insurance plan under the Affordable Care Act have been taking off lately, and this year is no different.
Linda J. Blumberg, John Holahan, and Erik Wengle at the Robert Woods Johnson Foundation and Urban Institute, decided to find out just how much prices increased between the 2015 and 2016 enrollment periods and why.
First off, the researchers said using a national aggregate didn’t make much sense as a way of understanding how and why premium prices were increasing because of the variance of the exchanges where the insurance plans are offered.
“We conclude that a national average rate of premium increase is a fairly meaningless statistic since different markets are having very different experiences,” the report said.
“The focus of attention should be on understanding the wide variability by identifying the characteristics of markets that have experienced high premiums or high growth in premiums and of markets with lower premiums or lower growth in premiums.”
Only five states saw a decrease in premium cost this year, while 12 states had increases of more than 20% on average. The states with the biggest changes are predominantly in the Midwest, but almost every region got hit with price jumps.
The variance is startling. The largest increase came from Oklahoma, which saw premium prices surge 41.8% this year, while on the other end Indiana’s prices decreased by 12.1%.
In all, about 48% of the US population lives in areas where prices decreased or increased by less than 5%; 26.3% of the population lives in areas that had an increase of more than 15%.
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The researchers found a variety of reasons for the discrepancy in prices, but the biggest difference-maker was competition.
“However, the most important factors associated with lowest-cost silver plan premiums and premium increases are those defining the contours of competition in the market,” the report concluded. “Rating areas with more competitors had significantly lower premiums and lower rates of increase than those that did not.”
The paper also found that there was one player that had more of an effect on prices than any other provider.
“Those rating areas with a Medicaid insurer competing in the marketplace also have lower premiums and lower rates of increase than those regions without a Medicaid insurer competing,” Blumberg, Holahan, and Wengle said.
This is an issue as insurance companies evaluate the profitability of the state exchanges. With considerable political pushback against expanding Medicaid, private insurers will have to carry most of the load and provide competition.
The nation’s largest insurer, United Healthcare, has already dropped out, leaving more (though not significantly more) Americans with one or two choices. If other insurers were to take a similar tact, though unlikely, it could cause an even further increase in prices.