Substantial underpricing of health plans in the early years of the ACA marketplace likely led to large premium increases as payers tried to balance the cost of new enrollees, a recent Urban Institute study found.
Researchers analyzed nongroup health insurance marketplace premium and payer data from HealthCare.gov and the websites of state-based marketplaces for the report. The premium costs for the lowest and second-lowest-cost silver plan offerings in each rating area were included in the data.
While the most popular health plans sold through the ACA marketplace saw a 25 percent premium hike on average this year, the study found premium increases nationwide varied drastically depending on which markets functioned well. For instance, premium increases for silver plans between 2016 and 2017, as well as between 2015 and 2017, reflect that the more insurers competing in a certain region, the lower the premium increase. In addition, in a given market, payer exit is linked to faster premium growth and insurer entrance is associated with slower premium growth.
Researchers also found the higher the premiums were in the data set's base year — either 2015 or 2016 — the slower the growth in premiums, according to the report.
Study authors concluded "the first years of reform were characterized by serious underpricing of premiums as insurers either misunderstood the market or priced overly aggressively in pursuit of market share. Underpricing has leveled in the last year or two, but at the cost of some substantial premium increases."