For ACA enrollees, premium increase next year mostly depends on Congress
Health insurers are now submitting to state regulators proposed premiums for 2023 for plans offered in Affordable Care Act (ACA) markets. Changes to these unsubsidized premiums are getting a lot of attention, but what really matters most to people buying coverage is how much they’re paying out of pocket. And the amount that ACA Marketplace enrollees pay is largely determined by the size of their premium tax credit. Generally speaking, when unsubsidized premiums increase, premium tax credits also increase, which means that dependent premium payments generally remain stable for those receiving financial assistance.
For just over a year, ACA Marketplace registrants have enjoyed enhanced tax credits under the American Rescue Plan Act (ARPA), which Congress passed as temporary pandemic relief. The enhanced aid significantly reduces patient premiums and millions of enrollees have seen their premium payments cut in half thanks to these additional subsidies. ACA Marketplace registrations hit an all-time high of 14.5 million people in 2022, including nearly 13 million people who received tax credits to lower their premiums.
Soon, the vast majority of those nearly 13 million people will see their premiums increase if the ARPA grants expire, as they should at the end of this year.
The ARPA grants were enacted temporarily for 2021 and 2022 as pandemic relief, but congressional Democrats are considering extending or making the expanded grants permanent as a way to build on the ACA, as the President Biden had proposed during his 2020 campaign. If Congress does not extend the subsidies, direct bonus payments will return to pre-ARPA levels, which would be seen as a significant bonus increase for millions subsidized enrollees. In the 33 states using HealthCare.gov, premium payments in 2022 would have been 53% higher on average except for additional ARPA grants. The same is true in states that operate their own exchanges. In New York, for example, bonuses for consumers eligible for the tax credit would be 58% higher if not for ARPA. Such an increase in direct premium payments would be the largest ever seen by the millions of grant recipients. The exact amount of a premium increase enrollees would see depends on their income, age, premiums where they live and changes in premiums charged by insurers for the next year.
For states, the timing of congressional action on ARPA grants is important for both tariff review and state registration systems. State-based exchanges — as well as the federal government, which runs HealthCare.gov — will need to reprogram their enrollment websites and train consumer support staff on the policy changes before enrollment opens in November. States will begin making these changes as soon as this month. Additionally, as insurers bring premiums up for review, state insurance commissioners and other regulators must assess the reasonableness of 2023 rates, and part of that determination will hinge on the future. grants from ARPA. The nonpartisan National Association of Insurance Commissioners (NAIC) has written to Congress seeking clarification on the future of ARPA grants. by July.
For insurers, the timing is important, as premiums for 2023 will be locked in later this summer. Last summer, when insurers were setting their 2022 premiums, some said ARPA had a slight downward effect on their premiums, depending on the risk profile of the affiliates. Insurers are currently setting premiums for 2023 and some may be factoring in an upward effect on premiums if they expect ARPA subsidies to expire. Premiums for 2023 are locked in by August, so if Congress doesn’t act before its August recess, whatever assumptions insurers make about the future of ARPA grants, they will be locked in on their 2023 premiums. Additionally, while not necessarily on the same scale as the uncertainty seen in 2017 around the ACA repeal and replacement debates (when many insurers explicitly stated that uncertainty was driving up their premiums), it’s possible some insurers are pricing 2023 plans a little higher than they otherwise would, simply because of the uncertainty surrounding the future of ARPA’s enhanced subsidies. The NAIC’s Letter to Congress warned that “uncertainty may lead to higher premiums than necessary”.
For enrollees, timing is important both to know how much they will pay and to maintain ongoing coverage. Almost all of the 13 million subsidized enrollees will see their out-of-pocket premium payments increase if the ARPA subsidies expire. But if the grants are renewed by Congress, but not until the end of the year just before the grants expire, there could still be a disruption if the states and federal government don’t have enough time to put updated their registration websites to reflect the enhanced grants. In this scenario, the millions of enrollees who currently have access to $0 premium Marketplace plans may have to pay a premium in January, putting them at risk of losing their coverage due to non-payment. Similarly, middle-income enrollees could temporarily lose access to tax credit advance payments in January, preventing them from maintaining coverage.
Congressional action or inaction on ARPA grants will have a far greater influence on the amount of premiums subsidized ACA Marketplace enrollees will pay for their premiums than market-driven factors that affect the unsubsidized premium. Even if unsubsidized premiums remain stable through 2023, the expiration of ARPA subsidies would result in the largest increase in premium payments borne by most enrollees in this market. It would essentially be a return to pre-pandemic normalcy, but the millions of new enrollees and others who received temporary premium relief may not see it that way.