ACA benchmark premiums up 3.4% in 2023

Premiums for benchmark plans purchased on Affordable Care Act (ACA) Marketplaces increased in 2023 while the number of new companies offering plans slowed somewhat compared to earlier years, according to a new study.

The study, funded by the Robert Wood Johnson Foundation and prepared by the Urban Institute, examined changes in ACA Marketplace premiums for each state and the District of Columbia. It found that average premiums for benchmark plans were up 3.4% from 2022-2023. That compares with a 2.2% decline between 2019 and 2022.

“The national increase in Marketplace benchmark premiums was mainly due to the strong economy and related inflationary pressures, the overall increase in healthcare costs, and potential uncertainty about a changing risk pool,” John Holahan, a fellow at the Urban Institute and one of the report’s authors, said in an accompanying news release.

The analysis provides premium and insurer participation data from the 33 states using the Healthcare.gov website and the 18 state-based Marketplace websites. State average benchmark premiums and growth rates were calculated from region-level data for more than 500 rating regions.

The results reveal significant variations in benchmark premium changes by state. States with the biggest percentage increases included New Mexico (14.5%), South Carolina (111.7%), Connecticut (10.7%), and Ohio (10.6%)

The largest declines were in Virginia (-18.4%), Idaho (-7.7%), Nebraska (-5.3%) and Alabama (-4.9%). Increases in the number of insurers in the rating region were associated with less growth in benchmark premiums.

Similarly, premium levels themselves are determined to a large extent by the number of insurers competing in a given rating region, the study finds, with more insurers leading to lower benchmark premiums and vice-versa. In regions with only one or two insurers premiums averaged $128 and $119 higher, respectively, than regions with five or more insurers.

The authors attribute the turnaround in 2023 premiums compared to the previous years to inflationary pressures resulting from the strong economy, the overall increase in heath care costs, and concerns over the impact on the risk pool stemming from the April 1 termination of Medicaid’s continuous coverage requirement.

“Marketplace premium increases were relatively modest in part because healthcare inflation has lagged other sectors, a situation which may well change,” Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation said in the news release. “While competition creates some welcome downward pressure on premiums, the expansion of the Premium Tax Credits has been the most critical factor driving the significant enrollment growth we have seen in the last two years.”