Inflation, lingering effects of COVID-19 will impact 2023 premiums
The potential end of pandemic-related public policies may also shrink enrollment and worsen the risk pool, causing premiums to rise.
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Several factors are expected to impact premiums in 2023, including global inflation, the lingering effects of COVID-19 and the end of enhanced subsidies for plans on the exchange, according to a new report from the American Academy of Actuaries.
Although the costs related to COVID-19 have become more predictable, especially with the worst days of the pandemic appearing to be over, there's still uncertainty regarding whether new variants of the coronavirus will evade immunity and continue to cause more serious health problems.
In addition to the direct and indirect effects of COVID-19 on health spending, the potential end of pandemic-related public policies can have an even greater impact in 2023. In particular, the expiration of American Rescue Plan subsidies is expected to shrink enrollment and worsen the risk pool, putting upward pressure on premiums.
Because of the timing around the subsidies' expiration, and uncertainty around when or if they'll be renewed, it will be difficult for insurers to account for them in rate filing. Some states are asking plans to submit rate documents for both scenarios.
By contrast, though, the resumption of Medicaid redeterminations could shift people from Medicaid to subsidized individual market coverage. This could result in an influx of people into the individual market, potentially improving the risk pool and lowering the premiums somewhat.
The report found it unclear whether this shift will improve or worsen the risk pool, and how that could vary by state. But it's expected to have a lesser effect on the risk pool relative to the expiration of ARP subsidies.
Another potential factor impacting premiums is inflation. It may have some effect on provider costs, but provider payments typically lag behind the rate of inflation, meaning the real effects may not be felt until later plan years. Still, workforce shortages could put upward pressure on provider payment rates.
Inflation has increased to levels not seen since 1982, the report found. Small business owners are finding it necessary to increase employees' wages and the prices they charge for their goods and services. It remains to be seen whether employers will stop offering coverage, reduce levels of coverage or decrease employer contributions to mitigate increases in their other business expenses. Any changes could vary by industry.
The actuaries said inflation's impact is likely to also extend to individual and small group premiums, and will affect providers' supply chains – which may affect negotiations over rate agreements with health plans.
WHAT'S THE IMPACT?
The 2023 individual and small group health insurance premium rate filing process is already underway.
Actuaries generally develop proposed premiums based on their projections of medical claims and administrative costs for pools of individuals or groups with insurance. Projected medical claims reflect unit cost and utilization levels, as well as the mix and intensity of services, all of which can vary by geographic area and from one health plan to another.
Risk pool composition is also important, as medical claims reflect the health status of individuals in the risk pool.
THE LARGER TREND
Relevant laws and regulations that govern various aspects of insurance plans – such as benefit requirements, issue and rating rules, and risk-mitigation programs – can affect the composition of risk pools and projected medical spending, as well as any amounts carriers need to include in premiums to cover the cost of taxes, assessments, fees they will pay and risk/profit charges.
All healthcare is local, the actuaries said, and rate changes will likely vary between individual and small group plans within the same geographic area, as well as variations between geographic regions. The expectation is that individual and small group premiums will increase at a greater rate than was experienced in 2022 and 2021, with average individual increases expected to exceed small group increases for similar plan designs.
Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com
