The Marketplace enables consumers to comparison shop for a plan that meets their needs and budget. Many will receive financial assistance to help with the cost of their monthly premiums. In 2014, 64 percent of individuals who selected a plan in the Marketplace selected the lowest cost (43 percent) or second-lowest cost plan (21 percent) in their metal tier—indicating that many Marketplace consumers shop on price.7
Consumers who return to the Marketplace will see that premiums for the benchmark plan (the second-lowest cost silver plan in each market) increased modestly, by 2 percent on average this year before tax credits. For example, the average premium for the benchmark silver plan for a 27-year-old increased from $218 in 2014 to $222 in 2015 before tax credits.8 The benchmark silver plan premiums are significant because the premium tax credits that are available to help make Marketplace coverage more affordable are calculated based on the premium for those plans.9 The lowest-cost silver plan in each market saw modest growth of 5 percent on average before tax credits.
The new Marketplace is competitive and dynamic. As described in the last section, the 2015 Marketplace includes many new issuers and plans, and issuers are competing to offer more affordable options to consumers. This means that the plan that was the benchmark or lowest-cost plan in 2014 is often not the benchmark or lowest-cost plan in 2015, so it will be important for returning consumers to shop around in 2015 to ensure that they select the plan that best meets their circumstances.
More than 7 in 10 current Marketplace enrollees can find a lower premium plan in the same metal level by returning to shop. For instance, the average lowest-cost premium for a silver plan available to current silver-level enrollees is $336 for 2015. The average consumer who bought a silver plan last year and decides to shop for a better deal this year can save $41 a month before tax credits—which works out to $492 a year. If all silver plan holders switch to the lowest-cost silver plan for 2015, the total savings for the year would be $1.6 billion. Across all metal levels, the total savings in premiums would be over $2 billion (see Table 2 for all metal levels). These savings represent the sum of savings to consumers and taxpayers.
Eighty-five percent of consumers who selected a plan for 2014 coverage received premium tax credits to help with the cost of monthly premiums. Consumers who receive premium tax credits are protected against excessive rate increases because the Affordable Care Act sets a cap on the amount they pay for the benchmark, second-lowest silver plan. Additionally, during the open enrollment period, all new and returning Marketplace consumers can easily compare plans’ pricing and benefits to shop for a plan with a lower premium.
Potential Savings from Shopping Based on Premium if Current Marketplace Enrollees Switch to 2015 Lowest-Cost Premium Plan within Metal Level for 35 States
Premiums Before Tax Credits, Current Marketplace Enrollees
|Average Lowest-Cost 2015 Monthly Premium Within Metal Level||$265||$336||$382||$439|
|Average 2015 Monthly Premium Savings if Consumers Switch to Lowest-Cost Plan within Metal Level||$36||$41||$54||$55|
|% of Enrollees Who Could Save on Premium Costs by Switching to the Lowest-Cost Plan in Metal Level||78%||78%||77%||71%|
|ANNUAL Average Potential Savings in Premium Costs per Enrollee||$432||$492||$658||$660|
|MONTHLY Total Amount of Potential Savings in Premium Costs across All Enrollees||$28 M||$131 M||$23 M||$11 M|
|ANNUAL Total Amount of Potential Savings in Premiums Costs Across All Enrollees||$336 M||$1.6 B||$271 M||$127 M|
Source: Plan information is from the plan landscape files as of November 2014 for 35 states. Enrollment information is based on active plan selections in the CMS Multidimensional Insurance Data Analytics System (MIDAS) as of May 12, 2014.
Note: Amounts presented here do not take into account potential tax credits. The lowest-cost premium refers to the plan with the lowest premium within the county within each metal tier and is based on all the plans available in 2015. The lowest cost plan does not take into account other cost-sharing features, but refers only to the cost of the premium charged for that plan. In some cases, plans were tied for lowest premium. This analysis includes only enrollees linked to complete plan and premium data for both 2014 and 2015, and excludes tobacco users. Catastrophic plans, which are not available to all consumers, were not considered in these calculations. We assume that all enrollee characteristics are unchanged and calculate premiums based on the same age, family composition, and household income as percentage of the FPL as in 2014. See the “Methods and Limitations” section at the end of this brief for more details.
7 Percentages are based on analysis of 2014 Marketplace plan selections in 36 states. See: Amy Burke, Arpit Misra, and Steven Sheingold, “Premium Affordability, Competition and Choice in the Health Insurance Marketplace, 2014,” ASPE Research Brief, June 2014, available at: http://aspe.hhs.gov/health/reports/2014/Premiums/2014MktPlacePremBrf.pdf
8 Plan and premium information are from the Center for Consumer Information and Insurance Oversight as of November 2014 for 35 states. Amounts represent monthly premiums and do not take into account potential premium tax credits. For averages, each county’s second-lowest cost silver premium is weighted by the number of Marketplace plan selections in each county. See Table 7 at the end of this brief for average premiums by state.
9 The Affordable Care Act specifies that an individual or family with a particular household income who is eligible for the premium tax credit will be required to pay no more than a fixed percentage of their income for the second-lowest cost silver plan available in the Marketplace in their local area. See the “Methods and Limitations” section at the end of this brief for more details on benchmark plans and premium tax credits.