Section II Highlights
Overview of Premiums for the Second-Lowest Cost Silver Plans:
- 82 percent of people eligible to purchase a Marketplace plan live in rating areas with 3 to 11 issuers; 96 percent live in rating areas with 2 to 11 issuers.
- On average, consumers eligible to purchase a Marketplace plan can choose from 5 health plan issuers and 47 Marketplace plans across all metal levels—of which, approximately 16 are silver plans.
- The national average for the second-lowest cost silver plan premium rate is $226 per month for a 27-year-old, ranging between a low of $127 to a high of $406.
- Second-lowest cost silver plan premium rates were comparable for rating areas located in both Federally-facilitated Marketplace (FFM) and State-based Marketplace (SBM) states and those located in states that chose to expand their Medicaid programs under the Affordable Care Act and those states that did not choose to expand.
Rating areas are geographic markets where insurers compete on premiums and other factors for customers in the Marketplace. The number of rating areas14 varies by state from a low of one rating area in smaller states like Rhode Island or Vermont to a high of 67 rating areas in Florida—corresponding to each of Florida’s 67 counties. However, rating areas are often an aggregation of counties. On average, there are approximately 10 rating areas per state for the 50 states and the District of Columbia.
There were a total of 266 issuers by state15 offering Marketplace plans, ranging from a low of one issuer in New Hampshire and West Virginia to a high of 16 issuers in New York. New issuers16 represent almost 26 percent of all state issuers. Among the new entrants, the majority had a history as Medicaid issuers and now offer commercial coverage through the Marketplace. New entrants also include consumer-operated and oriented plans (CO-OPs) authorized by section1322 of the Affordable Care Act.17
On average, there are approximately five health plan issuers per rating area, ranging from one to 11 issuers. The rating areas with the most choice as measured by the number of issuers are located in New York and Oregon; the rating areas with the most choice as measured by the number of Marketplace plans available are located in Wisconsin and Florida. On average, consumers shopping in the Marketplace can choose from approximately 47 Marketplace plans.
TABLE 5 Summary of Rating Areas, Health Plans, and Health Plan Issuers by Rating Area or State, 2014 Health Insurance Marketplace
Source: ASPE computations of plan and premium data from the following publicly available sources: Healthcare.gov, state rate filings (where available), and State-based Marketplace websites. Averages are weighted by the QHP-eligible18 population in each rating area estimated using the 2011 American Community Survey Public Use Microdata Sample.
As displayed on Figure 4, 82 percent of the people eligible to purchase a Marketplace plans live in rating areas with at least three issuers of Marketplace plans and 96 percent live in areas with at least two issuers. Fifty six percent can choose from plans offered by five or more issuers. This compares favorably with those covered by employer-sponsored insurance. One study found that approximately 46 percent of employees could choose from more than two issuers, while 25 percent had two issuer options, and the remaining 24 percent had only one issuer of plans from which to choose.19 In addition, prior to the implementation of the Marketplace, the individual market was dominated by one or two different issuers in most states. In 2012, 11 states had 85 percent of the individual market covered by the largest two issuers in the state. In 29 states, more than half of all enrollees in the individual market were covered by only one issuer and in 46 states (including DC)—two issuers covered more than half of the individual market.20
FIGURE 4: Percent of QHP-Eligible Population by Number of Issuers in a Rating Area, 2014 Health Insurance Marketplace
Source: Source: ASPE computations of plan and premium data from the following publicly available sources: Healthcare.gov, state rate filings (where available), and State-based Marketplace websites.
14 Rating areas are state-defined pricing regions for issuers. They overlap with the issuer service areas in many, but not all, cases. In general, the number of issuers or plans available in a rating area will be the number of choices available to all individuals and families living in that rating area. Issuers are not required to offer a Marketplace plan in every rating area within a state, however, so the number of available issuers and Marketplace plans varies by rating area. These totals exclude catastrophic plans, which are not available to all enrollees.
15 This is the number of unique issuer-state combinations nationally. For example, Aetna offers coverage in both Arizona and Florida, which is considered as two issuer-state combinations. Therefore, although Aetna is one company, it would be counted twice in the summation of issuer-state combinations for the total of 266 nationally.
16 New issuers are defined as issuers participating in the individual market for the first time in a given state.
17 The Consumer-Operated and Oriented Plan (CO-OP) program was created by the Affordable Care Act to provide support for the creation of nonprofit, member-controlled health insurance plans that offer ACA-compliant policies in the individual and small business markets.
18 For the purposes of this analysis, we define “QHP eligible” as U.S. citizens and others lawfully present who have only individual market coverage or are uninsured and have incomes that are: above 133 percent of the FPL for adults in Medicaid expansion states; above 100 percent of the FPL for adults in non-expansion states; and above 250 percent of the FPL for children (age 0-18) in all states. These estimates do not take into account the eligibility requirements relating to other minimum essential coverage.
19 Meredith B. Rosenthal, Bruce E. Landon, Sharon-Lise T. Normand, Richard G. Frank, Thaniyyah S. Ahmad, Arnold M. Epstein. 2007. “Employer’s Use of Value-Based Purchasing Strategies.” JAMA. 2007 Nov 21. 298(19):2281-8.
20 The White House, "Early Results: Competition, Choice, and Affordable Coverage in the Health Insurance Marketplace in 2014,” Available at: http://www.whitehouse.gov/system/files/docs/competition_memo_5-30... .
Variation in Premiums—Second-Lowest Cost Silver Plan Premium by Rating Area
We are interested in understanding the pattern of premium levels across rating areas. There are several premium measures that might be used in order to analyze variation in premiums across rating areas. In this brief we study differences with respect to a benchmark premium (the second-lowest cost silver plan premium in a rating area), all premiums and a measure of premium dispersion (coefficient of variation). 21 One rationale for choosing to focus on the second-lowest cost silver plan premium is that it is the benchmark used to determine premium tax credits. If premiums for second-lowest cost silver plans are lower, the cost of tax credits will also be lower, saving taxpayers money.22 In addition, evidence from other insurance markets suggests that lower-cost plans may be of particular importance to consumers.23,24 Notably, the majority (65 percent) of people who selected a Marketplace plan during the initial open enrollment period selected a silver plan.25
In most states, premium rates differ according to a person’s age (at the time of the policy’s effective date). In contrast, New York and Vermont do not permit age rating, meaning that an individual’s premium is not dependent upon the individual’s age. In other words, a 21-year-old in New York or Vermont would pay the same rate as someone who is 64-years-old, despite the difference in age.
Table 6 presents the average second-lowest cost silver plan premium by selected ages across rating areas. The average second-lowest silver plan premium for a 27-year-old individual is approximately $226 per month before tax credits and drops to $219 per month (3 percent) when New York and Vermont, which do not age rate, are excluded from the calculation. A 27-year-old iving in rating area 8 in Minnesota (which includes 11 counties in the greater Minneapolis area) can purchase the second-lowest cost silver plan for $127 a month—almost half the national average. As a point of comparison, in 2013, statewide premiums averaged across covered employees of all ages in the small group market were approximately $446 per month in Minnesota.26
Figure 5 shows the average second-lowest cost silver plan premium by selected ages and rating areas grouped by Marketplace type (FFM or SBM) and state decisions to expand their Medicaid programs or not. By the end of the initial open enrollment period (March 31, 2014), 25 states and the District of Columbia had chosen to expand their Medicaid programs under the ACA, including all 15 SBM states and 11 of the 36 FFM states.28 The premiums are comparable between the rating areas based on market type and the decision by a state to expand or not to expand its Medicaid program under the Affordable Care Act.
TABLE 6 Second-Lowest Cost Silver Plan Monthly Premiums (before Tax Credits)* by Selected Ages and Rating Area, 2014 Health Insurance Marketplace
Source: ASPE computations of plan and premium data from the following publicly available sources: Healthcare.gov, state rate filings (where available), and State-based Marketplace websites. Averages are weighted by the QHP-eligible population in each rating area estimated using the 2011 American Community Survey Public Use Microdata Sample.
*These premiums represent the premiums before the application of tax credits. Of those consumers who purchased plans through the Marketplace, 85 percent selected plans with financial assistance.27
FIGURE 5: Second-Lowest Cost Silver Plan Premium by Age Group, Marketplace Type, and State Medicaid Expansion Status, 2014 Health Insurance Marketplace
Source: ASPE computations of plan and premium data were taken from the following publicly available sources: Healthcare.gov, state rate filings (where available), and State-based Marketplace websites. The national average is weighted by the QHP-eligible population in each rating area estimated using the 2011 American Community Survey Public Use Microdata Sample. Second-lowest cost silver plan premiums for rating areas in New York (nine rating areas) and Vermont (one rating area), which do not establish premium rates based on age, were excluded from the analysis.
21 The coefficient of variation is a normalized measure of dispersion defined as the ratio of the standard deviation to the mean. Here it is used to measure the dispersion in premiums within a rating area.
22 As premiums decline, the amount of public funds needed to subsidize consumers also declines.
23 Leemore Dafny, Jonathan Gruber, and Christopher Ody. “More Insurers Lower Premiums: Evidence from Initial Pricing on the Health Exchanges.” NBER Working Paper No. 20140. May 2014.
24 Keith M. Ericson and Amanda Starc. “Heuristics and Heterogeneity in Health Insurance Exchanges: Evidence from the Massachusetts Connector.” American Economic Review, 2012. 102(3) 493-97.
25 The Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, May 1, 2014, “Health Insurance Marketplace: Summary Enrollment Report for the Initial Annual Open Enrollment Period,” http://aspe.hhs.gov/health/reports/2014/MarketPlaceEnrollment/Apr2014/ib...
26 John Holahan. “Will Premiums Skyrockets in 2015?” In-Brief: Timely Analysis of Immediate Health Policy Issues. The Robert Wood Johnson Foundation/Urban Institute. May 2014
27 Represents individuals who have selected a Marketplace plan, and qualify for an advance premium tax credit (APTC), with or without a cost-sharing reduction (CSR) from: The Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, May 1, 2014, “Health Insurance Marketplace: Summary Enrollment Report for the Initial Annual Open Enrollment Period,” http://aspe.hhs.gov/health/reports/2014/MarketPlaceEnrollment/Apr2014/ib....
28 These numbers represent the status of states regarding FFM, SBM, and Medicaid expansion decisions for the time of the initial open enrollment period. A FFM state is one in which the Marketplace is administrated by the Federal government, and a SBM is one in which the state opted to create and operate its own Marketplace. Here we include states that are a hybrid of the FFM and SBM, a State Partnership Marketplace (SPM) in the FFM group of states. For
current information on the sates regarding Medicaid expansion decisions see http://www.medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/D... .