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
|Average (NY & VT Included)||Average (NY & VT Excluded)||Minimum (NY & VT Excluded)||Maximum (NY & VT Excluded)|
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... .