Based on carrier rate filings with state regulatory agencies, this study built a nationally representative database and then examined trends in premiums prior to and immediately after the passage of the Affordable Care Act. Readers should view findings with caution – we found both the quantity and quality of filings wanting in many states. Some states had few filings and other states’ filings were not accessible. Because of the incompleteness of data, NORC conducted sensitivity testing. The objective was to determine if findings were sensitive to decision criteria for weighting and exclusions of carrier/state observations. NORC tested four different weighting and three different exclusion methods. Ultimately, NORC concluded that changes in point estimates derived from alternative decisions for weighting and exclusions would not result in changes to the main findings of the study.
With the passage of the Affordable Care Act, the growth of the SERFF system, and the proliferation of public websites with rate filing information, the transparency of the individual and small group insurance markets improved, and we expect, will continue to improve. Since the passage of the Affordable Care Act, 23 states have added a public website with information on rate filings. Six states have mandated that carriers file rate increases in SERFF format, thereby adding much-needed standardization to rate filings. Improved transparency should encourage more prudent buying by sophisticated purchasers such as brokers, agents, and navigators, which in turn may promote more price competition.
2011, the first year in which carriers were subject to the MLR requirements of the Affordable Care Act, was also the year of the lowest premium increases in both the individual and small group markets of the four years in the study. National estimates of premium increases were 2.9 and 2.1 percentage points below the figures for the previous year in the individual and small group markets, respectively. The percentage of premium increase requests receiving modifications peaked in 2010 and 2011 in both the individual and small group markets.
The largest three carriers within each state’s small group markets had lower rates of increases in premiums on average during the study period than did other carriers. Over the four-year study period, these large carriers raised rates by 10.7 percent less than smaller carriers did in the small group market. In the individual market, states with medium market concentration, defined as the largest carrier having between 50 and 79 percent of the market, had higher cumulative increases over the four years than did states with low and high market concentration by 8 and 11 percent, respectively.
In conclusion, in the first year of premium and MLR review under the Affordable Care Act, regulators modified and disapproved a higher percentage of requested premium increases than they did in the three years prior to the Affordable Care Act. Premium increases fell by 2.9 percentage points in the individual market and 2.1 percentage points in the small group market. Whether this decline represents a one-time saving or a long-term shift in the cost curve will only be evident in a few years. Lastly, although the study tracks trends in premiums before the passage of the Affordable Care Act and for the first year after rate review went into effect, the study’s methods do not enable us to assert that the ACA is responsible for the decline in premium increases from 2010-2011.