Average premium rates on the Arkansas Health Insurance Marketplace will be up 4.3 percent in 2016 as compared to 2015, according to information released today by the federal Department of Health and Human Services (HHS). That makes for relatively flat premium growth overall since the Marketplace began in 2014 — last year, premiums actually went down a little more than 2 percent (keep in mind that health insurance premiums typically go up every year, often dramatically, so the story of the last two years on the Arkansas Marketplace represents very good news). All of this is also good news for the private option, which uses plans purchased on the Marketplace, and projects to be well under the budget caps set by the federal government when the state enacted the policy.
The average rate changes calculated by HHS are based on the second-lowest-cost Silver plan (medium level of coverage) in each coverage area, considered the “benchmark” plan. The number is in line with what the Arkansas Insurance Department announced in August (4.4 percent rate increase for all plans, including those sold off the Marketplace).
The rate hikes in Arkansas are lower than the national average: HHS announced today that premium rates for insurance plans sold on the federally facilitated marketplaces (the 37 states, including Arkansas, which use healthcare.gov) will increase by an average of 7.5 percent. That’s a bigger jump than last year, when rates went up nationally 2 percent between 2014 and 2015, but is lower than the hikes projected by the Congressional Budget Office (and well below the doomsday “sky-rocketing” rate hikes predicted by some Obamacare opponents). The rates varied dramatically state to state; some actually went down, while some went up dramatically (Oklahoma had the biggest increase, 35.7 percent).
These marketplaces are the regulated health care exchanges created by Obamacare. People who don’t get insurance through a job or through a big public program like Medicare can shop on the marketplaces, with lower- or moderate-income people eligible for subsidies to help them with the cost of premiums (because these subsidies are linked to the price of the “benchmark” plan, they are protected from rate hikes). Around 84 percent qualified for subsidies last year, reducing premiums by an average of $270 per month.
In Arkansas, around 65,000 Arkansans purchased insurance on the Marketplace last year. The Marketplace is also where the Medicaid program purchases health insurance for more than 200,000 low-income Arkansans covered by the private option (private option beneficiaries get Silver-level plans).
The private option has helped keep premiums lower in Arkansas by adding a population that is significantly younger and healthier than the rest of the Marketplace. That is one reason that Arkansas has seen slower premium growth on the Marketplace than the national average over the last two years.
Meanwhile, relatively flat premiums on the Marketplace (again, about a 2 percent decrease from 2014 to 2015 and a 4 percent increase next year) bode well for the overall costs of the private option. Health insurance premiums typically grow much more than what we’ve seen in the last two years on the Arkansas Marketplace. Relatively lower premiums means relatively lower per-person costs for private option beneficiaries.
This year, the average per-person cost for the private option is around the same as it was last year. Will it bump up 4 percent next year given premium hikes? Not necessarily. Starting next year, a new rule mandates that plans can be no more than 10 percent more expensive than the second-lowest-cost Silver plan in order to qualify for the private option. Previously, any Silver plan was eligible. That means that some private option beneficiaries this year are covered by plans significantly more expensive than the benchmark, which won’t be the case next year. We’ll have to wait until January to see just how it shakes out, but if per-persons costs are only a tick higher in 2016 than they were back in 2014, that counts as a major policy victory for the private option.
Because the federal government anticipated higher annual premium jumps when it established budget limits for the private option, the state is on the path to easily come in under budget.