With the passage of the Inflation Reduction Act (IRA) and the consequent extension of the American Rescue Plan (ARP) subsidies for the ACA individual market, should we expect any changes in premiums for the 2023 plan year?
My guess is NO.
Charles Gaba estimates that in the 35 states that he has good information on, there is about an 8.3% requested rate increase.
Almost all states had requested that their insurers file with the assumption ARP subsidies for both individuals earning under 400% Federal Poverty Level (FPL) who would qualify for baseline ACA subsidies and individuals earning over 400% FPL who would otherwise pay full premium would not be renewed in 2023. This makes sense. Rates are built during the winter and spring of 2022 for 2023. Summer is when rates are finalized by tweaking core pricing assumptions from any new data showing up in claims. A mid-August change in law is late in the rate cycle and when the rate cycle started last Fall, the odds of the ARP subsidies being extended were fairly low.
But now that they are extended, does it matter?
A little bit. We know from Massachusetts evidence that folks who drop out of the market because they went from a zero premium plan to a not zero premium plan tend to be healthier and cheaper on average. We know that the ARP subsidies created a massive number of people enrolled in zero premium plans. If insurers expected ARP subsidies to discontinue we would have expected a massive number of people to move from zero to not zero beyond the normal plan rank order churn that already occurs. So if this is not occuring due to the higher subsidies the risk pool is likely to be both bigger and a little bit healthier as fewer low risk people fall through the cracks.
But is this a material difference that will meaningfully change rates?
California asked their insurers to estimate rate increases if ARP subsidies were extended:
The uncertain future of the expanded American Rescue Plan subsidies added less than 1 percentage point to premiums, as carriers anticipated that healthy enrollees may choose to drop their coverage.
1 point is not a lot. I think California’s estimate can roughly generalize to the nation.
At this point in the rate setting cycle, I can see insurers changing rates for a little bit up or a little bit down as contracts are renegotiated to incorporate inflation or claims are running a little hotter or colder than expected. I think ARP/IRA subsidy levels fall into the same category of tweaks — real, but barely noticable. This will not be emergency silverloading in October 2017.