ACA Marketplace Premiums Are Not High Compared With Employer-Sponsored Coverage

Nationally, nongroup marketplace premiums are 10% lower than the average employer-sponsored insurance premiums, according to an analysis by the Urban Institute. In addition, the research found that more than three-fourths of states and more than 80% of metropolitan areas have lower marketplace than employer premiums.

The study, by Linda J. Blumberg, John Holahan, and Erik Wengle, compared unsubsidized 2016 nongroup marketplace premiums to the average employer-sponsored insurance premiums in all 50 states and 73 metropolitan areas.

The study was undertaken to examine news accounts in recent months that have pointed to large increases in marketplace premiums throughout much of the nation.

“Many have taken these reports to question the viability of the marketplaces and the Affordable Care Act (ACA) in general,” the authors noted.

The focus of criticism is that the full, unsubsidized premiums available in the marketplace are high because the pool of nongroup insured are sicker than expected, and that it is proof that the new markets do not work. People with incomes above 400% of the federal poverty level bear the full premiums, and the higher the unsubsidized premiums, the higher the federal government’s costs for the premium tax credits.

The study authors compared nongroup premiums with employer premiums, because employer coverage has long been considered a natural risk-pooling mechanism and approximately 100 million workers plus their dependents were enrolled in employer plans in 2014. As a result, employer-sponsored plans are more likely to reflect average costs for a broad representation of the population, and likely enjoy a more efficient market in which to purchase insurance, the authors wrote.

The study found that:

• The average premium increases from 2015 to 2016 for insurance plans offered in the ACA marketplaces were highly variable from state to state and even within states.
• Three in 10 Americans (29.1%) live in a region where the average premium for the lowest-cost Silver plan declined from 2015 to 2016.
• Nationally, the second-lowest-cost Silver nongroup premium for single coverage was 10% lower than the average employer-sponsored insurance premium in 2016 using the actuarial value, utilization, and age-distribution adjustments.
• In 39 states (including the District of Columbia) the average 2016 second-lowest-cost Silver nongroup premium (the marketplace “benchmark” premium) was lower than the average employer-sponsored single premium when using the actuarial value, utilization, and age-distribution adjustments. Exceptions are: Alaska, Arkansas, Delaware, Georgia, Louisiana, Missouri, Nebraska, North Carolina, South Dakota, Vermont, West Virginia, and Wyoming.
• Of 32 large metropolitan areas studied around the nation, 4 (San Francisco, California; Atlanta, Georgia; New Orleans, Louisiana; and Charlotte, North Carolina) had higher nongroup premiums than the average for employer-sponsored insurance when using the actuarial value and age-distribution adjustments.

“With few exceptions, the level and growth of nongroup premiums in the Marketplaces should not be interpreted as evidence that these new markets are weak,” the authors concluded. “Nongroup insurance, when adjusted to make its premiums comparable to employer premiums, is much more often than not lower cost than the average coverage offered through employers.”

The persistent, uncomfortable truth is that healthcare is an expensive commodity, regardless of the market in which one purchases it.