The American Journal of Managed Care July 2016
Changes in Premiums of Cancelled Nongroup Plans Under the Affordable Care Act
Objectives: To examine the effect of the Affordable Care Act (ACA) on changes in premiums for subscribers of nongrandfathered, nongroup insurance plans that were “cancelled.”
Study Design: Retrospective multivariate analyses.
Methods: Changes in annual premiums post ACA were evaluated across subgroups of subscriber and health plan characteristics. Data was derived from databases containing information on premiums, plan benefit, and demographics for subscribers aged 18 to 64 years within Kaiser Permanente of the Mid-Atlantic States. A linear regression model was used to examine the independent association between subscriber and health plan characteristics on the relative change in premiums.
Results: In 2013, 4169 nongroup subscribers were enrolled in plans that were cancelled as a result of the ACA. The median pre-ACA premium was $3240 (range = $780-$39,492), which increased by a median of 21.3% (range = –77.4% to 193.6%), or $685 (range = –$27,464 to $8676), post ACA in 2014. Premiums increased more for high-deductible plans (median = 63.7%) than standard-deductible plans (median = 8.4%). Due to shifts in the age curve, premiums decreased for more than half of women aged 18 to 44 years, but increased by 35.2% for women aged 55 to 64 years. Premiums fell by 15.5% for subscribers who did not pass standard medical underwriting due to preexisting conditions.
Conclusions: Changes in premiums in the nongroup market post ACA, varied substantially across subgroups, primarily due to differences in the amount of coverage, changes in rating criteria, shifts in the age curve, and anticipated differences in risk selection and composition of the risk pool. Given the extent of this variation, it would be incorrect to conclude the ACA as being uniformly beneficial or detrimental to subscribers of these cancelled plans.
Am J Manag Care. 2016;22(7):e249-e257
- The changes in premiums varied substantially across subgroups, primarily due to differences in the amount of coverage, changes in rating criteria, shifts in the age curve, and anticipated differences in risk selection and composition of the risk pool.
- On average, subscribers migrated to ACA-compliant plans with modestly higher costs, but had higher levels of insurance coverage and stronger consumer protections.
- This study provides insight into how nongroup market reforms affect premiums.
At the center of this policy issue is the “grandfather” clause, where individuals had the option of keeping their plans that were in effect at the time the ACA was signed into law (March 23, 2010).4 Nongrandfathered plans offered or modified after that date must be made ACA-compliant, otherwise enrollees would need to purchase ACA-compliant plans either directly from insurers or from state health insurance exchanges.5 Although the Obama administration issued a transition policy that extended noncompliant plans until 2016,6 these plans will eventually be replaced. An estimated 2 million individuals purchased nongrandfathered policies in 2014, and the number of those who will continue to enroll in these plans is expected to be negligible by the end of 2016.7
There is little empirical data examining how premiums changed for subscribers of “cancelled plans” (ie, nongrandfathered, nongroup plans).8 Although much attention has focused on the aggregate number of cancelled policies, there has been less discussion about the extent to which certain subgroups might benefit from the ACA through lower premiums. Accordingly, we analyzed how premiums changed for subscribers of nongroup plans that were cancelled because of modification by the ACA within Kaiser Permanente of the Mid-Atlantic States (KPMAS), a large integrated delivery system with its own insurance plan and multi-specialty group practice that covers over 500,000 lives in Washington, DC (DC); Maryland; and Virginia.9
In 2013, noncompliant KPMAS plans were cancelled and ACA-compliant plans were offered in their place for 2014. Subscribers of these cancelled (ie, nongrandfathered, nongroup) plans in 2013 were identified and linked to databases containing demographic and health plan benefit information. Demographic data included age, gender, race, family size, and insurance jurisdiction. Health plan data included premiums, deductibles, benefit offerings, and plan type. KPMAS offered 3 types of plans in the nongroup market: 1) health maintenance organization (HMO) plans with zero deductibles; 2) deductible-HMO (D-HMO) plans with deductibles for hospitalizations, outpatient surgery, and skilled nursing facilities; and 3) high-deductible HMO plans (HD-HMO) with deductibles for most services except preventative care.
In general, HMO, D-HMO, and HD-HMO plans had comparable sets of covered medical services (ie, hospital care, medications, and laboratory) but at different levels of cost sharing (ie, deductibles, co-payments, and coinsurance). A small number of nongroup subscribers (3.4% of the sample) previously enrolled in group plans that closed or dissolved, exercised an option to continue coverage; these “guaranteed-issue” subscribers did not undergo medical underwriting, but instead were subject to community-rated premiums typically higher than standard policies. A small number of “rate-up” policies (3.6% of the sample) were also offered where subscribers who fell outside standard underwriting risk by a certain margin could purchase insurance at rates 35% to 50% higher than standard policies.
For each subscriber in 2013 with a cancelled plan, we identified the most similar ACA-compliant plan in 2014 (ie, bronze, silver, and gold) based on the closest level of cost sharing and benefit offerings. We then calculated the difference in premiums, prior to any federal subsidies, based on premium data provided by KPMAS. Analyses were conducted at the subscriber level because prior to the ACA, each family policy was assigned a single premium inclusive of all members; less than 15% of subscribers in the sample were family policies. Due to limited generalizability, we excluded 6 subscribers with platinum-equivalent plans and 52 subscribers who were 65 years or older.
Changes in annual premiums were evaluated across subgroups of subscriber demographic and health plan characteristics. The Kruskal-Wallis test was used to assess for statistically significant differences in median premiums. We calculated the expected relative change (ie, percentage change) in premiums and examined how it varied across categories of subscriber and plan characteristics using the χ2 test. We defined a threshold for “zero” premium change that accounted for increasing age (ie, all subscribers would be 1 year older) by estimating a log-linear regression model using 2013 data. To account for inflation, we used the annualized change in the 2013 Consumer Price Index (CPI) for medical care services.10 We used a multivariate linear regression model to examine the independent associations between subscriber and plan characteristics on relative change in premiums, using the ratio of 2014 to 2013 premiums as the dependent variable; heteroscedasticity-consistent standard errors were employed. Because of collinearity between the cost-sharing variables, multivariate models included only the plan type.
To understand the factors underlying the relationship between age and premiums before and after the ACA, we graphed the premium age, rating factors for the most common risk pool in the KPMAS nongroup market. The age curve represents the change in premiums due to age alone and was subject to approval by state insurance commissioners. For Maryland and Virginia, gender-specific age rating factors were used prior to the ACA, and the federal default age curve11 was used after the ACA. For DC, pre-ACA age rating factors were not gender-specific, and a DC-specific age curve was used post ACA.
Statistical analyses were performed using Stata version 13 (StataCorp LP, College Station, Texas). Significance testing was assessed at the P = .05 level. Approval for this study was obtained from the KPMAS Institutional Review Board.
A total of 7842 subscribers were enrolled in nongroup plans in 2013; 4169 of these subscribers were enrolled in cancelled plans that required modification by the ACA, representing 1.8% of all KPMAS subscribers aged 18 to 64 years. Subscribers of cancelled plans had a median age of 39.6 years; 41.3% of subscribers were female, 56.5% were white, and 20% were black (Table 1). Most subscribers resided in Maryland (43.2%) or Virginia (40.2%) and were either enrolled in D-HMO plans (44.6%) or HD-HMOs (38.8%). Bronze-equivalent plans consisted entirely of HD-HMOs with annual deductibles of $4500 or $8000. Gold-equivalent plans consisted of HMO plans or D-HMO plans with deductibles of $2000 or less (eAppendix Table 1 [eAppendices available at www.ajmc.com]). Only 3.4% and 3.6% of subscribers, respectively, were enrolled in guaranteed-issue or rate-up policies.
Changes in Plan Benefits
In 2014, all cancelled nongroup plans at KPMAS incorporated the following general provisions of the ACA: 1) annual limits on out-of-pocket expenses, 2) elimination of lifetime limits on expenses for essential medical benefits, 3) guaranteed issue and renewal, and 4) guaranteed ability for children to be covered under a parent’s health plan until age 26. KPMAS plans already offered comprehensive “essential health benefits”; there were only minor changes required after the ACA, consisting primarily of adding pediatric dental coverage, mental health parity with medical services, additional coverage for state-specific selected habilitative services, and elimination of cost sharing for some maternity/newborn services (Table 2).
Changes in Premiums After ACA
The median annual premium for cancelled nongroup plans was $3240 (range = $780-$39,492) in 2013 and $3803 (range = $1355-$26,513) in 2014. Premiums increased with older subscriber age and larger family size (Table 3). Overall variation in premiums decreased in the post-ACA period when examining subscribers with no spousal or dependent coverage (Figure 1). The median change in premiums after the ACA was $685 (range = –$27,464 to $8676). In relative terms, premiums increased by a median of 21.3% and a mean of 31.5% (SD = 50.4%; range = –77.4% to 193.6%). The distribution of percentage premium change was bimodal, with peaks at approximately 15% and 115% (Figure 2). The peak with the higher percent increase in premiums consisted almost entirely of subscribers who were either male or aged 55 to 64 years and enrolled in HD-HMOs. Of the 560 subscribers whose premiums at least doubled after the ACA, 97% who were either male or aged 55 to 64 years were enrolled in HD-HMOs.
In the overall cohort, subscribers aged 55 to 64 years had the highest unadjusted relative increase in premiums (median = 34.7%) compared with other age groups (P <.001) (Table 3). Overall, men had higher relative increases in premiums compared with women (median = 29.1% vs 9.9%; P <.001). However, when stratified by both age and gender, women aged 18 to 25 years, 26 to 34 years, and 35 to 44 years had median decreases in premiums of 15.2%, 3.0%, and 3.3%, respectively; in contrast, women aged 55 to 64 years had a median increase in premiums of 35.2%. Families with 2, 3, or 4 members had smaller median increases in premiums compared with individual subscribers (3.5% vs 0.6% vs 12.1%, vs 23.4%, respectively; P <.001). Maryland residents had higher premium increases compared with those in Virginia or DC (31.8% vs 14.1% vs 12.6%, respectively; P <.001). HD-HMO enrollees had a median increase in premiums of 62.7%, while premiums for the non–high-deductible plans rose by 8.4% overall; specifically, D-HMO and zero-deductible HMO premiums changed by 13.9% and –5.5%, respectively. Subscribers of guaranteed-issue and rate-up policies had a median reduction in premiums of 15.6% and 15.5%, respectively, while premiums for standard medically underwritten policies increased by a median of 23.4%.