Premiums in the individual health care market, on average, are lower than average employer-sponsored insurance premiums in 2016, according to a new analysis by the Urban Institute. The report offers perspective on the possibility of double-digit premium increases on Affordable Care Act exchanges next year.
The analysis found that nationally, the average second-lowest silver plan premium on an Obamacare exchange is 10 percent lower than the average employer-sponsored premium. The researchers made adjustments for actuarial value, or the percent of costs covered by the insurer, as well as utilization and age distribution.
“The persistent, uncomfortable truth is that health care is an expensive commodity, regardless of the market in which one purchases it,” the authors concluded.
The type of Obamacare plan used for the analysis is the same one used to calculate federal subsidies based on income. These subsidies largely absorb the brunt of individual-market premiums for eligible enrollees. While the Obama administration has emphasized the benefit of the subsidies ahead of the 2017 enrollment period, double-digit increases in rate proposals have still been dominating headlines.
In the employer market, a large portion of premiums are paid by the employer, which also disguises the cost of insurance. The Urban Institute’s analysis found that in more than 75 percent of states and more than 80 percent of metropolitan areas examined, individual-market premiums are lower than employer premiums.
“The focus of [ACA premium] criticism is that the full, unsubsidized premiums available in the marketplace are high — a sign that the pool of non-group insured are sicker than expected and that the new markets simply do not work,” the authors wrote.
Insurers and several experts agree that part of the reason for premium increases now, and poor exchange performance in the market, is that premiums were set too low in 2014, which led to losses. As more information becomes available, insurers will be able to more accurately set prices.
The employer market, by contrast, is well understood, and insurers have a lot of experience participating in it. That alone makes it more stable than the Obamacare market.
The future of Obamacare exchanges may depend on whether Congress and the administration are able to make improvements and adjustments based on the lessons of the first few years of implementation. Since the law passed, political barriers have prevented any meaningful adjustments from being made. It remains to be seen whether the results of the November election will give lawmakers greater ability to tinker with President Obama’s signature health care law.