ACA Marketplaces Well-Positioned for Strong 2022 Open Enrollment Season

Joel Ario and Amy Zhan, Manatt Health 

With the Patient Protection and Affordable Care Act’s (ACA’s) ninth open enrollment period (OEP) set to launch in less than a month, the ACA Marketplaces are seeing record enrollment numbers with more generous subsidies, new carrier competition, and a relatively stable rating environment.[i] At the same time, there is uncertainty with the trajectory of the COVID-19 pandemic and medical costs trending upward as the economy recovers, albeit at an uneven pace.

These trends have made for a challenging rate review process in the 47 states plus the District of Columbia (D.C.) that conduct their own ACA rate reviews of carrier-proposed rates using federal review standards.[ii] The process this year has not generated as much attention as prior years, partly because there were no big surprises this year, such as the termination of cost sharing reduction (CSR) payments in 2017 and the volatility of COVID-19 last year, and because the Biden Administration has made a series of changes—expanding subsidies through the American Rescue Plan Act of 2021 (ARP) and increasing  funding for consumer outreach—that have helped to stabilize and strengthen the ACA Marketplaces.

State announcements of 2022 rates have trickled out at a slower pace than in prior years, and it is likely that many states will not publish their approved rates until the beginning of open enrollment. As always, state rate results vary widely and, even within states, there often are substantial variations among carriers and across different regions in geographically diverse states. With these caveats, this expert perspective highlights some observations about the factors that are impacting rate changes this year and the kind of variations that exist among states.

ARP Subsidies and Enrollment Gains Drive Carrier Expansions

With ARP subsidies dramatically expanding premium subsidies and drawing 2.8 million new customers to the ACA Marketplaces during special enrollment periods (SEPs) this year, carriers have expanded their footprints for 2022 in many states. Although carrier expansions for 2022 are still subjects to final adjustments, announced expansions to date include the following:

• UnitedHealthcare has nearly doubled its footprint from 11 to 18 states, including expansions into Alabama, Florida, Georgia, Illinois, Louisiana, Michigan, and Texas.
• After fully exiting the ACA Marketplaces in 2018, Aetna/CVS is reentering eight states for 2022: Arizona, Florida, Georgia, Missouri, Nevada, North Carolina, Texas, and Virginia.
• Cigna has expanded from 10 states into three new states for 2022: Georgia, Mississippi, and Pennsylvania.
• Oscar is continuing to grow its footprint for 2022, adding three new states: Arkansas, Illinois, and Nebraska—while also expanding its existing footprints in eight other states.

Carrier participation in the ACA Marketplaces has been increasing since 2018, and it has produced two positive results for consumers. First, it increases consumer choices. For example, the percentage of enrollees with a choice of three or more insurers increased from 58 percent in 2019 to 78 percent in 2021.[iii] Second, more competition generally correlates with lower premiums. For example, a comprehensive state by state study of insurer competition and premium rates for 2018 and 2019 found that “states with lower silver premiums generally have robust competition among several insurers.”[iv]

Recent Financial Trends and Pandemic-Related Uncertainties Cloud the Rate Environment

While carrier expansions bring new competition, it is noteworthy that second quarter financial results (the most recent available) were down on a year over year basis for many of the largest carriers. National for-profit carriers reporting decreases in net income for the second quarter included United (35 percent),[v] Anthem (22 percent),[vi] and Cigna (16 percent).[vii] Aetna reported decreased earnings as well, and Centene, originally a Medicaid company that has become the largest carrier in the ACA Marketplaces with more than two million members, reported a net loss for the second quarter.[viii]

Carriers generally attributed their reduced income to higher medical loss ratios (MLRs)—the percentage of premiums that are paid out in claims costs—due to patients returning for deferred care in the spring and early summer. Combined with an economy that is picking up steam, this helps explain why some states report higher medical trends in 2022 rate filings than previous years. New Jersey, for instance, is reporting an average trend of 9.4 percent.[ix]

While recent financial results merit consideration, most insurers remain profitable. This is particularly true in the individual market, where many carriers are benefiting from MLRs that decreased from 103 percent on average in 2015 to 70 percent in 2018 and have continued to generate high profits into 2021. Under the ACA, carriers are required to pay rebates when their MLR dips below 80 percent in the individual market, and carriers have been paying record-high rebates—from less than $200 million in 2017 to more than $2 billion last year.[x] Because rebates are calculated on a three-year rolling average, many carriers face an ongoing cycle of substantial rebates if their rates remain too high.

In addition, careful study of the pandemic’s impact on rates indicates that pandemic-related trends have tended to net out over time. This was the key finding in a recent brief by the American Academy of Actuaries.[xi] The Academy found that deferred care and COVID-19 treatment costs tend to be inversely related, meaning that other medical costs increase when the virus is waning as it was this spring, while a waxing virus tends to squeeze out other costs as will likely be the case for the third quarter.[xii]

State Results Vary More for 2022 Than in Recent Years

Given this complex mix of competing factors, it should not be surprising that the emerging picture for 2022 is more rate variation and more upward pressure on rates, though nothing like the increases that occurred in 2018, when rates increased by 28 percent on average in response to the termination of CSR payments. On average, rates went up 2 to 3 percent in 2019, decreased less than 1 percent in 2020, and increased less than 1 percent in 2021.[xiii] There were variations among the states, but rates were remarkably stable across more states with few states reporting average rate increases or decreases of 5 percent or more.

This year the variations in proposed and approved average individual market rates have been more significant in the early reporting states:

Conclusion

The Marketplaces will enter the 2022 OEP with record enrollment, more affordable benefit plans due to ARP subsidies, and expanded carrier competition in many states. The challenges this year—ongoing COVID-19-related expenses, the return of pent-up demand, and increasing medical inflation—pose varying risks across local markets, which will result in rate increases that vary by state and carrier. Even still, the overall result for the ACA Marketplaces will be a third straight year of relatively stable rates, partly as a result of ACA standards for “effective rate review” that have improved the rate review process in the 47 states that have adopted those standards.

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Endnotes

[i] Keith K. “Record-High Marketplace Enrollment, New Census Data, and More,” September 21, 2021. Available here: https://www.healthaffairs.org/do/10.1377/hblog20210921.302725/full/

[ii] An effective rate review system must: receive sufficient data and documentation concerning rate increases to conduct an examination of the reasonableness of the proposed increases; consider several factors, including medical cost trend changes, changes in service utilization, cost-sharing changes, changes in benefits, and more; make a determination of the reasonableness of the rate increase under a standard set forth in State statute or regulation; post either rate filing under review or rate filing justifications on the state website or post a link to the rate filing justification information that appears on the CMS website; provide a mechanisms for receiving public comments; and report results of rate reviews to CMS for rate increases subject to review. HHS conducts rate review for three states: Oklahoma, Texas and Wyoming. More information is available here: https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/rate_review_fact_sheet

[iii] McDermott D., Cox C. “Insurer Participation on the ACA Marketplaces, 2014-2021,” KFF. November 23, 2020. Available here: https://www.kff.org/private-insurance/issue-brief/insurer-participation-on-the-aca-marketplaces-2014-2021/

[iv] Holahan J., Wengle E., Elmendorf C. “Marketplace Premiums and Insurer Participation: 2017 – 2020,” Urban Institute. January 2020. Available here: https://www.urban.org/sites/default/files/publication/101499/moni_premiumchanges_final.pdf

[v] “UnitedHealth Group Reports Second Quarter 2021 Results,” July 15, 2021. Available here: https://www.businesswire.com/news/home/20210715005337/en/

[vi] “Anthem Reports Second Quarter 2021 Results, Raises Full Year Outlook,” Press Release, Anthem. July 21, 2021. Available here: https://ir.antheminc.com/news-releases/news-release-details/anthem-reports-second-quarter-2021-results-raises-full-year?field_nir_news_date_value[min]=

[vii] “Quarterly Financial Supplement,” Cigna Corporation. June 30, 2021. Available here: https://s27.q4cdn.com/742843823/files/doc_financial/quarterly/2021/q2/cigna-corp-second-quarter-2021-financial-supplement.pdf

[viii] “Centene Corporation Reports Second Quarter 2021 Results,” Centene Corporation. July 27, 2021. Available here: https://investors.centene.com/news-events/press-releases/detail/746/centene-corporation-reports-second-quarter-2021-results

[ix] “NJ Department of Banking and Insurance Announces More Health Insurance Offerings in 2022, Record Levels of Financial Help Available for Another Year at Get Covered New Jersey,” News Release, New Jersey Department of Banking and Insurance. September 24, 2021. Available here: https://www.state.nj.us/dobi/pressreleases/pr210924.html

[x] McDermott D., Cox C. “Data Note: 2021 Medical Loss Ratio Rebates,” KFF. April 12, 2021. Available here: https://www.kff.org/private-insurance/issue-brief/data-note-2021-medical-loss-ratio-rebates/?utm_campaign=KFF-2021-Health-Reform&utm_medium=email&_hsmi=121016933&_hsenc=p2ANqtz-9U8V4dIUoGCntwSdMacxCgnB6Ixl2Gem5C4H_MY9DyvmPbM7B6b9MXOZX5V-JG-bPqbbmphXicJdi0Ayw11f-4aP7gnQ&utm_content=121016933&utm_source=hs_email

[xi] “Drivers of 2022 Health Insurance Premium Changes,” Issue Brief, American Academy of Actuaries. September 2021. Available here: https://www.actuary.org/sites/default/files/2021-09/PremiumDrivers2022.pdf

[xii] Corlette S. “As if COVID-19 Did Not Exist”: Health Plans Prepare for 2022 in Early Rate Filings,” Center on Health Insurance Reforms (CHIR) Blog. July 6, 2021. Available here: http://chirblog.org/health-plans-prepare-for-2022-in-early-filings/

[xiii] Gaba, C. “2021 Rate Changes,” ACASignups.net. Available here: https://acasignups.net/rate-changes/2021

[xiv] “Covered California Announces 2022 Plans: Full Year of American Rescue Plan Benefits, More Consumer Choice and Low Rate Change,” News release, Covered California. July 28, 2021. Available here: https://www.coveredca.com/newsroom/news-releases/2021/07/28/covered-california-announces-2022-plans-full-year-of-american-rescue-plan-benefits-more-consumer-choice-and-low-rate-change/

[xv] “Florida Office of Insurance Regulation Announces 2022 PPACA Individual Market Health Insurance Plan Rates,” New release, Florida Office of Insurance Regulation. September 21, 2021. Available here: https://floir.com/home/2021/09/21/florida-office-of-insurance-regulation-announces-2022-ppaca-individual-market-health-insurance-plan-rates

[xvi] Gaba, C. “Georgia: Preliminary Avg. 2022 #ACA Rate Changes: +0.7% Indy Market, +13.5% Sm. Group, *5* New Carriers Jump In!,” ACASignups.net. Available here: https://acasignups.net/21/09/22/georgia-preliminary-avg-2022-aca-rate-changes-07-indy-market-135-sm-group-5-new-carriers

[xvii] “The Maryland Insurance Administration Approves 2022 Affordable Care Act Premium Rates,” News release, Maryland Insurance Administration. September 3, 2021. Available here: https://insurance.maryland.gov/Documents/newscenter/newsreleases/2022-ACA-Approved-Rates-press-release-932021.pdf

[xviii] Lannan, K. “Health care costs continue to rise in Mass.,” The Lowell Sun. September 10, 2021. Available here: https://www.lowellsun.com/2021/09/10/health-care-costs-continue-to-rise-in-mass/

[xix] Gaba, C. “Mississippi: Preliminary Avg. 2022 #ACA Rate Changes: +3.1% Individual Market, +5.3% Sm. Group; Cigna Joining,” ACASignups.net. September 22, 2021. Available here: https://acasignups.net/21/09/22/mississippi-preliminary-avg-2022-aca-rate-changes-31-individual-market-53-sm-group-cigna

[xx] “Missouri, 2022 Single Risk Pool, Proposed Rate Filings as of 7/30/2021,” Missouri Department of Insurance. Available here: https://insurance.mo.gov/industry/filings/healthrates/documents/Publicposting-2022proposedhealthrates7-30-2021CAM.pdf

[xxi] “2022 Rate Filings and Rate Review,” Office of the Montana State Auditor. Available here: https://csimt.gov/your-insurance/health/2022-rate-filings-and-rate-review/

[xxii] Gaba, C. “Nebraska: Preliminary Avg. 2022 #ACA Rate Changes: +8.6% Indy, -2.1% Sm. Group (Unweighted),” ACASignups.net. September 23, 2021. Available here: https://acasignups.net/21/09/23/nebraska-preliminary-avg-2022-aca-rate-changes-86-indy-21-sm-group-unweighted

[xxiii] “NJ Department of Banking and Insurance Announces More Health Insurance Offerings in 2022,” New Jersey Business and Industry Association. September 27, 2021. Available here: https://njbmagazine.com/njb-news-now/nj-department-of-banking-and-insurance-announces-more-health-insurance-offerings-in-2022/

[xxiv] “DFS Announces 2022 Health Insurance Premium Rates, Saving New Yorkers $607 Million,” Press Release, New York State Department of Financial Services. August 13, 2021. Available here: https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202108131

[xxv] “State of Oregon releases final rate decisions for 2022 health plans,” News Release, Oregon Department of Financial Regulation. September 1, 2021. Available here: https://dfr.oregon.gov/news/2021/Pages/20210824-final-rate-decisions-for-2022-health-plans.aspx

[xxvi] “Requested and Approved Summary for 2022 Rates in the Individual, Small Group, and Large Group Markets,” State of Rhode Island Office of the Health Insurance Commissioner. September 2021. Available here: http://www.ohic.ri.gov/documents/2021/September/Final%202022%20Rate%20Review%20All%20Market%20Requested%20and%20Approved%20Summary%202021.pdf

[xxvii] “2022 ACA Individual Market Rate Summary (As of 9/02/2021),” Virginia State Corporation Commission (SCC). Available here: https://scc.virginia.gov/getattachment/2c3b7e0f-b741-44ae-aa7a-6ceeb1c8aca9/ratedata2022.pdf