Small-Group Insurance Premium Variations Likely to Continue in the Near-Term

Since 2000, small-group health insurance premiums averaged annual increases of 5.5% nationally; however, double-digit increases were not uncommon for states and large metropolitan areas, according to a study from the Urban Institute.

As insurers and state Marketplaces gear up for the open enrollment period for 2015, concerns have surfaced about large premium increases among nongroup and small-group insurance, according to authors Linda J. Blumberg and John Holahan, both fellows with the Urban Institute’s Health Policy Center.

State departments are currently reviewing submitted premiums rates and have yet to make public the final approved rates for small-group and nongroup Marketplace plans.

In reviewing data from the Medical Expenditure Panel Survey—Insurance Component, the authors determined that over the past 13 years average premiums frequently increased by double-digit percentages in the small-group insurance market. These large increases were “often followed by significantly smaller increases (and sometimes even decreases)” the next year, according to Blumberg and Holahan.

Although Nebraska and Illinois both reported low average annual growth of just 4.6% and 4.2%, respectively, from 2000 to 2013, both states experienced double-digit annual increases in roughly half the years studied.

In the Tampa-St. Petersburg-Clearwater, Florida, metropolitan area during 2002 to 2013, small-group single premiums for employers with fewer than 50 workers reported a minimum annual growth of -33.9% and a maximum annual group of 28.8%. Plus, a third of the years during the 2002 to 2013 time period recorded double digit increases.

Employer- and individual-specific premium variation is expected to be reduced significantly in plans compliant with the Affordable Care Act (ACA), according to the authors. However, they added that 2014 through 2017 will be transitional years while individuals and employers acquaint themselves with the law, its provisions, and the coverage options provided.

“The ACA’s market reforms, which prohibit insurers in the small-group and nongroup insurance markets from varying premiums based upon health status or claims experience of the enrollees, should decrease year-to-year premium variation relative to the pre-reform period,” Blumberg and Holahan wrote. “This will become especially evident once past the early implementation years in which the insurers are calculating the contours of the new playing field and consumer decisions reach equilibrium.”