As has been the case for the last few years, average individual and family health insurance rate changes for 2022 are mostly modest. The nationwide average increase is about 3.5%, and there are new insurers joining the marketplaces in the majority of the states.
That all sounds like great news, but the reality is a bit more complex. The modest average rate changes apply to full-price plans, but most marketplace enrollees do not pay full price. And although new insurers bring added competition, their entry could also mean a sharp reduction in premium subsidy amounts, depending on how the new insurer prices its plans.
So despite the headlines about small average rate changes, the rate change for your specific plan might be nowhere near that average. But that doesn’t necessarily mean you have to swallow a large increase.
What affects fluctuations in what you pay for insurance premiums?
The annual premium changes that grab headlines and that factor into state and federal averages are for full-price premiums. But very few marketplace/exchange enrollees pay full price. Most receive premium tax credits (subsidies), which means that their rate changes will also depend on how much their subsidy amount fluctuates from one year to the next.
ACA tax credits are set so that the enrollee pays a fixed percentage of income for the benchmark plan – the second-cheapest Silver plan in their area. When the unsubsidized benchmark plan premium changes from year-to-year, so does the size of the tax credit. If a discount insurer enters the market, your tax credit may shrink. That doesn’t matter if you choose the benchmark plan, but it may make other plans more expensive.
The averages also lump each insurer’s plans together, so although an insurer might have an average rate change of 5%, it could have a range of -10% to +20% across all of its plans.
And average rate changes also don’t account for the fact that rates increase with age. Even if your health plan has no annual rate changes at all for any of its plans, your pre-subsidy price will still be higher in the coming year simply because you’re a year older (if you receive subsidies, the subsidies will increase to keep pace with the age-related premium increases).
Anatomy of a drastic increase in premium payment
Let’s consider Monique, who is 36 years old, lives in Lincoln, Nebraska, and has an annual income of $35,000. This year, she’s enrolled in a Silver EPO plan from Medica (Medica with CHI Health Silver Copay) that has a $4,800 deductible, $45 copays for primary care visits, and an $8,150 cap on out-of-pocket costs. She pays no monthly premiums at all, because the full-price cost of the plan in 2021 is $504/month (based on her being 35 when she enrolled in that plan), and she’s eligible for a subsidy of $513/month.
Full-price premiums in Nebraska are increasing by more than the national average for 2022, with an average increase of a little less than 9%. But imagine Monique’s surprise when her renewal notice showed that her after-subsidy premium would be going from $0/month in 2021 to $226/month in 2022.
New health plan options can affect benchmark plans – and your subsidies
Nebraska is a good example of a place where there’s a lot more competition in 2022. Oscar and Ambetter have both joined the marketplace statewide, and the number of available plans has more than quadrupled. When Monique was shopping for plans last fall, she had a total of 22 options from which to choose. For 2022, however, she can pick from among 95 different plans.
In 2021, the benchmark plan (second-lowest-cost Silver plan) was offered by Medica and had a pre-subsidy price tag of $657/month. But for 2022, Ambetter offers the lowest-cost Silver plans in Lincoln, so they have taken over the benchmark spot. And the second-lowest-cost Silver plan for a 36-year-old now has a pre-subsidy premium of just $475.
So in Monique’s case, the cost of the benchmark plan has dropped by $182/month. And since subsidy amounts are based on the cost of the benchmark plan, Monique’s subsidy is also much smaller for 2022 – it doesn’t need to be as large in order to keep the cost of the benchmark plan at the level that’s considered affordable.
In addition, Medica has raised the base price of Monique’s plan from $504/month in 2021 to $560/month in 2022. That’s partially due to Monique’s increasing age, and partially due to the 10% overall average rate increase that Medica imposed for 2022.
The perfect storm for a large net rate increase?
That’s a perfect storm for a large net rate increase: The benchmark premium has dropped by $182/month while her health plan’s rate has increased by $56/month.
In 2021, Medica offered both the lowest-cost and second-lowest-cost Silver plan in Lincoln, and there was a significant difference in price between the two plans ($504/month for the lowest-cost, versus $657/month for the second-lowest-cost). Monique’s plan was the lowest-cost Silver option, and the large difference in premium between her plan and the benchmark plan explained why she was able to enroll in her plan with no premium at all. all. (A spread that big between the two cheapest Silver plans is unusual and creates a huge discount for the cheapest Silver plan when it happens.)
But that’s no longer the case for 2022. Ambetter has the four lowest-cost Silver plans in the area, and there’s only a $17 difference in price across all four of them. The two lowest-cost Silver plans are actually priced at exactly the same amount. As a result, the cheapest Silver plan that Monique can get for 2022 is going to be $141/month.
The two plans at that price both have lower out-of-pocket costs than her current plan. (They’re capped at $6,450 and $6,100, versus $8,550, which is the new out-of-pocket limit that her existing plan will have in 2022.) But non-preventive office visits are only covered after the deductible is met, whereas her current plan has copays for office visits right from the start. (Certain preventive care is covered in full on all plans, without a need to pay any deductible or copays.)
You may not be stuck with that higher 2022 premium.
The good news for Monique is that she’s not stuck with her new $226/month premium. There are 15 Silver plans that are less expensive than that for 2022, and there are also 43 Bronze plans that are less expensive, including several that are under $50/month. Bronze plans do tend to have fairly high out-of-pocket costs. But Monique can select from among three Bronze plans offered by Bright Health that include pre-deductible coverage for things like primary care visits, outpatient mental health care, and urgent care visits, with monthly premiums that range from $18 to $42.
Although those Bright Health Plans do have deductibles that are higher than her current Medica plan, she might find that she comes out ahead on out-of-pocket costs due to the more robust pre-deductible coverage that they provide. And that might be especially true when she factors in the premium savings: A plan that costs $18/month will save her more than $200/month in premiums, compared with renewing her current plan.
The takeaway point here is to not panic if your plan’s premium is increasing by a lot more than you might have expected. Even if your rate is increasing significantly, you might find that there are other options available that will be a better fit for your budget.
The fact that there are more plans available in most areas of the country for 2022 can be a plus or a minus, depending on the circumstances. In Monique’s case, a new plan has taken over the benchmark spot and reduced her subsidy amount. But there are also dozens of other new plans in her area, many of which might be a perfect fit for her medical needs.
How to find solid replacement coverage with a lower net premium
In order to pick a plan, Monique will need to consider the whole picture, including total premium costs, expected out-of-pocket medical costs, and provider networks. If she takes any medications, she’ll need to compare the various plan options to see whether her drugs are covered and how much she can expect to pay at the pharmacy.
Although this article focuses on plans available in Lincoln, Nebraska, people in other parts of the country can be facing varying degrees of surprising net rate increases, even when overall full-price rate changes in their area are fairly modest.
In states that use HealthCare.gov, the average enrollee can select from among almost 108 plans for 2022, up from just 61 in 2021. Even if the benchmark plan in your area has remained unchanged, the influx of new plans might mean that there’s a better option available for you in 2022, and now’s your chance to switch your coverage. It’s never in your best interest to just let your plan auto-renew without considering the other options, and that’s especially true when there are so many new plans available.
In every community, there are brokers and Navigators who can help you understand what’s happening with your current plan, and consider whether a plan change might be in your best interest. For more information about selecting a plan during open – and open enrollment deadlines in your state – read our 2022 Guide to ACA Open Enrollment.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.