Key Factors in 2023 Individual Health Insurance Market Premiums

As payers finalize premiums for 2023 for the individual market, 2023 individual health insurance market premiums will be subject to a variety of factors, according to an issue brief from AHIP.

The individual health insurance marketplace has an enrollment population of 20 million Americans and offers healthcare coverage to individuals who may not have access to insurance through a public payer or an employer-sponsored health plan.

In 2022, the individual market experienced a couple of unusual circumstances that could affect the market’s risk pool and, by extension, premiums going forward.

The American Rescue Plan Act went into effect in 2021 and has changed the cost and accessibility of individual health insurance marketplace plans. The law offered zero-dollar premium plans for individuals with incomes, enhanced premium subsidies, and expanded premium subsidy eligibility based on income bracket. In 2021, these measures reduced state premiums by 40 percent.

Individual health insurance market 2023 premiums will depend in part on whether Congress chooses to extend the American Rescue Plan Act’s subsidies, which are set to expire at the end of 2022. However, even if policymakers ultimately decide to extend the law, until the decision is finalized insurers will have to establish 2023 premiums based on the assumption that the law will expire.

Additionally, a policy change in the second half of 2021 implemented a special enrollment period for low-income enrollees which is expected to result in a higher amount of churn in the individual health insurance marketplace.

One factor that could potentially influence the risk pool is Medicaid eligibility redeterminations. When the public health emergency ends, the Medicaid flexibilities will end with it, unless policymakers make them permanent. Those who lose Medicaid eligibility might qualify for advanced premium tax credits on the individual health insurance marketplace.

However, Medicaid eligibility redeterminations will not happen until the coronavirus national public health emergency ends and the end date for the public health emergency remains unknown as of the publication date of this article.

Beyond risk pool variables, there are other factors in play such as inflation, the coronavirus pandemic, and provider costs.

Inflation has sky-rocketed in 2022. As of late July 2022, the inflation rate was 9.1 percent. The American Academy of Actuaries has already stated that the record-high inflation rate will begin to impact healthcare prices in late 2022 and 2023.

Payers will have to account for potential costs related to the coronavirus pandemic in their 2023 premiums. While healthcare spending is normalizing overall, deferred care will still have downstream effects that will need to be factored into rate setting.

Additionally, insurers will have to include higher provider costs in their premiums. Hospital costs consume a sizable portion of the average premium dollar and providers are expected to negotiate higher rates for the coming year.

“Affordable health coverage is critical to boosting access to high-quality care,” Matt Eyles, president and chief executive officer of AHIP, said in the press release. 

“Health insurance providers are committed to improving the individual market and delivering lower costs, effective coverage, and better health outcomes for everyone. We will continue to work with Congress, the Administration, and other stakeholders to deliver a strong, stable market that works for all Americans.”