Reducing Premiums Can Lead to Improved Insurance Coverage

The elimination of small premiums could lead to better coverage, lower costs, and more effective retainment of consumers, according to research from the USC-Brookings Schaeffer Initiative for Health Policy.

The USC-Brookings Schaeffer Initiative for Health Policy is a collaboration between Economic Studies at Brookings and the University of Southern California Schaeffer Center for Health Policy and Economics.

Small positive premiums are less than 0.5% of the gross premium of the health plan, or approximately $3 per month.

When a premium payment is necessary, it often results in barriers to care, particularly for low-income individuals. The report estimated that about 60 percent of those who owe small positive premiums live off of incomes that are 150 percent of the federal poverty level (FPL) or less.

Eliminating small positive premiums and improving healthcare benefits are linked trends. The researchers indicated that eliminating small positive premiums will only be effective if the health insurance that these premiums cover is extensive. Otherwise, eliminating small positive premiums on low-quality healthcare coverage will only result in higher spending.

To effectively eliminate small positive premiums, the premium tax credit must advance to the point of covering full premiums, the report determined.

As policymakers tackle the ideas surrounding the elimination of small positive premiums, there are several options that they could consider.

The first proposed strategy involves policymakers paying premiums, increasing the premium tax credit, and covering total premiums. The second option would be for insurers to extend small premium balances, having paid in full.

Policymakers could also explore other options for reducing small positive premiums to maintain solid enrollment and lower the existence of premiums, options such as enforcing the requirement that Affordable Care Act marketplace plans defray the costs of non-essential health benefits.

The report also noted that, while most of the report’s policy suggestions focused on the federal level, individual states operating independent marketplaces have the option of implementing their own guidelines.

The relationship between policy changes and premium rates is complex, as the two factors can determine the fate of one another.

Researchers and policymakers have been considering how the impending expiration of the American Rescue Plan Act could lead to the return of Medicaid redeterminations. If this occurs, the American Academy of Actuaries predicted that premium rates and risk pool composition would change for health insurance plans in 2023.

Moreover, if the American Rescue Plan Act premium subsidy expire, the US Department of Health and Human Services warned about a potential increase in the number of uninsured people, along with higher out-of-pocket spending.

Research from the Kaiser Family Foundation in June 2022 also stated an expectation that payers would issue $1 billion in medical loss ratio rebates.