2021 Premium Changes on ACA Exchanges and the Impact of COVID-19 on Rates

Insurers planning to offer health plans on the Affordable Care Act (ACA) marketplaces must submit filings to state or federal regulators detailing their plan offerings and justifying their premiums for the upcoming year. Rates are finalized in early fall (October 15, 2020) ahead of the annual open enrollment period, set to begin on November 1, 2020.

This year, insurers set premiums for 2021 amid the coronavirus pandemic, which has created considerable uncertainty as to what health costs, utilization and enrollment will look like next year. In 2020, many insurers have provided premium relief and/or voluntarily waived cost-sharing for COVID-19 treatment for their members due to excessive profits and low medical loss ratios during the pandemic. In our earlier look at preliminary rate filings in 10 states, we found that while overall proposed rate increases for 2021 appeared modest, most insurers were taking a “wait-and-see” approach, electing to hold off on factoring the pandemic into their premiums for next year until they had more predictability and claims experience.

Now that 2021 rates are being finalized, this brief summarizes the most current premium rate filings in all 50 states and the District of Columbia. We reviewed rate filings for an overall average premium increase across all plans on the individual market, with a focus on the effect of the pandemic on rate changes. We find that the majority of rate changes for 2021 are still moderate, with increases or decrease of a few percentage points. Proposed rate changes range from a -42.0% decrease to a 25.6% increase, though half fall between a 3.5% decrease and 4.6% increase (Table 1). Insurer and state level rates are shown in Table 2.

118 of the 273 (43%) filings specified the effect of COVID-19 on their rates for next year. Among these insurers, the impact of COVID-19 on 2021 premiums ranges from a 3.4% decrease to an 8.4% increase, with half of insurers falling between no impact (0.0%) and 2.0% increases (Table 1). Many insurers used similar language to describe their approach to the pandemic, noting that it would put both upward and downward pressure on health costs in 2021 (see examples below).

The most common factors that insurers cited as driving up health costs in 2021 were the continued cost of COVID-19 testing, the potential for widespread vaccination, the rebounding of medical services delayed from 2020, and morbidity from deferred or foregone care. At the same time, many insurers expect health care utilization to remain lower than usual next year as people continue to observe social distancing measures and avoid routine care, especially in absence of a vaccine or in the event of future waves of the virus. At least 53 insurers included a COVID-19 impact of 0% on their premiums because they did not have enough information to confidently alter their premiums or estimated that these factors would offset one another. 29 of the 273 filings (11%) did not mention COVID-19 at all in their rate filings.

The range of COVID-19 loads included in 2021 rate filings partly reflects differences in issuers’ assumptions about the course of the pandemic and individual behavior next year. Below are a handful of representative explanations that insurers provided to justify any impact that COVID-19 had on their overall 2021 rate filings. These examples provide a glimpse of the different expectations that insurers have regarding the availability and distribution of a vaccine, the extent to which pent-up demand for health care services will rebound in 2021, and various other factors.

Pent-up demand and morbidity adjustments. Many insurers expect that health costs will increase in 2021 due to pent-up demand following deferred care, direct costs related to COVID-19 testing and treatment, and vaccination costs, assuming a vaccine will be ready and available to the general public next year. Some insurers also anticipate increased morbidity resulting from deferred care and the impact of that deferred care on chronic conditions, as well as from the impact of the economic downturn on individuals’ health and insurance status.

Vaccination costs. Some insurers specify loads for a likely vaccine. For instance, MVP Health Care in Vermont loaded an additional 1.0% to premiums in preparation for covering one dose of a COVID-19 vaccination (priced at $75) for 80% of their enrollees. (MVP also loaded another 0.3% for deferred services.)  Other insurers refrained from factoring in COVID-19 vaccine costs, citing a lack of credible information.

No adjustments to premiums from COVID-19. Many insurers refrained from specifying any COVID-19 rate impact. Of those that did, several insurers said they would not adjust their rates, citing uncertainty about how the pandemic will affect costs next year. Others expect the upward and downward effects on costs resulting from the pandemic will have a net impact of zero. In some states such as Connecticut, insurers did not apply adjustments due to COVID-19 under the direction of state regulators.

Expected decreases in premium costs due to COVID-19. Though less common, a few insurers expect that circumstances surrounding COVID-19 will have a net negative effect on their costs.

DISCUSSION

Most premium changes on the ACA marketplaces will be modest heading into 2021, even with the uncertainty surrounding the pandemic. Most individual market insurers that specify the impact of the pandemic on their 2021 premiums are loading an extra couple percentage points onto the premium (with the median COVID-19 factor being 1.9%). Thus far during the pandemic, individual market insurers have remained profitable and loss ratios have been low, on average, so large premium increases would have been hard to justify. That said, the range of assumptions that insurers have made about vaccine costs and availability, enrollee utilization, and general morbidity demonstrate just how much uncertainty remains about the state of the pandemic heading into next year.