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Hospital Report

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The premier resource for hospital professionals from Relias Media, the trusted source for healthcare information and continuing education.

CMS: Reports of Marketplace Insurance Unrest Have Been Greatly Exaggerated

August 12th, 2016

This week, CMS released a surprising conclusion in a report on the health of the Affordable Care Act insurance exchanges: They are alive, well, and steadily growing.

The report comes at a time when large insurers, including Humana, announced their exit from some state marketplaces due to heavy losses, while others are increasing premiums for 2017.

Findings from the report include the following:

  • ACA marketplace individual plan costs per member remained unchanged between 2014 and 2015, while private insurance per-member costs increased 3%-6%.
  • States with the most marketplace enrollment growth saw the largest decreases in per-member costs.
  • The slow cost growth is largely attributed to the increase in healthy, low-cost consumers signing up for marketplace plans.
  • Marketplace enrollment continues to increase in almost all states.

Despite the cheerful report, there still remains the question of insurers raising rates or pulling out of certain state marketplaces altogether. If the marketplace risk pools are strong, why are insurers reporting huge losses? CMS ventures a guess: “Evidence suggests that many insurers priced below cost for 2014, for reasons that included difficulty predicting cost in a new market and a desire to offer strongly competitive rates to gain share in a new market,” according to the report.

External Data Gathering Environment (EDGE) data show a 2% increase in premiums in 2015, “would have been sufficient, on average, to keep pace with claims costs, because of the exceptionally slow growth in per-enrollee claims. However, it would not have been sufficient to make up for 2014 gaps between prices and costs or to accommodate the partial phasedown of the transitional reinsurance program,” according to CMS.

A healthy, growing insurance marketplace is definitely welcome news for states and a sigh of relief for the Obama administration. It’ll be interesting to see how the market will perform under a new president.