Health Insurance Exchanges: Changes in Benchmark Plans and Premiums and Effects of Automatic Re-enrollment on Consumers' Costs
Released: 2017-12-14T00:00:00

Letter

Background

There are several aspects of individual market plans sold through the exchanges for consumers to consider when selecting a plan, including: (1) metal tiers; (2) premium variation and plan availability; (3) covered benefits; and (4) premium tax credits. Current exchange consumers who are eligible for continued health insurance and do not actively select and enroll in a health plan for the subsequent year may be automatically re-enrolled in the same or a similar crosswalked plan.

Considerations for Selecting and Enrolling in Individual Market Health Plans through the Exchanges

Plans sold through exchanges are offered at one of four levels of coverage, or metal tiers—bronze, silver, gold, and platinum—that reflect the out-of-pocket costs that may be incurred by a consumer. The four metal tiers correspond to the plan’s actuarial value—a measure of the relative generosity of a plan’s benefits that is expressed as a percentage of the covered medical expenses expected to be paid, on average, by the issuer for a standard population and set of allowed charges for in-network providers. The actuarial values of these metal tiers are as follows: bronze (60 percent), silver (70 percent), gold (80 percent), and platinum (90 percent). If an issuer sells a plan on an exchange, it must offer at least one plan at the silver level and one plan at the gold level. Issuers are not required to offer bronze or platinum plans.

Premium Variation and Plan Availability As we have previously reported, the range of premiums for health plans offered through the exchanges can vary widely across counties and states, and the number and type of plans available in the health insurance exchanges vary from year to year. Issuers can add new plans and adjust or discontinue existing plans from year to year, or they can extend or restrict the locations in which plans are offered. As a result, the options available to consumers can change from year to year.

PPACA requires that health insurance plans offered through the exchanges be certified as qualified health plans, meaning that they must provide essential health benefits, comply with cost sharing limits, and meet certain other requirements. Essential health benefits include items and services within ten categories. Some health insurance plans offered through the exchanges include benefits above and beyond the minimum requirements. For these plans, only the percentage of the plan premium that covers the essential health benefits is considered when determining the consumer’s benchmark plan.

Certain consumers purchasing health insurance through the exchanges are eligible for and receive premium tax credits that may reduce their out-of-pocket costs for premiums. To be eligible for premium tax credits, individuals and families must generally have a household income of at least 100, but no more than 400, percent of the federal poverty level (FPL).

Consumers who are eligible for premium tax credits and enrolled in the benchmark plan are responsible for paying premiums that are generally limited to a percentage of household income, such that individuals and families with lower household incomes contribute a smaller portion of their income toward the health plan premium than individuals and families with higher incomes, and premium tax credits may be applied to only the portion of the premium that covers essential health benefits. For example, in 2016, the percentage of household income that consumers who were eligible for premium tax credits and who lived in the United States were expected to pay toward the portion of their premiums for their benchmark plan that covered essential health benefits was 2.03 percent for those at 100 percent of the FPL, 8.18 percent for those at 250 percent of FPL, and 9.66 percent for those at 400 percent of FPL. A consumer’s required contribution to the premium is the amount of that benchmark plan premium that is not covered by the premium tax credit. (See table 1.)

Although consumers’ premium tax credit amounts are determined in part based on the cost of premiums for their local benchmark plan, the credit can also be applied towards the premiums for other eligible exchange plans. However, the premium tax credit available to consumers does not increase if they enroll in exchange plans with higher premiums than the local benchmark plan. In such cases, consumers are responsible not only for their required contribution but also for the difference in premiums. Similarly, if a consumer chooses to enroll in an exchange plan with lower premiums than the local benchmark plan premium, then the consumer’s premium tax credit would also generally remain the same, so the consumer would pay less for that plan. The tax credit cannot, however, exceed the total value of the premium. Because most consumers enrolling in exchange plans are eligible for premium tax credits, most consumers’ out-of-pocket premium costs are lower than the advertised cost of premiums. (See table 2.)

Process for Automatically Re-enrolling Consumers into Exchange Plans

Re-enrollment in an exchange plan may occur through either an active choice by a consumer or through automatic re-enrollment by the exchange. Eligible returning consumers may enroll in a health insurance plan through the exchange each year during an open enrollment period. Federally facilitated exchanges automatically re-enroll eligible exchange consumers for the next year, unless their health insurance is terminated or the consumer makes an active plan selection. Through automatic re-enrollment a consumer is re-enrolled in the same plan for the next year if that plan remains available to him or her; if the same plan is no longer available (e.g., because the issuer decided to discontinue a particular plan or to stop offering the plan in certain locations), then the consumer is generally re-enrolled in a similar crosswalked plan. The criteria HHS established for identifying appropriate similar crosswalked plans have changed over time, but the similar crosswalked plan is typically the same metal tier level as the original plan. During the 2015 to 2016 transition, all similar crosswalked plans were plans offered by the same issuer as the original plan. If that issuer no longer offered an exchange plan, there was generally no crosswalked plan and automatic re-enrollment was not an option. Starting with the 2016 to 2017 transition, if the original issuer did not offer a similar plan, then automatic re-enrollment could be into a health plan offered by a different issuer, with plan similarity determined using established criteria.

Both issuers and exchanges have had roles in informing consumers about the enrollment process. For example, prior to the start of the 2015 and 2016 open enrollment periods, both the exchange and health plan issuer were to provide current exchange consumers with general information about the upcoming enrollment period, including key dates and information regarding eligibility for re-enrollment. In addition, some consumers were also to receive special notices from the exchange that provided more detailed information regarding their application status, eligibility for enrollment and affordability programs, and potential effects on enrollment if they had not updated information about their income or eligibility or reviewed their re-enrollment options with the exchange prior to the end of the open enrollment period. Consumers who were automatically re-enrolled by an exchange were to receive an additional notice with updated information about their re-enrollment status. According to CMS officials, automatically re-enrolled consumers were provided with information about their new premium amount and any new advance premium tax credit amounts in a message confirming their enrollment.

From 2015 to 2017, Most Plans Identified as Benchmark Plans Changed and Benchmark Plan Premiums Generally Increased

In most of the nearly 2,600 counties included in our analysis, the plan that we identified as the benchmark plan changed from 2015 to 2017. For example, in 85 percent of the counties included in our analysis, the 2015 benchmark plans were not benchmark plans in either 2016 or 2017, the other 2 years we studied. The benchmark plan was the same plan in all 3 years in only 3 percent of counties. (See table 3.)

In addition, benchmark plan premiums were more likely to increase than decrease from year to year, and increases were higher from 2016 to 2017 than they were from 2015 to 2016. Among all the counties in our analysis, the median change in monthly premiums for the benchmark plans was an increase of 11 percent from 2015 to 2016, and 28 percent 2016 to 2017. As shown in figure 1, the gross premiums for benchmark plans increased by more than 55 percent from 2016 to 2017 in 12.4 percent of the counties in our analysis but did not increase by more than 55 percent in any counties from 2015 to 2016. In contrast, although not particularly common, relatively stable or even decreasing premiums from year to year were more likely from 2015 to 2016 than from 2016 to 2017. Appendix I provides examples of median benchmark plan premiums for 2015, 2016, and 2017 for select groups of consumers. Because premium tax credits limit eligible consumers’ payments for benchmark plan premiums to a percentage of their income, an increase in premiums may not increase their financial responsibility. Instead, for eligible consumers, the amount of the tax credit would increase. According to HHS, most exchange consumers have been eligible for these tax credits; those who were not eligible for tax credits would not have this protection from premium increases. The premium increases for consumers who were not eligible for premium tax credits, or for those who were eligible but who chose plans that had higher premiums than their benchmark plan premiums, could have had a more substantial financial impact, because premium tax credits would not have offset, or fully offset, the higher premiums.

Although gross premiums for benchmark plans were likely to increase from 2015 to 2016 and from 2016 to 2017, we found that in many counties, the implications for automatically re-enrolled consumers were modest because net premiums—after accounting for tax credits for those eligible for those credits—were limited. We compared the 2016 premiums for plans that had been benchmark plans in 2015 to the 2016 benchmark plan premiums, and we compared the 2017 premiums for plans that had been benchmark plans in 2016 to the 2017 benchmark plan premiums. To focus this analysis on the potential effects for those who were automatically re-enrolled, we limited our comparisons to plans that were available in both years, or plans for which a similar crosswalked plan had been identified for the second year. For this analysis, we excluded plans that were benchmark plans in one year and were also benchmark plans, or were crosswalked to a benchmark plan, in the following year. We found that in many counties, the new premiums for plans that had been (but were no longer) benchmark plans differed only modestly from the new benchmark plan premiums. For example, in 60 percent or more of the counties in our analysis, the premium for the previous benchmark plan was within plus or minus about 7.5 percent of the new benchmark plan premium. This finding indicates that automatic re-enrollment from a benchmark plan into a plan that was not a benchmark plan did not necessarily result in substantially higher premiums compared to the premiums for the new benchmark plans, and the same would be true for consumers who actively chose their same or similar crosswalked plan.

While modest premium differences were not uncommon in either year, figure 2 also shows that some differences were substantial. (See fig. 2.) Although consumers who were eligible for premium tax credits were somewhat insulated from large differences in premiums, if they were automatically re-enrolled in a plan with a premium that was higher than their benchmark plan premium, no matter how great the difference, they would have been be required to pay a larger share of their incomes on those premiums. And, as already noted, the premium differences for consumers who were not eligible for premium tax credits, or for those who were eligible but who chose plans that had higher premiums than their benchmark plan, could have had a more substantial financial impact because premium tax credits would not have offset, or fully offset, the higher premiums.

Thirty Percent of Consumers Who Re-enrolled in 2016 Were Automatically Re-enrolled, and the Remaining Consumers Actively Re-enrolled, Generally into Different Plans

Among consumers who were enrolled in plans through the federal platform in both 2015 and 2016, 30 percent (about 1.7 million consumers) were automatically re-enrolled. Of those consumers who were automatically re-enrolled, 71 percent were re-enrolled in their same plan and 29 percent were re-enrolled in a similar crosswalked plan, because their 2015 plan had been discontinued or was no longer offered in the consumer’s local area. These data do not indicate whether these consumers explored their options for switching plans and made an active decision not to change plans.

The remaining 70 percent of consumers who enrolled in exchange plans through the federal platform in both 2015 and 2016 (more than 3.9 million consumers) actively re-enrolled in 2016. Of these consumers, 39 percent chose the same plan in which they had been enrolled in 2015 or the similar crosswalked plan to which they would have been automatically re-enrolled. The majority of consumers who re-enrolled actively, 61 percent, switched to a plan that was neither their 2015 plan nor the similar crosswalked plan. (See fig. 3.) Of those consumers who actively switched plans, more than half (54 percent) would have been automatically re-enrolled in their same plan if they had not actively switched plans, indicating that plan discontinuation was not the only factor involved in consumers’ decisions to change plans.

Consumers’ Financial Responsibility for Premiums Generally Increased Less with Active Re-enrollment than with Automatic Re-enrollment

Consumers’ median net monthly premiums (after premium tax credits) generally increased less from 2015 to 2016 for those who actively re-enrolled ($5) than for those who were automatically re-enrolled ($22). As shown in table 4, consumers who actively re-enrolled had a lower median increase in their net monthly premiums than consumers who were automatically re-enrolled for both the same and similar crosswalked plans. Moreover, table 4 also shows that consumers who re-enrolled actively, and who switched plans from 2015 to 2016, enrolled in plans with median monthly net premiums that increased the least overall—a median net increase of $1 compared to $13 per month for those who enrolled in the same plan. In addition, the table shows that enrollment in a similar crosswalked plan did not generally result in a higher median net premium than enrollment in the same plan: whether enrollment was active or automatic, consumers’ median net monthly premiums increased less for those who enrolled in a similar crosswalked plan than for those who enrolled in the same plan. Changes in net monthly premiums varied around these medians, however, with some consumers facing large increases or, in some cases, large decreases in their net monthly premiums. Large increases or decreases in net monthly premiums could result from changes to eligibility for tax credits, selections of plans of different metal levels, or other circumstances.

Our findings are consistent with other work by ASPE that suggested that consumers consider possible cost savings when deciding to switch plans. For example, ASPE found that average net monthly premium for the 61 percent of consumers who actively switched plans in 2016 was $132, which represented an average savings of $42 per month compared to what they would have paid if they stayed in their same or similar crosswalked plans. This work also found that the net monthly premiums of consumers who actively chose to remain in their same or similar crosswalked plans in 2016 were, on average, only $10 more than those for consumers who actively switched plans. In addition, ASPE found that consumers’ plan selections indicated sensitivity to net premiums. For example, ASPE found that consumers were much more likely to switch plans when the net premium of their 2015 plan increased than when the gross premium of their 2015 plan increased, but the net premium did not.

Agency Comments

We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Acting Secretary of Health and Human Services and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.

Appendix I: Median Benchmark Plan Premiums for Select Groups of Consumers, 2015 through 2017

Benchmark plan premiums generally increased from 2015 through 2017. Table 5 shows the median monthly gross benchmark plan premiums (exclusive of any applicable premium tax credits) for select consumer groups.

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Gerardine Brennan, Assistant Director; Kristen Joan Anderson, Analyst-in-Charge; Todd Anderson; and LaKendra Beard made key contributions to this report. Also contributing were Muriel Brown; Daniel Lee; Laurie Pachter; and Emily Wilson.