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Small Business Employee Benefits and HR Blog

5 Things to Know about Marketplace Rates in 2015

going_upWith open enrollment 2015 coming up, there's a lot of buzz about the Marketplace rates for 2015. What are the facts?

Here are five things to know about marketplace rates in 2015

1. Most People Will Pay More

The ever-increasing cost of health care is a substantial financial burden for individuals and corporate America alike. There will be rate increases across the board for employer-provided group health insurance and individual insurance.

2. Average Increases on the Marketplace Are 8.2%

According to an analysis by PricewaterhouseCooper (PwC), 29 states and the District of Columbia have released initial rate filing information as of this month. The average rate increase is 8.2 percent, with the average monthly premium around $385. Although this seems like a significant rate increase, before the Affordable Care Act (ACA) came into play rates increased at an average of at least ten percent each year.

The average monthly premium, however, does not include the premium tax credits which are available to the majority of individuals and families who purchase coverage on the public Health Insurance Marketplaces. In the federally-run Marketplace in 2014, 87% of those who selected a health plan were eligible for premium tax credits, and are paying an average of $82/month (source).

3. Rates Vary Significantly by State and Region

Rating areas have a lot to do with premium costs. Under the ACA there are 501 rating areas for premiums. Premium increases will vary widely across areas for reasons including the level of competition between insurance companies and how accurately insurers projected the mix of healthy and sick people in their risk pools.

The rate filings differ widely by state. The states in this analysis with the five lowest average rate increases include:

  • Oregon (-2.5%)

  • Delaware (+1.3%)

  • Maine (+1.7%)

  • Colorado (+3.6%)

  • Michigan (+4.6%)

The states with the five highest average rate increases include:

  • Indiana (+15.4%)

  • Tennessee (+13.8%)

  • Kansas (+13.6%)

  • Vermont (+12.6%)

  • Arkansas (+11.7%)

4. Most People Qualify for Premium Tax Credits

Rates aside, most people purchasing an individual or family plan through the new health insurance marketplaces are expected to qualify for a premium subsidy to offset part their premium costs.

During the 2014 open enrollment period, an estimated 85 percent of people who bought a Marketplace plan were eligible for a premium tax credit. This means the "sticker" price does not matter as much because, for most people, the premium tax credit will limit how much they pay for their premium.

As a quick refresher, here's how the premium tax credits work.

The premium tax credits are offered on a sliding-scale, and cap the cost of the premium at between 2 percent and 9.5 percent, depending on income. Individuals earning up to $46,680 a year in 2014 are eligible. Therefore, with the tax credits acting as a cost cap, a 32-year old individual earning $27,000 in 2014 will pay a maximum of $249/month for a "Silver" rated plan, or $103/month for a "Bronze" rated plan, no matter what the "sticker" cost of the premium is.

5. Increased Competition Will Keep Rates Down in Many Regions

As the Marketplace enters the second year of operation, more major health insurance carriers are entering the Marketplaces or expanding their presence in the Marketplaces.

For example, Assurant Health will enter the public Marketplaces in 16 states and United Healthcare is expanding their Marketplace presence from five states in 2014 to as many as 24 states in 2015. Aetna, Humana, and Cigna are also expanding Marketplace offerings in 2015.

For consumers, this news means more individual health plans to choose from and more competition in many of the state Marketplaces. This increased competition among carriers will help to keep rates down in 2015.

What do you think about the Marketplace rates for 2015?