How will Premium Rate Changes Affect Consumers’ Renewals into Marketplace Coverage? Lessons Learned from 2015’s Enrollment Season

In a few weeks we’ll know just to what extent premium rates have changed for marketplace health plans in 2016 as states conclude their rate reviews by August 25. As we found in a recent report examining consumers’ renewal experiences in six state-based marketplaces, price is the deciding factor for consumers choosing a marketplace plan. And since the amount of the premium subsidy to purchase health insurance is tied to the cost of the second lowest cost silver plan (SLCSP) in the market, changes in rates – and potentially in which plan is designated the SLCSP – play a significant role for marketplace consumers, the majority of whom receive subsidies.

So what will changing rates mean for consumers as most marketplaces begin to automatically renew 2016 coverage for eligible consumers during this year’s open enrollment? Foremost, increases or decreases in premium rates, particularly for the SLCSP, mean that consumers should shop around and see whether they are better off switching health plans. Consumers also need to be aware that even if they are in a state with moderate overall changes like California, which is only seeing an average 4 percent proposed increase in rates for 2016, an average rate increase is just that – an average. Individual consumers may see more dramatic changes up or down in their own plan, or in the SLCSP, which will affect the value of their subsidy. . California’s marketplace executives are well aware of this, so it is encouraging consumers across the state is to “shop around.” Covered California is also encouraging consumers to check out two new insurers that will be offering health plans in some of its regions.

Second, while eligible consumers in the federally facilitated marketplace (FFM) who are automatically renewed can be assured of getting a redetermination for their premium subsidy eligibility based on 2016 rates and latest available income information, some automatically renewed consumers may not know the exact premium subsidy amount until their first invoice. The FFM is allowing insurers to put last year’s premium subsidy amount in their notices as long as they indicate the amount is only an estimate. That’s because insurers may not have the necessary information to provide an accurate 2016 premium statement before they are required to sent out their open enrollment notices. The bottom line? Consumers should return to the marketplace to update their financial and household information, even if they’ve had no changes. This triggers an eligibility redetermination for 2016, which in turn will provide them with their 2016 subsidy amount. Knowing this information can help consumers avoid any sticker shock later on.

In our research, we found that price fluctuations in some states resulted in many consumers getting a better bang for their subsidy dollar by actively renewing. We also found that consumers were surprised by higher-than-expected premium bills in January when they were automatically renewed. Some consumers will likely have similar experiences in 2016, but marketplace executives have learned important lessons about communicating with consumers about their renewal options, and hopes are high that the second renewal season will go much more smoothly.

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The opinions expressed here are solely those of the individual blog post authors and do not represent the views of Georgetown University, the Center on Health Insurance Reforms, any organization that the author is affiliated with, or the opinions of any other author who publishes on this blog.