As the health marketplace open enrollment period ends, states have shifted their attention to ensuring plan affordability.
Open enrollment, which typically runs Nov. 1 to Jan. 15 (later in some states), is the annual period when people can join a health insurance plan through a state-based or the federally facilitated marketplace, also known as exchanges, for the next calendar year. Individuals, families and small businesses may sign up for a new plan, change their current coverage or reenroll in their current plan.
So far, 2024 appears to be another record-setting year for open enrollment. The Centers for Medicare & Medicaid Services reports that over 20 million Americans signed up for individual market insurance coverage. These numbers show a steady increase from 14.5 million enrolled in 2022 and 16.3 enrolled in 2023 for the 21 states and Washington, D.C., operating state-based marketplaces and 29 states using the federally facilitated marketplace. Record enrollment may be linked to the Medicaid unwinding and the availability of premium subsidies, extended via the Inflation Reduction Act through 2025.
A record 20 million-plus Americans signed up for individual market insurance coverage this year.
Record enrollment is accompanied by an average premium increase of 6%, according to a KFF analysis across 320 insurers participating in the exchanges in 50 states and the district. The continued availability of premium subsidies will likely insulate many consumers from these increases in the short term. However, increased premiums may lead to higher federal spending on consumer subsidies.
According to the same KFF analysis, insurers cited price increases for medical care and prescription drugs as a key driver of premium growth. Insurers also identified use of services as a driver of premium growth, particularly as use continues to grow relative to pandemic years.
States are considering various strategies to ensure accessible, affordable marketplace coverage, including premium rate review and public option-style plans.
Strengthening Premium Rate Review
Premium rate review enables an approval authority to assess whether premium rate increases are “unreasonable” or “excessive” by considering benefits in relation to premiums, previous premium rates, a carrier’s reserves and other factors. Some states have also established requirements for provider-insurer contracting, particularly relating to price increases, to improve premium affordability. Most states use some form of rate review. CMS estimated that rate review reduced total premiums for Americans in the individual and small-group markets by $1.5 billion in 2015.
Rhode Island uses “affordability standards” when assessing premium rates, including minimizing price increases for inpatient and outpatient services in provider-insurer contracts to no more than annual inflation plus 1%. The affordability standards include other cost-containment strategies, such as primary care investment and alternative payment model adoption.
Texas authorized a new rate review program in 2021. Through the program, the commissioner of insurance is authorized to establish rules for reviewing and rejecting rate changes, creating a dispute resolution process for insurers and requiring that proposed rate increases are made available for public comment. Additionally, the legislation aims to maximize the amount of premium subsidies that state residents receive.
Iowa requires insurance carriers to immediately notify policyholders of any application for rate increase that exceeds the average annual health spending growth rate in the most recent national health expenditure projection published by CMS. Carriers’ notices are required to specify the proposed rate increase for each policyholder as well as the computation of factors causing the rate increase. Iowa’s rate review process also requires a public hearing and approval, disapproval or modification of proposed rates by the insurance commission.
Illinois is the most recent state to enact legislation establishing a premium rate review process. The law requires that premium rates for individual and small-group health plans for the years 2026 and beyond must be approved by the Department of Insurance.
Public Option-Style Plans
Some states are considering offering a marketplace public option-style plan that ties reimbursement to a certain rate, often Medicare rates, to control costs.
While models vary, generally, a public option refers to a government-run health plan that competes with commercial plans on the health insurance marketplace. They may be offered as a new publicly insured plan through an option to buy into an existing public plan (like Medicaid), or through a public-private partnership where private insurers administer a government-regulated or -designed health plan.
Washington became the first state to require the implementation of a public option in 2019. The bill required the state Health Care Authority, in consultation with other agencies, to provide a state-designed plan offered by private insurance companies for purchase through the marketplace. In attempts to increase availability of the public option after some initial challenges, Washington enacted legislation in 2021 changing provider participation requirements and capping provider payments at 160% of Medicare rates. The state’s public option plan rates will increase by 5% in 2024, compared with an 8% for nonpublic option plans.
Colorado and Nevada both enacted public option legislation in 2021. Colorado is the only state besides Washington with an operational program—the Colorado Option—with plans being offered on the individual and small-group marketplaces as of 2023. In Nevada, plans will be offered in 2026.
The Colorado Option includes a methodology for premium-reduction targets that requires plans to lower premiums by 10% in 2024 (compared with 2021 plans) and by 15% in 2025. These requirements are accompanied by an enhanced rate review process that requires insurers to notify the Division of Insurance whether their plans meet premium rate reduction targets each year. If not, the insurers must explain why and, if applicable, identify any health care provider that they assert is causing their inability to meet the targets. In 2024, health plans have expressed concern about meeting price-reduction targets on most of the Colorado Option plans they currently sell, stating that the inflation calculation doesn’t sufficiently consider health care costs or utilization trends. Meanwhile, the Colorado governor’s administration has stated that the program is saving consumers money, as premiums are 30% lower than those for non-Colorado Option plans.
As enrollment numbers and premium rates continue to evolve, states will likely continue to examine the affordability of marketplace plans.
Samantha Scotti is a project manager in NCSL’s Health Program.
NCSL acknowledges the Arnold Ventures for its support of this resource.
Please note that NCSL takes no position on state legislation or laws mentioned in linked material, nor does NCSL endorse any third-party publications; resources are cited for informational purposes only.