Executive summary

Following the introduction of the Patient Protection and Affordable Care Act (ACA), the individual health insurance marketplace has experienced continuous changes. To support understanding of the condition and stability of the individual market, we have prepared our third annual profile of the individual health insurance market for each state along with the District of Columbia (DC).

This information is vital to state, federal, and insurer stakeholders for several reasons:

• 1332 State Innovation Waiver (1332 Waiver). The number of states with approved 1332 Waivers has increased from three in 2018 to 13 as of October 2019, with 12 of the approved 1332 Waivers including reinsurance provisions. ⁷ State-based reinsurance programs have become a common approach to adhering to 1332 Waiver requirements of covering at least as many individuals under current law, while not increasing the federal deficit. Under these programs, federal pass-through funding is generated from the reduction to federal premium subsidies provided to consumers. These programs also assist in enabling marketplace coverage to be more affordable for consumers not eligible for advanced premium tax credits (APTC).
  
  In 2018, approximately $250 million in federal pass-through funding was provided to the three states operating a reinsurance program under a 1332 Waiver. ⁸ The amount of 1332 Waiver federal pass-through funding is expected to exceed $1 billion by 2020. Each state profile provides estimated federal expenditures on APTC and cost-sharing reduction (CSR) subsidies along with the number of individuals receiving these subsidies from CY 2016 through CY 2019. This information can enable a state to better understand the funding and coverage requirements that must be adhered to under Section 1332 of the ACA.
• Insurer stability. On an aggregated basis, insurers reported financial losses in the individual market in CY 2010 ⁹ through CY 2016, with CY 2017 marking the first year of financial gains in recent history. ¹⁰ Year-end financial reporting for CY 2018 suggests further financial improvement, with insurer margins approaching 10% of premium. Insurers’ return to profitability is anticipated to result in favorable premium changes in future years, with many states having experienced marketplace premium decreases in 2019 and minimal increases nationally for 2020. ^11,12 The state profiles contain key financial metrics for CY 2017 and CY 2018, providing further insight into insurer financial stability in each market.
• Marketplace enrollment. Average monthly marketplace enrollment has remained stable in recent years, with minimal changes in the number of premium subsidy recipients between CY 2018 and CY 2019. However, during this same time period, the number of consumers receiving CSR subsidies has diminished. In many states, the population eligible for CSR subsidies have the ability to select a low cost (or often no cost) bronze-level plan as a result of CSR loading on silver-level plans ¹³ (resulting from the discontinuation of direct CSR funding effective October 2017¹⁴ ). When selecting a bronze plan, the recipient forgoes CSR subsidies in lieu of lower upfront premium costs. Enrollment patterns in recent years have demonstrated that this is perceived as an attractive trade-off for many individuals.
  
  Bronze plans often have high member cost sharing requirements (capped at $7,900 and $15,800 for individual and family coverage, respectively, in 2019¹⁵ ), which may exceed affordable levels for the low-income population electing to purchase bronze coverage over a CSR plan. This dynamic has the potential to result in increases in provider bad debt and other related expenses. Each state profile includes information related to the number of individuals receiving premium subsidies and CSR subsidies over time, which can assist stakeholders in understanding the extent to which this could be occurring in a given market. The figure below illustrates changes in the distribution of marketplace selections by metal level for persons with income between 100% and 250% of the federal poverty level (FPL). Bronze-level selections have increased from approximately 15% of total plan selections in 2017 to 20% in 2019.
  
  Figure 1: Metal Level Selections for Persons with income between 100% and 250% FPL
  
  
  Note: Data reflects only states reporting metal-level household income data for the Centers for Medicare and Medicaid Services (CMS) marketplace open enrollment report in each year.
• Marketplace premium. Marketplace premium changes from 2016 to 2019 varied by state due to a number of factors, including insurer profitability, risk pool morbidity, the treatment of CSR payment termination ¹⁶ , and the availability of reinsurance through one of the approved 1332 Waivers. States with high insurer profits in CY 2018 or recently approved 1332 Waivers are likely to have experienced low, or even negative, marketplace premium increases in CY 2019. Figure 1 and Figure 3 of our state profiles provides insight into this dynamic.

Methodology and assumptions

The information contained in this report and the 51 state market profiles was prepared through the use of publicly available data sources and estimates of effectuated marketplace enrollment. Effectuated marketplace enrollment includes the population that has made premium payments and is actively enrolled in a marketplace policy. Data underlying our analyses is based on information from CY 2016 through CY 2019.

Insurer financial results

Financial results for CY 2017 were summarized through the use of annual Medical Loss Ratio Reporting Data (MLR Data), which was publicly released by the Center for Consumer Information and Insurance Oversight (CCIIO) within CMS. ¹⁷ Financial results for 2018 were based on statutory statement financial data submitted through the National Association of Insurance Commissioners’ Supplemental Health Care Exhibit (SHCE). SHCE data was not available for California and Massachusetts because a material number of companies operating in these markets do not complete NAIC statutory financial statements. Individual market financial information from the MLR and SHCE Data is inclusive of marketplace enrollment, off exchange (marketplace) enrollment, and enrollment on transitional products. Further information related to CY 2017 and CY 2018 insurer financial results can be found in our annual research report on the commercial health insurance market. ¹⁸ Additional adjustments were made to the data for observed reporting issues or data variances relative to statutory financial statements.

Marketplace enrollment and subsidy value

CMS released effectuated enrollment summaries for the insurance marketplace on a national and state level for 2016 through 2019. ^19,20,21 Effectuated marketplace enrollment was provided separately for total marketplace enrollment, APTC enrollment, and CSR enrollment.

• APTC:Payments are made directly to the insurance company by the federal government on behalf of the qualifying members to make out-of-pocket premiums more affordable for lower-income households. The amount of the premium tax credit varies for each qualifying household based on its income relative to the FPL and the price of the second-lowest-cost silver plan (commonly known as the “subsidy benchmark plan”) that the household can purchase in the insurance marketplace. Qualifying households must have income between 100% and 400% of the FPL and must not be eligible for other sources of affordable minimum value coverage.
• CSR:The ACA requires insurers participating in the individual insurance marketplace to automatically provide a reduced level of cost sharing to qualifying households. Reduced cost sharing takes the form of CSR variations of base silver plans on the marketplace. The CSR variants include reductions to cost sharing such as deductibles, copayments, coinsurance, and out-of-pocket maximums. The magnitude of the reduction to required plan cost sharing varies based on the income level of the qualifying households purchasing such coverage. Qualifying households must have income between 100% and 250% ²² of the FPL and must not be eligible for other sources of affordable minimum value coverage.

The effectuated marketplace enrollment data also includes the average APTC on a national and state level. We relied on CY 2019 marketplace open enrollment report (OER) public use file to estimate the average premiums for members receiving a premium subsidy.

For CY 2016 through 2019, average monthly premium (for individuals receiving an APTC) were estimated through the use of the public use files for states using the federal marketplace. Due to inconsistent data sources across the three-year period, we have not illustrated monthly marketplace premiums for state-based exchanges that operated in 2019. For all states, it is certain that the actual results will vary from the estimates developed within each state profile. CSR payments were sourced from the MLR Data. For Arkansas and New Hampshire, we adjusted the CSR payments reported in the MLR data for private Medicaid expansion enrollees.

Data reliance

Publicly available data used in our analysis was reviewed for reasonableness and consistency. However, the data sources have not been audited. To the extent data items were not correctly reported, the values presented in this report and accompanying state profiles will need to be updated.