4 Drivers of Premium Changes for 2019
As actuaries begin to file the 2019 health insurance premium rates, that might change premium rates from 2018. Here are some major drivers that could change your employees’ premium costs for the coming year.
1. Medical Trend
The underlying growth of health care costs heavily influence premium rates. Medical claims reflect unit costs of a health care service or medication, as well as correlate with the amount of utilization of a plan, the range and intensity of the service, and how the plan is designed. Health care service costs also vary based on location, regional medical practice patterns and how much insurers can negotiate with fees and care management protocols with health care providers. For 2019, specialty drug costs are expected to continue increasing while the cost for prescription drugs are expected to be similar to 2018 costs.
2. Legislation and Regulations
Laws and regulations on the federal and state level affect risk pool composition, projected medical spending and the amount of taxes, assessments and fees included in the premium. Actuaries must also consider recent and upcoming policy changes when calculating premium rates, such as the elimination of the individual mandate penalty and changes to how insurers are instructed to load premiums to account for cost-sharing reduction subsidies.
3. Risk Pool Composition
By pooling risks, healthy individuals can subsidize the costs of less-healthy individuals. The success of the risk pool, however, depends on how many people it makes up and the proportion of healthy to less-healthy individuals. Premium rates reflect the overall health of a risk pool; if a risk pool has disproportionately more individuals with higher expected claims, premiums will be higher.
4. State Actions on Reinsurance
Premium rate increases for 2019 can vary by state. Ongoing market -specific dynamics affect each state’s economy differently and could result in varying premium changes. In addition, individual states have either taken or proposed actions, such as implementing reinsurance plans or imposing individual mandate penalties, that could heavily impact premiums.
There are multiple factors that play into calculating premium costs. To learn more about the estimated 2019 premium costs, feel free to contact us.