Virginia health insurance premiums are still too high for many customers, report finds

Nearly five years after changes to the Affordable Care Act, Virginia is still struggling to control the cost of premiums on the individual health insurance market.

A new report presented Tuesday to the state’s Joint Commission on Health Care found that the average cost of silver plans, a mid-tier option that generally includes some out-of-pocket costs, increased by nearly 60 percent between 2016 and 2021 — raising the monthly price by more than $200 for most customers.

The average cost of premiums for bronze and gold plans also went up, increasing a little more than 37 percent for bronze and 25 percent for gold. 

Over the same period, enrollment in Virginia’s health care marketplace dropped by just over 20 percent. And prices remain high even though the cost of premiums has generally lowered over the course of the pandemic — driven by lower-than-normal use of medical services. Without state intervention, analysts warn that participation may continue to drop over the next few years as people struggle to afford higher premiums.

“Average adult costs have increased significantly,” said Stephen Weiss, a senior health policy analyst for the commission. “And even though there’s been some decline, it’s not enough to offset the impact of those increases.”

Most of the changes in enrollment, and costs, can be traced to actions on the federal level. In 2017, Congress eliminated the individual mandate, a key provision in the Affordable Care Act that required most Americans to enroll in health insurance. While its removal didn’t lower market participation as dramatically as many experts expected, the uncertainty drove up the cost of premiums — especially in Virginia, where the average monthly price of silver plans rose by more than $300 between 2017 and 2019.

The same year, the federal government stopped paying insurance companies directly for subsidies offered to many low-income customers. As a result, many carriers incorporated those costs into their premium rates. As prices began to rise, state analysts found that younger, healthier people began to leave the market. 

Over the last five years, enrollment drops have been the sharpest among Virginians aged 18 to 34. Medicaid expansion has contributed to some of the losses as more low-income people qualify for government-provided insurance. But among residents who aren’t eligible for the program, Weiss said many have downgraded to bronze plans or left the health care marketplace altogether. 

“Many were young adults just above the Medicaid income threshold or who weren’t eligible for tax credits,” he said. Those subsidies lower the monthly cost of premiums for adults within a certain income bracket, making health care more affordable.

The American Rescue Plan Act expanded those tax credits dramatically, leading thousands more Virginians to participate in the individual marketplace. If those subsidies continue, state analysts estimate more than 440,000 people will be enrolled by 2023 — roughly 108,000 more than there would be without the expanded benefits.

The problem, though, is that the act is set to expire next year, with no clear sign that Congress intends to extend the enhanced subsidies. If those end, it’s anticipated that many Virginians will once again forgo insurance on the exchange.

“It’s having an oversized impact on enrollment and affordability,” Weiss said. “ARPA has brought so many people into the market that ending it is expected to see most — if not all — of them leave due to cost.”

The potential loss of enrollment is a concern to the state for many reasons. For one, lawmakers want Virginians to be insured, and a lack of coverage could raise health care costs down the road if people forgo preventive care or don’t have coverage during medical emergencies. 

But high participation is also key to stabilizing premiums long-term. If young, healthy people leave the market, insurers are left covering those who are older and sicker and can’t risk going without insurance. As a result, costs rise for those more vulnerable patients. In Northern Virginia, for example, the health carrier Group Hospitalization and Medical Services, Inc. had the highest premiums in the state — and the country — in 2021. Weiss said it was due to declining enrollment overall and a higher number of members with more intensive medical needs.

“This is exactly what we do not want to happen in the marketplace or even in a single plan,” he said. Historically, unpredictable enrollment has also led insurers to pull out of the market. While a lack of competition doesn’t always lead to an increase in premium costs, state experts worry there could be a repeat of 2018, when Charlottesville was left with a single health insurer on the exchange and skyrocketing prices as a result.  

Virginia lawmakers have already taken steps to lower the cost of premiums, including establishing a state-run health exchange in 2020 and passing a reinsurance program the following year. But neither initiative is expected to be fully implemented until at least 2023. In the meantime, analysts are recommending other policy options to further reduce costs and stabilize enrollment for individuals on the exchange.

The suggestions include a range of initiatives, from funding additional navigators to help connect Virginians with health plans to creating a public option plan that could boost market competition. Creating a statewide individual mandate is another option, as is eliminating a rule that allows existing insurers to charge tobacco users more for coverage (a policy that disproportionately impacts low-income Virginians, according to Weiss).

Regardless of which options lawmakers gravitate toward in the upcoming General Assembly session, the biggest impacts will likely come if the federal government also chooses to maintain expanded subsidies on the marketplace.

“If ARPA expires, the number of uninsured people in the state is expected to go back up to 748,000,” he said. That’s nearly 10 percent of the population — more than 100,000 more people than would be expected if the benefits continued past 2022.