Medicaid unwinding, inflation could influence 2024 health premiums

By Susan Rupe

The Medicaid redetermination, changes resulting from the end of the COVID-19 public health emergency and inflation are at the top of the list of reasons why health insurance premium rates for next year could see some changes. That was the word from the American Academy of Actuaries, which recently published a policy issue brief on the drivers of 2024 health insurance premium changes.

“While there are some recent signs that the top-line inflation that consumers hear about in the news is moderating, higher health care and provider costs are putting upward pressure on premium rates for next year – maybe even more so than when this year’s premium rates were developed in 2022,” said Joyce Bohl, chairperson of the Academy’s Individual and Small Group Markets Committee, which produced the issue brief.

Premium rate changes can vary between individual and small group plans within the same geographic area, and there may be variations between geographic regions, the academy said. The academy broke down some of the factors that will influence rate changes for rate changes within Affordable Care Act-compliant individual and small group health insurance plans for 2024.

Medicaid unwinding

Although Medicaid eligibility redeterminations - also known as The Great Unwinding – will likely result in an increase in the individual health insurance market enrollment, the impact on the risk pool and health insurance premiums is uncertain, the academy said. Inflation and other factors will increase negotiated provider payment rates and will increase premiums.

COVID-19 public health emergency ending

As the payment responsibility for COVID-19 and tests shifts from the federal government to health insurers, premiums could possibly increase, the academy said. But those increases could potentially be offset by carriers reducing their coverage of at-home COVID-19 tests.

The impact of long COVID-19 on medical costs and future health insurance premiums is one of the biggest uncertainties going into next year. The academy said little is known about how many people are affected by long COVID-19, how long it will last for those affected, and how it will impact their personal health. Increased medical spending is likely a consequence of long COVID-19. It is expected that any increases to premiums due to long COVID-19 will vary by carrier and by region, based on the underlying demographics of the health carrier’s enrollees and the local prevalence of COVID-19.

Inflation's impact on health premiums

General inflation, including wage inflation, continues to remain elevated, putting significant cost pressure on small groups, the academy said. However, they said it remains to be seen whether small employers will stop offering coverage, reduce levels of coverage or decrease employer contributions to mitigate continued increases in their other business expenses.

Some small employers may also choose to stop offering health insurance coverage and use Individual coverage health reimbursement accounts or qualified small employer health reimbursement accounts to fund a portion of their employee’s health insurance premiums. It is difficult to gauge what impact such movement into ICHRAs or QSEHRAs could have on premium rates in the small group fully insured market as both groups with higher-than-average and lower-than-average risk could see benefits in this strategy.

Inflation is impacting health care providers as well as employers.

Recently, health care costs have been increasing at a rate above that of inflation. The reimbursement rates that carriers negotiate to pay providers are contracted in advance and are typically set on a multiyear basis. As these contracts come up for renewal, contracted rates are likely to increase significantly due to increases in providers’ operational costs. High demand and competition for this staff and union negotiations may result in salary increases that exceed inflation. These factors will contribute to premium increases.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.