Significant ACA Pricing Variation by State, Metal Tier

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In some states, lowest-cost Gold plans are more affordable than lowest-cost Silver. Insurers need to weigh competitive differences by metal tier across geographies in making pricing decisions.

Ryan Schultz  and  Corryn Brown

4 min read

Variation in pricing across Affordable Care Act products gives insurers plenty to think about as they near the close of the 2023 Open Enrollment period and plan for 2024. As we discussed in an earlier article, consumers are generally seeing a modest uptick in premiums for the lowest-cost plans in each of the Bronze, Silver, and Gold metal levels on the federal Marketplace. Based on additional analysis, we identified two key observations related to carrier pricing relativities by metal level for plan year 2023:

1. There is significant variation in cost relativities between the average lowest-cost Bronze and lowest-cost Gold plans by state, ranging from 1.24 in Wyoming — meaning the LCG plan is 24% more expensive than the LCB plan — to 1.68 in Alabama.
2. There are seven states where the average LCG plans are cheaper than the average lowest-cost Silver plans available to consumers.

We utilized premium rate data from the Centers for Medicare & Medicaid Services to determine the premium rates for the LCB, LCS, and LCG plans by county, and then calculated weighted-average lowest-cost rates at each of those metal levels by state, where weights were based on 2022 Open Enrollment plan selections by county. We focused on these plans because they represent the lowest-cost plans at each of the most popular metal levels that an individual or family seeking coverage through the federal Marketplace can access.

Variation in LCG and LCB Pricing

In general, for consumers purchasing coverage through the Marketplace, Bronze plans tend to be the leanest, having the highest deductibles and highest copays, while Gold plans, with the lowest deductibles and lowest copays, tend to be the richest. There are significant differences in the pricing relativities between the LCB and LCG plans across the 33 states that will utilize the federal Marketplace for plan year 2023. Across all 33 states, the average premium rates for the LCG plans are approximately 37% higher than that of the LCB plans. However, in Alabama, the premium rate for the average LCG plan is 68% higher than that of the average LCB plan. That compares to Wyoming where the premium rate for the average LCG plan is only 24% higher than the average LCB plan.

This variation will result in the plans within a particular metal level having a different value proposition to consumers from one state to the next. From a risk standpoint, in order to anticipate the mix of individuals that may enroll, existing carriers, as well as new entrants, should consider the differences between the metal pricing slope they intend to use and the metal pricing slope(s) being utilized by their competitor(s) in each geographic region where they plan to offer coverage.

LCG Premium Rate Levels Relative to LCS Plans

Across all 33 federal Marketplace states, LCG plans are priced, on average, only approximately 3% higher than the LCS plans. This is due in large part to cost sharing reduction loads being applied by carriers to Silver plans. Further, there are seven states where the average LCG plans will be cheaper than the average LCS plans for plan year 2023 — Alaska, Delaware, Florida, Iowa, North Dakota, Texas, and Wyoming. The largest observed difference among those seven states is in Wyoming, where the average LCG plan will be approximately 12% lower than the average LCS plan. The smallest observed difference among those seven states is in Florida and North Dakota, where the average LCG plan will be approximately 2% lower than the average LCS plan.

That means enrollees who can’t access Silver CSR plans — households with incomes greater than 200% of the federal poverty level — should be able to purchase Gold plans at a cheaper rate, on average, than Silver plans. Additionally, in those seven states, there is a greater likelihood that consumers who are eligible for premium tax credits may have access to Gold plan coverage at little to no cost. Consequently, the on-Exchange enrollment in those seven states may be expected to skew more heavily toward Gold plans in plan year 2023 than in the other 26 states.