What You Should Know About Benchmark Premium Changes

Benchmark Premium Cncreases: Here's What You Need to Know.

When premiums were finalized for health plans that would be available on HealthCare.gov in 2018, HHS noted that the average benchmark plan premium would be 37 percent higher than it had been in 2017. A year later, when premiums were finalized for 2019, HHS announced that the average benchmark premiums would drop by 1.5 percent.

And there had been significant variation in benchmark premium changes prior to 2018: They increased by an average of just 2 percent for 2015, and by an average of 7 percent for 2016, but grew by an average of 25 percent for 2017.

But What Exactly Does That Mean? 

The benchmark plan is the second-lowest-cost Silver plan in a given area. So if you go on Healthcare.gov (or your state-run exchange site if you're in DC or one of the 11 states that operate their own exchanges; this will grow to 12 states by late 2019, when Nevada begins running their own enrollment platform) and get quotes, the second-lowest-cost Silver plan that pulls up is the benchmark plan in your area. Why does this matter? Because subsidy amounts are based on keeping the net cost of the benchmark plan at a level deemed affordable under the ACA.

In other words, premium subsidies keep pace with the cost of the benchmark plan in each area; if the benchmark premium decreases, you can expect average subsidy amounts to decrease too (regardless of how premiums change for other plans in the market). And when benchmark premiums increase, you can expect to see larger premium subsidies.

Each fall, HHS publishes a report showing how average benchmark premiums are changing for the coming year in states that use HealthCare.gov. But within a state, there are different plans available in different areas. And even if the plan is the same in different areas, the price could be different, because location is one of the factors that can be used to set premiums.

For another reference point, Kaiser Family Foundation tracks benchmark premium changes within major metropolitan areas each year. This helps to illustrate how benchmark premium changes within a state can vary quite a bit. For example, statewide benchmark premiums only increased by 0.3 percent in Georgia for 2019. But if we only look at the Atlanta area, average benchmark premiums grew by 5 percent.

Benchmark Plan Can Be Different Each Year

Another key factor in understanding the benchmark premium changes is the fact that the benchmark can be an entirely different plan from one year to the next. In 2019, the second-lowest-cost Silver plan in your area might be a $5,500 deductible plan from Carrier X. But if Carrier X raises rates more than Carrier Y, the benchmark plan in 2020—in the same area—might be a $5,000 deductible plan from Carrier Y.

When HHS or a state agency reports that the average benchmark premium in a given area is changing by a certain percentage for the coming year, they just mean the cost of the plan that occupies the second-lowest-cost Silver spot in the exchange. It won't necessarily reflect how much the premium changes for the plan that currently holds the benchmark spot, since the benchmark plan might be an entirely different plan in the coming year. In the scenario above, the rate change would involve comparing Carrier X's price in 2019 with Carrier Y's price in 2020.
So when regulators talk about the average change in benchmark premiums for the coming year, it doesn't tell you anything in terms of how much your current plan's premiums will change. But it does give an indication of how your premium subsidy might change next year. Again, it's just averages; the specifics vary from one area to another. But if the second-lowest-cost Silver plan in your area is going to be more expensive next year than it was this year, your subsidy will probably be larger than it was this year too. And the reverse is also true.

[Note that there are other factors involved in the actual amount of your subsidy, including changes in your income, changes in the federal poverty level, and changes in the percentage of income that you're expected to pay for your coverage.]

Take the Time to Shop Around

There's no way to know how much your plan, your subsidy, and the other plans in your area will be until you compare available options during open enrollment. Letting your plan auto-renew could result in a surprise when you get your January invoice; even if you know how much your plan's premium is changing, a changing subsidy—based on changes in the benchmark premium—could also result in a higher or lower premium than you're expecting.

And since plan availability and insurer participation can vary in each area from one year to another (including new plans coming into the market and taking over the benchmark spot), you may find that a new plan will provide a better value than keeping the one you have now. There's no one-size-fits-all when it's time to renew your health insurance—shop around!

November 1 to December 15 Open Enrollment Applies Only to the Individual Market

The open enrollment window that runs from November 1 to December 15 (in most states) only applies to the individual health insurance market. If you get your health insurance from your employer, your open enrollment window is different. Medicare has its own set of open enrollment windows and Medicaid/CHIP enrollment runs year-round.

The benchmark premium changes that we're talking about here only apply to people who buy individual health insurance in the ACA-created exchanges (marketplaces). Although insurer participation in the marketplaces and benchmark premium changes generate numerous headlines each year, these plans are purchased by a very small percentage of the population. Most Americans have coverage from an employer or via Medicare, Medicaid, or CHIP, and thus do not need to purchase their own coverage in the marketplace.

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