Living benefit riders to life insurance policies: Pricing considerations and strategy
Adding benefit riders to policies provides meaningful coverage for those who need it, and carriers usually can do so at a relatively low cost.
The Patient Protection and Affordable Care Act (ACA) introduced many changes to the individual health insurance market beginning in calendar year (CY) 2014, including new rating rules and federal financial assistance to purchase health insurance through the insurance marketplaces. It is important to understand the condition and stability of the individual health insurance market and how the ACA has affected its health insurance consumers.
To support this understanding, we have prepared our second annual profile of the individual health insurance market for each state along with the District of Columbia (DC). The profile summarizes insurer financials, marketplace enrollment1, and federal assistance provided to households purchasing insurance coverage through the insurance marketplaces, incorporating recently released data from the 2018 open enrollment period2 and early 2018 effectuated enrollment snapshot. 3 The table below summarizes our estimates of effectuated marketplace enrollment and associated federal financial assistance for the CY 2016 through CY 2018 time period. CY 2016 and CY 2017 information has been updated from last year’s report based on published data subsequent to the release of last year’s reports.
Profiles of the individual health insurance market for the 50 states and the District of Columbia
|Average monthly marketplace enrollees||10,011,000||9,763,000||9,865,000|
|Average monthly premium subsidy recipients||8,395,000||8,229,000||8,550,000|
|Average monthly CSR subsidy recipients||5,636,300||5,597,600||5,185,500|
|Annual premium subsidy3||$3,500||$4,500||$6,200|
|Annual CSR subsidy payments3||$1,000||$1,000||N/A|
|Aggregate premium subsidy ($ millions)1||$29,228||$36,836||$53,221|
|Aggregate CSR subsidy payments ($ millions)2||$5,393||$5,895||N/A|
|Aggregate premium & CSR subsidy payments ($ millions)||$34,621||$42,731||$53,221|
1Aggregate premium subsidy amounts exclude $243 million in combined federal pass-through funding related to 1332 Waivers approved for Alaska, Minnesota, and Oregon.
2a.CSR subsidy payments reflect estimated benefits received by marketplace consumers. Amounts exclude CSR subsidy payments provided to Medicaid-eligible consumers in Arkansas and New Hampshire, which are estimated to exceed $500 million annually in 2017 and 2018.
2b.Illustrated values reflect the estimated consumer benefit of CSR variant plan designs. CSR subsidy payments for 2017 have not been reduced for the termination of federal CSR subsidy payments for the fourth quarter of CY 2017.
2c.For 2018, we have assumed no federal CSR subsidy payments. However, in most states, premium rates have been increased by insurers to reflect the loss of direct federal CSR subsidy funding, resulting in an increase to premium subsidy amounts.
3.Values have been rounded and reflect estimated annual per capita amounts.
This information is vital to stakeholders for several reasons:
|Distribution of selections federally facilitated marketplace by metal level for 100-250% of FPL CSR treatment: Impact to selected metallic level|
|CSR subsidy treatment permitted||Year||Bronze||Silver||Gold||Total selections|
|Silver QHP only||2017||14.1%||84.1%||1.8%||4,306,888|
|All silver plans||2017||13.8%||84.5%||1.7%||925,339|
TThe information contained in this report and the 51 state market profiles was prepared through the use of publicly available data sources and estimates of effectuated marketplace enrollment. Effectuated marketplace enrollment includes the population that has made premium payments and is actively enrolled in a marketplace policy. Data underlying our analyses is based on information from CY 2016 through CY 2018
CY 2016 financial results
Financial results for CY 2016 were summarized through the use of annual Medical Loss Ratio Reporting Data (MLR Data), which was publicly released by the Center for Consumer Information and Insurance Oversight (CCIIO) within Centers for Medicare and Medicaid Services (CMS).8 Individual market financial information from the MLR Data is inclusive of marketplace enrollment, off exchange (marketplace) enrollment, and enrollment on transitional products. Further information related to CY 2016 insurer financial results can be found in our annual research report on the commercial health insurance market.9 Values contained in this report, as well as our individual market state profiles, reflect risk corridor shortfalls for CY 2016.10 Additional adjustments were made to the data for observed reporting issues or data variances relative to statutory financial statements.
Marketplace enrollment and subsidy value
CMS released effectuated enrollment summaries for the insurance marketplace on a national and state level for CY 201611, CY 2017, and February 2018.12 Effectuated marketplace enrollment was provided separately for total marketplace enrollment, APTC enrollment, and CSR enrollment.
The effectuated marketplace enrollment data also includes the average APTC on a national and state level for CY 2016, CY 2017, and February 2018. Additionally, we relied on CY 2016 through CY 2018 marketplace open enrollment report (OER) public use files.14 Through the use of this information, we applied effectuation seasonality factors (based on CY 2017 experience and adjusted for changes in open enrollment period length between CY 2017 and CY 2018) to February 2018 effectuated enrollment for the purpose of estimating effectuated enrollment in CY 2018 (for the average of all 12months) . While we believe our methodology for estimating average monthly effectuated enrollment is sound, actual values are certain to vary from our estimates to an unknown degree.
For CY 2016 through 2018, average monthly premium (for individuals receiving an APTC) were estimated through the use of the public use files for states using the federal marketplace. Due to inconsistent data sources across the three-year period, we have not illustrated monthly marketplace premiums for state-based exchanges that operated in 2018. For all states, it is certain that the actual effectuated monthly APTC amounts will vary from the estimates developed within each state profile.
CSR subsidy payments
CY 2016 CSR payments were sourced from the MLR Data. For Arkansas and New Hampshire, we adjusted the CSR payments reported in the MLR data for private Medicaid expansion enrollees. CSR payments for CY 2017 were estimated by trending CY 2016 CSR payments per 12-month effectuated enrollment period at a 10% annualized trend rate. This annual trend rate assumption was developed based on our review of medical trend assumptions underlying individual market insurer rate filings during this time period.
Publicly available data used in our analysis was reviewed for reasonableness and consistency. However, the data sources have not been audited. To the extent data items were not correctly reported, the values presented in this report and accompanying state profiles will need to be updated.
2018 summary of individual market enrollment and Affordable Care Act subsidies
A profile of the individual health insurance market for each state and the District of Columbia, summarizing insurer financials, marketplace enrollment, and federal assistance provided to households purchasing insurance coverage through the insurance marketplace, incorporating recently released data from the 2018 open enrollment period.