If you’ve been paying attention to headlines about health insurance this fall, you’ve probably seen plenty indicating that premiums are going up, while others say that premiums are going down for 2022. So, what’s really going on?
As it turns out, both sets of the headlines are true—in some areas, premiums are going down, while in other areas, they’re increasing. And nationwide, average benchmark plan premiums (on which premium subsidies are based) are decreasing for the fourth year in a row.
This article will explain how you can sort through all the noise and figure out what’s really happening to your health insurance premiums. In most states, open enrollment for 2022 health plans continues through at least January 15, 2022, but your opportunity to enroll in 2022 coverage after that will be limited.
Rate Changes for the Individual Market
For starters, the vast majority of the headlines you’re seeing are for major medical health insurance that people buy in the individual/family market (ie, non-group plans), and that are compliant with the Affordable Care Act (ACA). That can be in the health insurance exchange or outside the exchange (i.e., purchased directly from the health insurance company), but it does not include coverage that people get from an employer, nor does it include Medicare, Medicaid, or the Children’s Health Insurance Program.
There are only about 14 - 15 million people enrolled in ACA-compliant individual market health insurance in the United States, including on-exchange and off-exchange enrollments. That amounts to less than 5% of the U.S. population.
So although the vast majority of Americans get their health insurance either from an employer or from a government-run program (Medicare, Medicaid, CHIP, the VA, etc.), the headlines that you’re seeing don’t tend to have anything to do with those plans. Instead, the headlines tend to refer to the individual market.
That’s the market that was most in need of reform before the Affordable Care Act, and it’s the market segment that was most heavily affected by the ACA (the small group health insurance market also saw some significant reforms, but not as much as the individual market). Not surprisingly, it’s also been the market that has seen the most change over the last several years and has been in the spotlight each year when rate changes are announced.
(Note that while all new individual major medical plans are ACA-compliant, there are some people who are still enrolled in grandmothered and grandfathered individual market plans. And there are also other types of non-group coverage, such as short-term health plans, Farm Bureau plans in some states, and healthcare sharing ministry plans, that are not ACA-compliant. Some of these plans are not even considered insurance, and none of them are the plans we’re talking about when we look at overall average rate changes for the individual market.)
Overall vs. Benchmark Premiums
When we look at overall average premiums across the entire individual market nationwide, they’re increasing slightly for 2022. According to an ACA Signups analysis, overall average premiums for existing plans are increasing by about 3.5% for 2022. But that doesn’t account for new plans in the market, and those are quite common for 2022. When we consider all plans, including new market entries, a KFF analysis found that the full-price (ie, pre-subsidy) lowest-cost plans at the silver and gold level are decreasing in price, while the lowest-cost plan at the bronze level will see very little change in premiums for 2022.
2022 is the fourth consecutive year with modest overall rate changes. In 2019, overall average premiums increased by less than 3%. In 2020, they decreased slightly, and in 2021, they increased by about 1%. The individual market was much less stable before that, with average rate increases of about 25% in 2017, and about 30% in 2018. But the rates have largely leveled off since then, and in many states, the 2022 rates are quite similar to 2018 rates.
Although overall average rate changes are very modest for 2022, the rate changes vary considerably from one area to another. In New Mexico, for example, average individual market premiums are increasing fairly significantly, by an average of about 15%, although the state has changed the way silver plan rates are calculated, resulting in larger premium subsidies. And even in states where the overall average rate change is a decrease, there can still be some insurers that are raising their prices for 2022.
Average rate changes calculations also tend to be based on how rates would change if everyone keeps their current policy in 2021, which is unlikely. A significant number of enrollees shop around during open enrollment each year and switch plans if there’s a better option available, and new insurers have joined the markets in the majority of the states, adding additional options for 2022 coverage.
So there’s a lot at play here. Prices for existing plans can be increasing, despite lower overall average rates when new plans are considered as well. Overall average benchmark rates are decreasing, but that’s due in part to the new insurers that have joined the marketplaces in many areas.
The data did not include information about benchmark plan changes for DC and the 17 states that run their own exchange platforms, which account for about a third of all exchange enrollment in the country (for 2022, this includes Maine, Kentucky, and New Mexico, all of which used HealthCare.gov as of 2021 but have established their own state-run exchange platforms as of the fall of 2021).
In October 2021, the federal government published data showing how average benchmark premiums in 33 states would be changing for 2022: They’re decreasing by an average of 3%, although there’s wide variation across the states. This is the fourth year in a row with an average decrease in benchmark premiums across the states that use HealthCare.gov.
What This Means for 2022 Premiums
Benchmark premiums are important because premium subsidies are based on the cost of the benchmark plan. The idea is that the cost of the benchmark plan minus the premium subsidy results in a net premium that’s considered affordable based on the enrollee’s income.
When the cost of the benchmark plan in a given area increases, premium subsidies in that area have to increase as well in order to keep the net premiums at an affordable level. But when the cost of the benchmark plan decreases, premium subsidies decrease too, since the subsidy doesn’t have to be as large in order to get the benchmark plan’s net premium down to an affordable level.
The specific subsidy amount for each enrollee depends on the cost of the plan they select and the cost of the benchmark plan in that area (benchmark plans vary considerably within each state). But in general, premium subsidies decrease when the benchmark plan premium decreases.
Average benchmark premiums declined in 2019, 2020, and again in 2021. And average premium subsidy amounts also declined: For people with effectuated coverage as of early 2019, the average subsidy amount was about $512/month. It had dropped to $492/month as of 2020, and to $486/month as of 2021.
But that was before the American Rescue Plan sharply increased premium subsidies starting in the spring of 2021. Those subsidy enhancements are still in effect for 2022. So although there will likely be a small overall average reduction in premium subsidies for 2022 due to the lower overall benchmark premiums, subsidy amounts will still be much higher than they were in early 2021, before the American Rescue Plan was enacted.
And subsidy amounts will also depend on average incomes and the average age of enrollees: If overall average incomes are lower, the average subsidy amount will be higher, because the subsidies are designed so that people with lower incomes receive larger subsidies. And the average age of exchange enrollees is older, the average subsidy will also be higher, since premiums are higher for older enrollees and they thus need larger premium subsidies to make their coverage affordable.
How Will Your Premium Change for 2022?
The cost of your specific health insurance policy could go up or it could go down, depending on whether you receive a premium subsidy (most exchange enrollees do, but everyone who enrolls outside the exchange pays full price), and how much your plan’s price is changing. And depending on where you live, you might have some all-new options for 2022 and choose to switch to one of those plans instead of renewing your existing coverage.
If you’re subsidy-eligible and your plan’s price is increasing slightly, but the premium subsidy in your area is decreasing slightly, you could end up with a higher net premium in 2022 than you had in 2021 (again, the American Rescue Plan enhancements that you likely saw in mid-2021 will continue to be in place in 2022).
On the other hand, if you’re not eligible for a subsidy, you’ll just need to look at how much your plan’s regular premium is changing—it varies a lot from one area to another and from one insurer to another.
There’s no single answer that applies to everyone. And sometimes changes that seem uniformly good can actually result in higher premiums for some enrollees.
For example, additional insurers joining the insurance market in a particular area generally seems like a good thing for enrollees—who wouldn’t want increased competition, right? But if the new insurer has lower prices than the existing insurers and undercuts the current benchmark plan, it will take over the benchmark spot. Since it has a lower premium, that will translate to smaller premium subsidies for everyone in that area, regardless of whether they switch to the new insurer or not. If they opt to keep their existing coverage, their net (after-subsidy) premium might increase, even if their own plan’s rate is staying fairly stable.
The additional plan options for 2022 do bring added competition and choice. But they also make it particularly important for enrollees to double-check their options during open enrollment.
Another example is reinsurance. More than a dozen states have implemented reinsurance programs, which help to reduce overall average premiums in the individual insurance market. That seems like it would be obviously beneficial, but again, it depends on how it affects the cost of the benchmark plan.
When reinsurance drives down premiums, the people who don’t get premium subsidies (and thus have to pay full-price for their coverage) will obviously benefit from lower premiums. But for people who do get subsidies, the subsidies decrease along with the overall rates. And in some cases, they decrease by more than the cost of the average premiums, resulting in higher net premiums for people who get premium subsidies. This happened for many enrollees in Colorado in 2020, for example, due to the state’s new—and quite successful—reinsurance program.
Summary
Overall average premiums for existing plans in the individual market are increasingly slightly for 2022. But when we consider all plans, including new entries to the market, average premiums for the lowest-cost silver and gold plans are decreasing, while the average premiums for the lowest-cost bronze plan are remaining mostly unchanged. And nationwide, average benchmark premiums are decreasing.
Most exchange enrollees receive subsidies, and those subsidies depend on the cost of the benchmark plan in each area. So a person’s net premium change for 2022 will depend on how their own plan’s rate changes, whether they switch to a new plan, and how much their subsidy amount changes. This will all vary considerably from one area to another and from one person to another.
A Word From Verywell
Although overall average benchmark premiums in most states are decreasing slightly for 2022, that just means that premium subsidies will be slightly smaller in 2022. It doesn’t mean that your premiums will be smaller in 2022. Overall average premiums are increasing slightly for existing plans. Coupled with the slightly lower benchmark premiums (and thus smaller subsidies), some enrollees could end up paying more for their coverage in 2021.
But if you’re willing to shop around and consider new plan options, you might find that you can get a lower-priced plan for 2022. And the American Rescue Plan’s subsidy enhancements are still in effect for 2022, meaning that coverage continues to be more affordable than it was prior to mid-2021.
There are new insurers joining the exchanges in many states, and the slight decrease in benchmark premiums means that your after-subsidy premium might be higher than it was in 2022 if you just keep your current plan. Switching to a lower-cost plan might be an option for many enrollees, although there’s not a one-size-fits-all answer there either, since it will depend on the provider network, overall benefits, and covered drug lists for the alternative plans you’re considering.
At the end of the day, it’s particularly important for people with individual market health insurance to shop carefully during open enrollment (November 1 to January 15 in most states). Ignore the headlines that lump everyone together, and focus instead on the communications you receive from your insurer and the marketplace: They’ll let you know exactly what’s changing for your plan, and you’ll be able to compare all of your available options during open enrollment.
If you need help, you can find a broker or navigator who is certified by the exchange. And in nearly every state, you’ll have until at least January 15 to pick a plan for 2022 (in most states, if you’re enrolling after December 15, your new plan will take effect February 1 instead of January 1).
