CHANGES IN PROVIDER NETWORKS. CMS recently announced that it is shifting the responsibility to evaluate network adequacy to the states (for states that have adequate review authority and capability). If states require some insurers to contract with additional providers, premiums for those insurers may increase slightly. Likewise, if states allow more restricted networks, there may be slight decreases in premiums.
 
The prevalence of plans built around more limited provider networks increased after the implementation of the ACA. Premiums for such narrow network plans have been lower than those of comparable plans. Although there may be some new narrow network plan offerings introduced for 2018, the number of such plans is not likely to increase as much as in previous years. However, if there are continued market withdrawals of broad network plans, the average premiums may be lower, not considering other premium change factors, albeit with less choice of provider.
 
BENEFIT PACKAGE CHANGES. Changes to benefit packages (e.g., through changes in cost-sharing requirements or benefits covered) can affect claim costs and therefore premiums, even if a plan’s metal level remains unchanged. For 2018, changes have been made to the rules regarding the allowable variation in actuarial value (AV), which measures the relative level of plan generosity. Plan designs must result in an AV within a limited range around 60 percent for bronze plans, 70 percent for silver plans, 80 percent for gold plans, and 90 percent for platinum plans. Previously, variations of up to 2 percentage points above or below the target AV were allowed. For 2018, variations of up to 4 percentage points below the target or 2 percentage points above the target are permitted.
 
For bronze plans, the allowed variation below the target is 4 percentage points and an upward variation of up to 5 percentage points is permitted if at least one major non-preventive service is covered before application of the deductible or if it is a health savings account (HSA)-qualified high-deductible health plan.^10,11 The leaner plan designs allowed by the wider variations will have a downward effect on premiums, although an upward effect on cost sharing.

 
Other changes in benefit packages could be made based on market competition or other considerations, putting upward or downward pressure on premiums, depending on the particular change. Changes would be expected to be minimal as long as the current essential health benefits (EHB) requirement is in place. Other plan design features, such as drug formularies and care management protocols, also could affect premium changes.
 
MARKET COMPETITION. Market forces and product positioning also can affect premium levels and premium increases. Health insurers are increasingly focused on local competition, offering coverage only in geographic regions in which they believe they have a competitive advantage. As such, there may be more price competition in those regions where many health plans are offered, and less price competition where fewer health plans participate.
 
In 2014–2016, many markets saw increased insurer participation and new entrants offering coverage for the first time, sometimes at very competitive premium levels. More recently, the opposite occurred, with many insurers indicating that they were reducing the number of markets they would participate in for 2017—in some cases even exiting the market completely. In 2017, 33 percent of counties (covering about 21 percent of enrollees) have only one participating insurer.¹²The increased legislative and regulatory uncertainty combined with continued losses has led to additional market withdrawals for 2018, while other insurers have announced plans to expand into new markets.
 
In counties where the marketplace has only one insurer left, the premiums may rise as that single insurer bears the entire risk of the market and there is limited competitive pressure to keep premiums low. However, the single insurer will also consider the impact of rate increases on retention and risk levels and will be subject to rate review, which may put some offsetting downward pressure on rates.
 
In markets where there are no longer any insurers on the marketplace, premiums for off marketplace policies could rise significantly. Under current law, low-income enrollees do not have access to premium subsidies off-marketplace and will therefore experience the full increase in premiums in addition to the loss of subsidies if they purchase off-marketplace coverage. This will likely reduce the number of insureds, as subsidy eligible individuals may find non-subsidized coverage unaffordable. Those retaining coverage, even without a subsidy, will likely be those who expect higher medical spending. Because of this potential for adverse selection, insurers may be more likely to exit the individual market entirely (on- and off-marketplace) rather than exit only the marketplace.
 
CHANGES IN PROVIDER COMPETITION AND REIMBURSEMENT STRUCTURES. Consolidation of health care providers is ongoing in many local markets. This trend is likely to continue. Ideally, consolidation improves the quality and efficiency of health care delivery, but it also increases providers’ negotiating power. Any increased negotiating power among providers could put upward pressure on premiums. On the other hand, insurer mergers could have the opposite effect if they increase insurers’ negotiating leverage with providers. Finally, partnerships between health care plans and providers offer a new business model that is intended to reduce premiums with higher levels of managed care and quality.
 
Insurers are pursuing provider reimbursement structure changes that move from paying providers based on volume to paying based on value, and often shifting a portion of the risk to the providers. For example, accountable care organization structures offer incentives to health care providers to deliver cost-effective and high quality care, and may penalize providers for failing to meet certain targets. Such efforts could put downward pressure on premiums, at least in the short term. To the extent providers are unwilling to take additional risk and choose not to participate, these changes also could contribute to narrower networks and fewer choices for consumers.
 
CHANGES IN ADMINISTRATIVE COSTS. Changes in administrative costs will also affect premiums. Some health plans are finding that increased and changing regulatory requirements associated with the administration of provisions in the ACA are increasing their administrative costs. Decreases in enrollment can result in increased costs due to allocating fixed costs over a smaller membership base. Premiums must cover all of these costs. Depending on the circumstances in any particular state, changes in marketing and administrative costs can put upward or downward pressure on premiums. As noted above, increased uncertainty in the market may lead insurers to increase risk margins to protect themselves from adverse selection. However, the ACA’s medical loss ratio requirements limit the share of premiums attributable to administrative costs and margins.
 
CHANGES IN GEOGRAPHIC FACTORS. Within a state, federal rules allow health insurance premiums to vary across geographic regions established by the state. Insurers can use different geographic factors to reflect provider cost and medical management differences among regions, but are not allowed to vary premiums based on differences in health status (which should be accounted for by the single state risk pool construct and risk adjustment process). An insurer might change its geographic factors due to changes in negotiated provider charges and/ or in medical management of some regions compared to others. A decision to increase or decrease the number of regions in which the health plan intends to offer coverage in 2018 within a state could also result in a change in its geographic factors. Another key reason for changes in geographic factors could be new provider contracts that reflect different relative costs. A realignment of these differences could result in changes across the rating regions within a state.

1.	“Analysis: Market Uncertainty Driving ACA Rate Increases”; Oliver Wyman Health; June 14, 2017.