Costs for health insurance are declining nationwide

There have been few issues in the national conversation more prominent in the past decade-plus than the rising cost of health care and coverage — and that's not likely to change any time soon. However, it seems that in 2021, the conversation may be shifting a bit, specifically because health insurance premiums are on the decline and have been for some time now.

The latest data from the Urban Institute indicates that, when it comes to buying individual health coverage via the Affordable Care Act's mandated insurance exchanges, the average monthly premium for a 40-year-old non-smoker slipped to $443 (before subsidies) for 2021. That's down from $451 last year, a drop of 1.7%, but was the third straight year in which ACA marketplace premiums dropped. Between 2017 and 2018, there was a shocking 31.9% increase, but small decreases have been observed every year since.

Americans paid less for health care last year, largely due to the pandemic.

Of course, even with the more recent declines, the current price still stands well above where it was in 2017 — in fact, today's premiums are still 24% higher than they were five years ago — but things are certainly trending in the right direction. Likewise, these changes to costs for coverage purchased on the exchanges are reflected in ups and downs for employer-sponsored private coverage over the same time period, as well.

However, the cause of the more recent marketplace price drops is largely attributable to more insurers offering coverage on those sites; with increased competition, prices are coming down. Around 2016 and 2017, there was some concern that participation in these markets would not be fruitful for insurers, especially due to uncertainty about how the Trump administration would approach the ACA. But as time went on and it became obvious that the marketplaces would not be shuttered or hobbled, more insurers flooded back into them, and that's been good news for consumers.

Health care costs also shifting
At the same time, the amount of money people are spending on health care in the U.S. is dropping — though this seems to have been a quirk of the pandemic, according to the latest Milliman Medical Index. Health care costs slipped 4.2% nationwide between 2019 and 2020, largely because people either stopped seeking elective care or deferred treatment until after the effects of the pandemic receded. As such, even with care providers spending large sums of money on COVID testing and treatment for the first time, that sudden new reality did not increase spending nearly enough to offset the decline in other expenditures.

However, even with that year-over-year drop, the cost of health care for a typical family of four carrying employer-sponsored health insurance through a preferred provider organization was still north of $26,000. Likewise, the average cost for individuals with similar coverage came in at more than $6,000. What's more, Milliman projects that all the deferred spending is going to rebound as the pandemic winds down, resulting in expected health care cost growth in 2021 to the tune of 8.4% year over year. That means the same family of four can expect to pay more than $28,250, and the individual in excess of $6,500 before the year is over. Both figures are up markedly from where they were in 2019, before the pandemic hit.

The good news is that most of those costs will be covered by their employers, though the employee share of contributions and out of pocket expenses are likely to keep rising by about 4% in 2021. That was the same increase observed from 2019 to 2020. Meanwhile, many Americans who previously had health insurance but lost their jobs due to the pandemic have yet to regain employer-sponsored health insurance.

Finding affordable coverage
Because so many people lost their coverage as a result of the pandemic, the federal government stepped in and expanded access to the Healthcare.gov. The Centers for Medicare and Medicaid Services estimates that between Feb. 15 and the end of May — the most recent period for which full data is available — roughly 1.24 million Americans signed up for coverage thanks to the expanded enrollment window, and that number was picking up steam as time went on and more people needed to access the exchanges.

In fact, beyond the 1.24 million who actually chose new health care plans in this 10-week period, another 1.06 million had submitted applications for new coverage but not yet selected a plan. Altogether, more than 1.96 million were determined to be eligible for coverage via the marketplace, and another 331,500 were newly eligible for Medicaid/CHIP plans.

Furthermore, nearly 3.2 million called the Healthcare.gov-run call center, and the website itself saw enrollment increase to nearly 19.2 million users. Still more people relied on Healthcare.gov's Spanish-language equivalent, CuidadoDeSalud.gov.

Other issues persist
At the same time as health care spending dropped, the pandemic led to many difficulties for care providers, which may result in another reason to expect that costs will continue to rise. Financial difficulties for hospitals and other care providers rose as high-value elective procedures were put on hold. That fueled further consolidation in the market in the form of hospital mergers. According to Bloomberg, that eliminates competition that otherwise helps keeps prices down for patients and insurers alike.

When single entities own a number of providers in a given region, their pricing power is more or less unchecked; in so-called monopoly markets, the cost of treatment is roughly 12% higher than it is in parts of the country where there are four or more hospitals competing with one another.

Health insurers no doubt play a strong part in steering people toward coverage that makes sense for them both in terms of treatment options and cost. The more companies can do to take an active role, the more informed are people's health care decisions. That, in turn, sets them up for long-term wellness and undergirds a stronger appreciation for what a health insurer can do for them.