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Healthcare Reform

Healthcare Reform > FAQs FAQs

Indiana Department of Insurance

The Impact of the ACA on Insurance Costs

What impact will the Affordable Care Act have on individual health insurance rates in Indiana?

The actuaries at the Indiana Department of Insurance project a 72% average cost increase for individual health insurance in 2014 attributable to the Affordable Care Act. The cost increase is consistent with the projections made by the State’s external actuaries in 2011 report.

How did the State calculate the 72% increase in individual insurance costs in 2014?

First, we began with the average “per member per month” cost for 2012, which is based on actual filings submitted to the DOI by Indiana health insurance companies. We then compared this number to average “per member per month” cost for 2014 filings. After subtracting normally expected cost increases or “trend” costs, we arrived at a 72% average cost increase for 2014. This is the increase amount in insurance costs directly attributable to the ACA.

What factors caused the increase costs?

In addition to the normal “trend” costs, the following requirements of the Affordable Care Act have significant impact on the insurance costs.

  • Community rating (insurance rates are basically the same regardless of occupation, age or health conditions)
  • Essential health benefits (mandated coverages)
  • Minimum loss ratios (insurance companies are required to pay out 80% of all premiums collected in claims)
  • Taxes and fees on insurance companies.

      Is the State comfortable with the assumptions made by the insurance companies in their rates filings?

      One of the statutory responsibilities of the Indiana Department of Insurance is the analysis and approval of insurance rates submitted by all types of insurance carriers. The Department has a staff of professional analysts and actuaries who regularly review numerous rate filings. In the reviews they develop a broad perspective of projections and assumptions prepared by insurance companies. From this perspective, they can identify and question assumptions that inconsistent or out of normal range.

      Does this mean that all customers purchasing an individual health insurance policy will have a 72% increase in premiums?

      No. Individual premiums vary widely because insurance policies may include different coverage, co-pays and deductibles. In addition, individuals purchasing health insurance through the Federally Facilitated Insurance Marketplace whose household income falls between 100% and 400% of the Federal Poverty Level will be eligible for a sliding scale tax credits to help pay the premium.

      Do the federal tax credits reduce the cost of health insurance?

      No. The federal tax credits do not change the cost of health insurance. These credits mean that U.S. taxpayers are helping pay for the insurance through the federal government.