Health Insurance

Drivers Of 2022 Health Insurance Premium Changes

Issues surrounding the pandemic continue to be a consideration for rate setting

A new report from The American Academy of Actuaries provides a window on what’s behind expected health insurance premium rate changes for 2022. Read the issue brief here.

WASHINGTON—The American Academy of Actuaries has published an issue brief examining what’s driving changes in individual and small group markets health insurance rates that focuses on how the costs and effects of the COVID-19 pandemic are figuring into insurers’ proposed 2022 rates.

“Insurer premium rate filings for approval by regulators for 2022 are generally based on the last full year of claims experience, 2020, with adjustments,” said Academy Senior Health Fellow Cori Uccello. “Carriers’ premium rates may include adjustments due to COVID-related or non-COVID-related costs and utilization that are expected to be different from that base year.”

COVID-19 Impact on 2020 Claims Experience

The Affordable Care Act (ACA) rate review process requires issuers to develop premium rates based on the most recent year of experience, which is two years prior to the pricing plan year. Adjustments are then applied to reflect expected differences in claim costs between the experience year and the pricing plan year. In the case of 2022 rates, the 2020 benefit year is, in most cases, being used by insurers as the experience period. Because this experience was significantly impacted by the COVID-19 pandemic, with the impact varying across the country, additional adjustments need to be considered.

The following are some impacts of the pandemic observed by the committee with implications for 2020 claims experience:

  • At the onset of the COVID-19 pandemic, utilization of many types of non-COVID-19 medical services decreased significantly because of stay-at-home orders and state and local closing and curtailment of non-essential services. Utilization of these non- COVID-19 nonessential / elective services started to increase in the summer of 2020 relative to the beginning of the COVID-19 pandemic but may still have been lower than pre-pandemic levels in many areas.
  • In the fall of 2020, a sharp increase in COVID-19 hospitalizations required some health care systems to reduce non-emergency medical services to ensure inpatient hospitals had adequate staff and resources.
  • The beginning of the COVID-19 pandemic saw an initial increase in utilization of prescription drug services due to early refills, however, the overall impact was much less pronounced relative to the impact on medical services.
  • The direct costs associated with COVID-19 in 2020 were significant. Issuers incurred costs for the treatment of COVID-19 patients, including high-cost hospitalizations, as well as costs associated with COVID-19 testing.
  • Federal requirements were imposed on issuers to waive any member cost-sharing for COVID-19 testing. Many issuers subsequently chose to waive member cost-sharing for COVID-19 treatment, and some issuers chose to waive member cost-sharing on telehealth services.
  • While telehealth services have been used to help fill in some of the service gaps in 2020 and 2021, there is still uncertainty as to whether telehealth will continue to replace certain office visits, whether 2022 treatment patterns will return to pre-COVID-19 levels, or somewhere in between. Prior to COVID-19, telemedicine services were typically reimbursed at a lower unit cost than similar in-office services. In some cases, providers are currently receiving the standard in-office payment rates, and changes to reimbursements may influence provider incentives relative to telemedicine. Additionally, telemedicine is not likely to be as comprehensive as an in-person visit for certain services, and as such could lead to increased utilization if it takes longer to identify and treat health conditions in this medium. There could also be increased utilization due to the convenience of telehealth compared to an office visit if providers begin to offer the option more broadly. The area where telehealth is expected to continue at higher levels than pre-COVID-19 is for mental health services.
  • Several additional aspects of the COVID-19 pandemic likely impacted issuers’ 2020 experience. Social distancing and mask mandates likely reduced spread of influenza and colds, decreasing the need for services associated with these illnesses. There was also an increase in utilization of mental health services due to individuals being separated from their normal support systems and social interactions.

Drivers of 2022 Rate Changes

Uncertainties remain regarding how the potential ending of the public health emergency and the enhanced premium subsidies available through the American Rescue Plan Act will affect plan enrollment and spending...

When developing 2022 health insurance rates, insurers are likely to consider multiple scenarios involving differing assumptions and may consider the following:

  • Will new COVID-19 waves emerge later in 2021 (such as the delta variant) or in 2022,
    nationally or regionally?
  • What are the impacts of the increases in deferred and avoided services including the
    underlying impacts to morbidity of these delays?
  • What’s is the cost of vaccines delivered in 2022?
  • How does the need for booster vaccines, and their cost and availability impact 2022
  • How do the following changes impact 2022 rates?

The changes to composition of the individual market due to premium credits, subsidies, changes in open enrollment periods and Medicaid changes.

Changes to the composition of the small group market due to expiration of COBRA (Consolidated Omnibus Budget Reconciliation Act) subsidies and unemployment benefits and the movement to self- funded coverage.

Greater degrees of uncertainty could lead to more conservative assumptions and risk margins for some insurers. Alternatively, carriers might lower risk margins, seeing an opportunity to capitalize on the increased exchange enrollment due to the ARPA subsidies. In many states, health insurers are permitted to file updated rates on a quarterly basis in the small group market, which could reduce the need for conservatism. However, individual market rates are filed annually and cannot be updated during the calendar year.


Key conclusions of the issue brief, which was developed by the Academy’s Individual and Small Group Markets Committee, include:

As more information is available on how COVID-19 has and could continue to affect healthcare spending, carriers are more likely to include adjustments in their 2022 rates. Nevertheless, those impacts are not expected to be material.
Issues surrounding the pandemic continue to be a consideration for rate setting, including how the pandemic may affect regional variations in hospital utilization, the cost of vaccinations and need for booster shots, how and where members seek or delay medical care, and utilization for mental health services and telemedicine.

Uncertainties remain regarding how the potential ending of the public health emergency and the enhanced premium subsidies available through the American Rescue Plan Act will affect plan enrollment and spending.

The economic impacts of COVID-19 are causing shifts in insurance enrollment along with changes in the risk pool composition related to these shifts. While new information continues to emerge regarding the epidemiological, economic, and health care impacts of this pandemic, there is still a wide range of potential effects on 2022 health insurance premiums.



About the American Academy of Actuaries
The American Academy of Actuaries is a 19,500-member professional association whose mission is to serve the public and the U.S. actuarial profession. For more than 50 years, the Academy has assisted public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.