It’s Still the Prices: Looking Under the Hood at Proposed 2025 Premiums

By Sabrina Corlette

July is rate review season for state insurance departments—the annual process of collecting proposed health insurance premiums from insurance carriers, assessing whether they are reasonable and justified, and, in many states, approving or disapproving them. In a few states, regulators require that insurers submit their rate filings in May or June, before the July federal deadline. They also publish proposed rates and supporting documentation on their websites.

For the past several years, CHIR has dug into these early filings because they can help reveal how insurers are responding to market trends, policy changes, and underlying drivers of health care cost growth. This year, unlike in past years, insurers’ proposed 2025 premium rates do not appear to be significantly affected by national-level policies or trends. Federal insurance market policy has been relatively stable, and the effects of the COVID-19 pandemic are waning. However, this hasn’t inhibited some insurers from proposing rate hikes well above the rate of inflation for 2025. In this blog, we dig into the assumptions and justifications behind those premium increases, for individual and small-group market health plans, in the District of Columbia (DC), Maine, Maryland, Oregon, and Vermont.

Insurers’ Rate Filings Seek Premium Increases For 2025

Notably, some state insurance departments do a better job than others providing the public with access to rate filing materials. Among our selected states, Maryland stands out for its lack of transparency—insurers there are permitted to redact from public view large portions of each rate filing. However, the limited transparency in Maryland is still better than in many other states, such as Illinois, where the vast majority of insurers’ actuarial memoranda is redacted, or Virginia, which doesn’t publish proposed rate filings at all.

Across the board, insurers in the individual market in our selected states are seeking to increase rates for 2025, although the size of the increase varies quite a bit across companies and products. See Table 1.

Table 1. Average Proposed Individual Market Rate Changes in Selected States (Plan Year 2025)

StateHighest Average Rate Request (%)Lowest Average Rate Request (%)DC9.0 (Kaiser Foundation Health Plan)3.6 (CareFirst BlueChoice)Maine15.8 (Harvard Pilgrim Health Plan)3.9 (Taro Health Plan)Maryland14.2 (CareFirst Blue Cross Blue Shield – PPO)3.2 (CareFirst BlueChoice – HMO)Oregon8.4 (BridgeSpan)2.0 (MODA Health Plan)Vermont16.3 (Blue Cross Blue Shield)11.7 (MVP)

*Source: Authors’ analysis of individual market rate filings.

Insurers in the small-group market are also requesting price hikes, with significant variation across our selected states and among the companies. See Table 2.

Table 2. Average Proposed Small-Group Market Rate Changes in Selected States (Plan Year 2025)

StateHighest Average Rate Request (%)Lowest Average Rate Request (%)DC8.0 (Kaiser Foundation Health Plan)1.4 (CareFirst BlueCross BlueShield – PPO)Maine19.6 (Maine Community Health Options)3.9 (Taro Health Plan)Maryland21.7 (Aetna – PPO)3.2 (CareFirst BlueChoice – HMO)Oregon8.4 (BridgeSpan)2.0 (MODA Health Plan)Vermont16.3 (BlueCross BlueShield)11.7 (MVP)

*Source: Authors’ analysis of small-group market rate filings.

An examination of the assumptions and projections underlying the proposed rate increases reveals several factors and trends.

Insurers’ top cost driver is “medical trend,” a combination of the projected changes in unit costs (the prices insurers pay for health care goods and services) and changes in service utilization (the number and intensity of services enrollees receive). Several insurers point in particular to increasing pharmacy costs. For example, Blue Cross Blue Shield of Vermont predicts a year-over-year trend of 14.8% for just the GLP-1 category of drugs (i.e., Wegovy and Ozempic).

In the individual market, insurers appear to be shrugging off the disenrollment of almost 14 million people from Medicaid, at least in our selected states. One Vermont insurer (BlueCross BlueShield) believes that the people transitioning from Medicaid to the Marketplace have contributed to a larger, healthier risk pool, but an Oregon insurer (BridgeSpan) predicts that Medicaid transitioners will make the individual market risk pool sicker. Overall, however, most insurers are projecting little, if any, change in the health status of the individual market risk pool in 2025.

It’s (Still) the Prices, Stupid

Although most insurers are projecting the cost of specialty drugs to rise more steeply than any other factor, they also are projecting that hospital costs – particularly the growth in hospitals’ contracted rates – will be the largest contributor to consumer and small employers’ 2025 premiums. There are a few exceptions; CareFirst BlueChoice in the District of Columbia predicts that health care utilization will grow faster than its provider prices. For the most part, however, the growth in provider prices, not utilization, is the primary driver behind rise in medical trend. Or, as put by renowned health economist Uwe Reinhardt and colleagues, “It’s the Prices, Stupid.”

A Blind Spot? While Unit Prices Rise, Carriers Focus on Utilization

Although rising unit prices are the biggest factor driving rate increases for most insurers, in their filings they point to utilization management as their primary strategy for containing costs. For example, Oregon requires insurers to submit narrative reports detailing their efforts to constrain cost growth. Almost universally, Oregon insurers are focusing their efforts on programs that reduce the use of health care services, such as through more aggressive prior authorization, claims auditing, and case management for enrollees with complex care needs.

The filings revealed very few efforts to reduce unit prices. These include a program by BridgeSpan in Oregon to encourage enrollees to seek care at ambulatory surgery centers instead of full-service hospitals. Another insurer (MODA) reports that they were able to generate $4 million in savings in air ambulance costs alone, thanks to the federal No Surprises Act (NSA), stating: “Implementation [of the NSA] resulted in improvements in contractual terms with in-network providers and a reduction in costs with the application of the Qualified Payment Amount (QPA) for out-of-network claims.” In Maryland, Aetna reports that they are “working to reduce the ability of out-of-network providers to collect unreasonably excessive payments,” although they do not describe how they intend to accomplish this.

Local Factors Driving Rate Changes

State-based policy and market changes are also driving some rate changes. For example, the Vermont legislature recently enacted restrictions on insurers’ ability to conduct prior authorization. Vermont insurers are predicting significant cost increases as a result of that bill. MVP health plan, for example, predicts it will result in an 8-10 percent increase in premium rates.

In Maryland, the increased shift towards level-funded health plans among small employers is likely contributing to rate increases for the state-regulated small-group market. For example, Aetna, which is seeking a 21.7 percent average increase for its small-group market PPO product, notes that the “movement of [small-group] business between the ACA market and other options,” such as level-funded plans, is prompting increases in average premiums and a less healthy risk pool.

Looking Ahead

Health insurers in the ACA-compliant individual market have benefited from several years of relative stability and growth. However, as with the rest of the commercial insurance market, they are confronting increased provider consolidation and ever-rising provider costs, which they are in turn passing onto consumers through higher premiums. Thanks to the ACA, Marketplace enrollees eligible for premium tax credits are largely insulated from these price increases, and the enhanced subsidies provided in the Inflation Reduction Act have significantly improved the affordability of Marketplace plans. However, these enhanced subsidies will expire at the end of 2025. If Congress does not extend the subsidy enhancements. And unless there is a more robust regulatory effort to constrain health care prices, more individuals will be ineligible for subsidies and will bear the brunt of rising health care costs.

Premiums are also rising for many small employers, due to both rising provider costs and the shift of healthy employer groups into level-funded plan options. States have a number of options to preserve and protect the ACA-compliant small-group market, including but not limited to a Maine-style reinsurance program, a Colorado-style public option, and Rhode Island-style enhanced rate review.