People who bought Obamacare health plans in 2015 saw a significant increase in the number of companies offering coverage on HealthCare.gov, which in turn led to lower premium hikes in the counties where there was more competition, a new federal report revealed Thursday.
The report comes as state insurance regulators are reviewing proposed price increases and applications from insurance companies to enter the Obamacare marketplaces for 2016.
This enrollment year, 86 percent of people eligible to buy coverage through HealthCare.gov had at least three insurance issuers to choose from, according to the report released by the U.S. Health and Human Services Department.
That's up from 70 percent of such people in 2014, the first year the federal health marketplace operated, that analysis found.
On average, there was a net gain of one issuer per county in the 35 states served by HealthCare.gov in both years, the report said. In 2014, there was an average of 2.6 Obamacare issuers per county on HealthCare.gov; this year, that average rose to 3.5.
Just 8 percent of counties on HealthCare.gov saw a net reduction in the number of insurance companies selling plans. One-third of all counties saw no change in the number of issuers.
The overall increase in issuers is "good news for consumers," said Richard Frank, assistant secretary for planning and evaluation at HHS. "Because there's more choice—and diverse choice—we have a better chance of getting consumers' needs met."
Frank added that "premiums are typically driven lower" with an increase in the number of insurance companies offering plans, because existing issuers seek "to protect their market share" from new entrants.
As evidence of that, he pointed to several findings in the report. Among them: The average price increase in important benchmark plans sold on HealthCare.gov in 2015 was just 2 percent, based on weighed enrollment from the prior year.
The benchmarks are the second lowest-priced plans in the "silver" tier of Obamacare plans, and are important because they play a key role in determining how much all eligible customers of an Obamacare exchange get in the way of federal subsidies.
The growth in premiums for benchmark plans between 2014 and this year was 8.4 percentage points lower in counties that experienced a net gain in issuers, the report said.
What's more, each net gain in issuer was associated with a 2.8 percentage point reduction in the growth rate in premiums of the benchmark plans, the report said.
Silver plans, as a group, have moderate prices compared to other "metal" group plans—they're not the cheapest or the priciest. Silver plans, which are the most popular in terms of enrollment, cover 70 percent of medical costs, on average, with the rest of the costs being the responsibility of customers.
In counties that saw a net gain in the number of issuers offering plans, the average premiums for all silver plans—not just the benchmark plan—was 1.5 percentage points lower than in other counties, the analysis found.
"It shows how competition keeps premium prices moderate," Frank said.
That said, Thursday's report was a retrospective look at prices and plans offered during open enrollment for 2015, when 10.2 million people obtained coverage through Obamacare exchanges nationally. Plans for 2016 coverage go on sale Nov. 1.
Frank noted that several recent independent analyses "suggest fairly modest premium growth" in 2016—in the range of 4 to 5 percent on average over this year. He also said that "what we've seen suggests" there will continue to be a healthy level of competition in terms of the number of issuers.
California's state-run Obamacare exchange, which has more than 1 million enrollees, earlier this week revealed that customers would see premiums rise in 2016 by an average of 4 percent on a weighted basis. Additionally, two new insurers will be joining the existing 10 now selling plans on that marketplace.
However, a number of insurers with significant market share in various states are requesting approval for rate increases of 10 percent or more, with some issuers asking for hikes of 20 percent or higher.
A recent analysis by HealthPocket found that premiums for individual plans in major U.S. cities would rise by an average of 12 percent in 2016 if newly proposed prices are approved.
Last week, HealthCare.gov CEO Kevin Counihan wrote all 50 state insurance commissioners, most of whom have approval power over rates, a letter suggesting they consider several factors that would back arguments for only moderate overall price increases.
Counihan's letter was seen as a sign of concern that some rates next year could limit gains in overall enrollment on the exchanges.
The Obama administration has repeatedly pointed out that people can, and should, shop around for better prices and coverage choices on the exchanges. The administration also has noted that more than 8 out of every 10 customers of the exchanges receives financial assistance to lower the cost of their insurance.
Those subsidies, worth an average of $272 per month, are available to people with low to moderate incomes.