Tuesday, December 09, 2014

Forecast: A lot more Pennsylvanians will buy bronze plans in the ACA marketplace in 2015 than in 2014

Here's a prediction: the percentage of ACA private plan buyers in Pennsylvania who select bronze plans -- the lowest metal level, with the lowest monthly premiums and the highest deductibles -- is going to shoot up in 2015.

In 2014, among states with the lowest percentages of bronze plan buyers in the ACA marketplace, Pennsylvania was something of an anomaly.

Most states with a low level of bronze plan takeup in the ACA's first open season are among the nation's poorest. That's as it should be. Low-income buyers are eligible for Cost Sharing Reduction subsidies that reduce deductibles, co-pays, and maximum out-of-pocket costs -- but only if they buy silver plans, which have higher premiums than the lower-level bronze.  Since bronze plans carry per-person deductibles averaging $5,000 per person, they are inappropriate for most low-income buyers. With some exceptions, states with high median household incomes had the highest percentages of bronze plan selection, topped by Hawaii (41%), Colorado (40%), and Washington (38%).

Pennsylvania tied for the lowest level of bronze plan takeup, at 8%, and had the lowest bronze takeup among subsidized buyers, 5%. Its nearest rivals, Mississippi and Alabama, have median household incomes of $40.8k and $41.4k respectively. By contrast, Pennsylvania's median household income, $53.9k, is above the 50-state average, $53.1k.

What gives? The answer lies in a peculiarity in 2014 plan offerings in Pennsylvania.

ACA premium subsidies are calculated against a "benchmark" plan, which is the second-cheapest silver plan in every state. A buyer with an income below 400% FPL will pay a fixed percentage of her household income for that plan, ranging from 2% to 9.5%, irrespective of age. In 2015, a solo buyer with an income of $23,000 will pay $118 per month (give or take a dollar) for the second cheapest plan in every market in the country. The person's subsidy will vary according to age and location, since  the subsidy is the difference between the unsubsidized plan price (which goes up with age) and $118.

The buyer can pay a lower premium for a cheaper plan. His subsidy amount remains fixed. If the subsidy is larger than the base price of a cheaper (usually bronze) plan, he will pay nothing.

In most states and regions, the premium for the cheapest silver plan is within ten dollars of the premium for the benchmark second-cheapest. If you want to pay a lot less per month, you have to buy a bronze plan.

Southeast Pennsylvania, however, had one silver plan that was way cheaper than the benchmark. For an unsubsidized 44 year-old, the price difference was $49 per month -- and the cheapest silver was just $20 per month more than the cheapest bronze.

That price spread made the silver level, with its generous Cost Sharing Reduction subsidies, an easy choice for most low-income buyers. In most other markets, the silver premium was a hard swallow for many low-income buyers. In Atlanta, a 44 year-old earning $23k would pay $110 per month for the cheapest silver and $63 for the cheapest bronze.  In Biloxi, the cheapest silver for the same age and income would be $112; the cheapest bronze, $26. In New Haven, the spread was $115 vs. $1.

In Phili, by way of contrast, the cheapest silver plan for our 44 year-old at $23k income was $73 per month; vs. $53 for bronze. Pittsburgh also had a $20 spread. In Phili, the CSR-enhanced deductible for the cheapest silver plans was $0; for the cheapest bronze, it was $6,000.

This year, Pennsylvanians' opportunity to leverage an usually large spread between the second-cheapest and cheapest silver plan is gone.In fact, in Phili the premiums for the cheapest and second-cheapest silver plans are identical, so our 44 year-old at $23k cannot pay less than $118 per month for silver., as opposed to $65 for the cheapest bronze.

On the plus side, Pennsylvania has accepted the ACA's Medicaid expansion for 2015. A lot of buyers whose incomes would have qualified them for Medicaid last year -- those with household incomes between 100 and 138% of the Federal Poverty Level -- will transition into it this year (or rather, into "private option" equivalents), and so will escape being confronted with a tougher choice between low-premium, high-deductible bronze and higher-premium, Cost Sharing Reduction-enhanced silver.

But those over 139% FPL will pay considerably more than they did last year for silver. The state's bronze takeup rate will probably move toward the national median of 20%.

Don't add copper plans to ACA -- enhance bronze
Connecticut's exchange steers low-income buyers toward silver plans
Rational choice in the ACA market
In Mississippi ACA rollout, one large disaster, one small success
News from New York: Most low-income ACA plan buyers chose wisely

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