Tuesday, December 22, 2015

Higher health plan prices may bring *more* young buyers into the exchanges

In its latest ACA enrollment snapshot, CMS is touting an increased percentage of younger enrollees compared to last year.

As of the Dec. 17 deadline to obtain coverage beginning Jan. 1, enrollees under age 35 comprised 35% of all HealthCare.gov customers, compared to 33% in the year prior (that includes children, who last year accounted for about 7% of enrollees on the federal exchange). Among new enrollees only, 41% are under 35 this year, compared to 38% last year.

The modest de-aging of the risk pool is good news, and, according to Sarah Kliff, relieves a worry:
Obamacare premiums went up a lot faster for 2016 coverage (the year this current open enrollment covers) than they did for 2015. That created some worry that young people might not sign up in high numbers. Because younger people tend to have fewer medical needs, they tend to be more price sensitive and willing to forgo coverage in the face of a premium spike.
It's possible, though, that the price spike actually brought more young customers into the marketplace.

Last year, 87% of those who enrolled in plans via HealthCare.gov before the close of open season qualified for premium tax credits. Subsidized buyers are largely insulated from increases in unsubsidized premiums, because they pay a fixed percentage of income for the benchmark plan in their area (the second-cheapest silver plan). A price hike only affects them if they select (or re-enroll) in a plan that has a wider price spread from the benchmark than the plan they bought the previous year (if it costs more than the benchmark) -- or a narrower spread from the benchmark if the plan of choice costs less.

Benchmark silver plans went up an average of 7.5% this year. That means that subsidies went up too. If the benchmark itself in a given region is higher than the previous year's, then more people will be eligible for subsidies. This is especially relevant for younger buyers, because unsubsidized premiums are lower for them* and so more likely to be deemed affordable according to the ACA subsidy scale. For many young buyers last year, subsidies phased out below 300% of the Federal Poverty Level (FPL), though buyers are potentially eligible for subsidies up to 400% FPL. Those earning 300-400% FPL are eligible for subsidies if the unsubsidized benchmark plan costs more than 9.6% of their income.

If you're ineligible for a premium subsidy, there's no reason to buy your plan on-exchange -- it's easier to deal directly with the insurer, or even use an online commercial exchange. Thus,  HealthCare.gov and the state exchanges may suck more young enrollees out of the off-exchange market this year than last. (That won't affect the risk pool in most cases, as an insurer that sells both on- and off-exchange in a given market maintains one risk pool for customers in both groups.)

It may even be the case that a modest subsidy makes it psychologically easier to buy coverage, even if a cheaper, unsubsidized plan would have cost you the same amount last year. If you're 27 and earn $35,000 a year, you'll be unsubsidized if the benchmark silver plan in your area costs up to about $280 per month.  That's what you'll pay in New York, too -- but there insurance is so expensive that the state will be kicking in $89 per month to bring your share of the premium down to that level. Your misery may love company.

The sharp increase in the tax penalty for going without coverage this year may be the primary driver of any substantial increase in enrollees. But higher prices also may pull younger buyers into the government exchanges.

UPDATE, 12/30: In a followup post, I've found that for a 27 year-old, the annual income threshold for subsidy eligibility has risen by an average of about $1000 for 2016 plans, to about $32,500. At the same time, the evidence is pretty good that the individual mandate is pulling more young buyers into the exchanges.

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