Tuesday, January 10, 2017

Careful with that study! A second look at enrollment decisions in Covered California

A study of the buying decisions of enrollees in California's ACA marketplace, Covered California, in 2014, suggests that a lot of people left benefits on the table:
The Affordable Care Act includes financial assistance that reduces both premiums and cost-sharing amounts for lower-income Americans, to increase the affordability of health insurance coverage and care. To receive both types of assistance, enrollees must purchase a qualified health plan through a public insurance exchange, and those eligible for the cost-sharing reduction must purchase a silver-tier plan. We estimate that 31 percent of individual-market enrollees in California who were likely eligible for financial assistance purchased plans that were not silver tier or that were not sold on the state’s exchange and thus missed opportunities to receive premium or cost-sharing assistance or both. Lower-income enrollees who chose plans not eligible for subsidies had two to three times higher odds of reporting difficulty paying premiums and out-of-pocket expenses during the year, compared to those who chose eligible plans. Regardless of how the structure of the individual market evolves in the coming years, efforts are likely needed to steer lower-income enrollees away from financially suboptimal plan choices.
The study, just published in Health Affairs, lead author Vicki Fung of Harvard and Mass General, is based on  survey responses from 2103 enrollees and has some very interesting results regarding the difficulty (or lack thereof) that enrollees experienced paying premiums and out-of-pocket expenses at different income levels and benefit levels. But while the authors are quite thorough in enumerating the study's limitations, some caveats are worth elaborating.* In brief: CSR takeup is higher at income levels where the benefit is strong, and many of those deemed potentially eligible for subsidies are not in fact eligible.

Let's look more closely at the more specific claims.
We estimated that nearly one-third of enrollees in California’s individual insurance market who were likely eligible for financial assistance forfeited some assistance by choosing ineligible plans. Specifically, 14 percent of fully eligible enrollees purchased off-exchange plans and thus did not receive either the premium tax credits or cost-sharing assistance to which they were entitled, and 20 percent selected nonsilver plans and thus did not receive the cost-sharing reduction.One-quarter of partially eligible enrollees purchased off-exchange plans and did not receive any premium assistance.
The authors define "fully eligible" as reporting a household income up to 250% of the Federal Poverty Level (FPL), and therefore being potentially eligible for both premium subsidies and CSR. "Partially eligible" means having an income below 400% FPL, and thus being potentially eligible for premium subsidies.

The caveats:

1. The authors acknowledge that not all of the "partially eligible" as defined by the study are in fact eligible for premium subsidies:
However, purchasing an off-exchange plan likely resulted in minimal financial disadvantage for some partially eligible enrollees at the higher end of income eligibility (those with incomes of 300–400 percent of poverty). Specifically, in fifteen of the nineteen pricing regions in California, a forty-year-old individual with an income of 400 percent of poverty would receive no premium subsidy because the benchmark plan cost less than 9.5 percent of income.17
In fact, a quite large numbers of enrollees with incomes well under 400% FPL would have been subsidy-ineligible in California in 2014. In California's rating region 15, located in Los Angeles, the cheapest silver plan for a 40-year old in 2014 was offered by HealthNet at $253 per month. Blue Shield and Anthem were not far behind at $255 and $257 respectively (see 2014 Product Prices here). This year, similarly, a silver plan is available to a 40-year old in zip code 9006 for $258 per month, according to the Kaiser Family Foundation's subsidy calculator. That same plan would cost an unsubsidized 26 year-old $207 per month.  Her premium subsidy would phase out at an income of $29,600 -- which, oddly, would leave her eligible for CSR. At income $29,701, however, she would be eligible for neither. So consider: in the most populous part of California, premiums for young adults phase out in the neighborhood of 250% FPL.

2. The survey finding that 80% of CSR-eligible enrollees on-exchange selected silver plans and obtained CSR exactly matches Covered California's enrollment stats for 2014 ((see the Active Member Profile for June 2014 here).. But not all CSR is created equal, as the study notes. CSR raises the actuarial value of a silver plan from a baseline of 70% to 94% for those with incomes up to 150% FPL, to 87% in the 150-200% FPL range, and to a relatively negligible 73% for those between 200% and 250% FPL.

 Not surprisingly, takeup falls off as income rises. CoveredCA enrollment stats spell out that silver plan selection in 2014 was 91% for enrollees in the 138-150% FPL band, 79% at 150-200% FPL, and just 54% at 200-250% FPL. (Among 33,000 enrollees with incomes below 138% FPL, CSR takeup was a relatively low 81%, indicating that many of these special cases may not have qualified for any subsidy at all.) Overall, takeup for CSR enrollees with incomes up to 200% FPL, for whom the benefit is really strong, was 89%.

3. The study authors acknowledge that not everyone whose income is in subsidy range is in fact eligible for subsidies. Some off-exchange enrollees may be undocumented immigrants, and some on- or off-exchange may be ineligible for subsidies because an employer offers insurance deemed "affordable" by the ACA (this includes enrollees stuck in the family glitch). These categories are quite substantial. According to Kaiser Family Foundation estimates, 4.5 million of the nation's uninsured, or 16.5%, are ineligible for marketplace subsidies because of an employment offer, and 5.4 million, or 19.8%, are undocumented immigrants.

Taking these factors together, I suspect that a considerably smaller percentage of CoveredCA enrollees irrationally forfeited subsidies than the study's top line suggests.Given California's standardized benefit package for each metal level, decent pricing and comparatively smooth-functioning website function in 2014, decision-making was probably better there than in many states.

That's not by any means to discount the still-substantial number of enrollees who lacked effective assistance (a focal point of the study), or who had difficulty paying for premiums or out-of-pocket costs. But it does indicate that broadly speaking, marketplace enrollees make better choices than is often assumed.

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* Originally, I had added here:
For starters, the abstract above may be misread (has been misread, on Twitter) as asserting that 31% of enrollees eligible for Cost Sharing Reduction (CSR) failed to obtain it, while in fact it states that 31% of enrollees may have missed out on CSR or premium subsidies or both.
I've relegated this to a footnote because the abstract is actually quite precisely worded and shouldn't be misread. But past experience suggests to me that it will be. Let's see.... 

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