Friday, October 20, 2017

Bronze and gold plan discounts in California, 2018

As I noted recently, Covered California has acted on its plan to shield marketplace enrollees from the effects of Republicans' CSR sabotage.  For 2018, a surcharge averaging 12.4% has been loaded onto silver on-exchange plans only (the only plans with which CSR is available) to cover the cost that until now has been reimbursed by the federal government.

We can now examine the effects of the surcharge, which I've done below.  The effects should theoretically be as follows (more detail here):

  1. Off-exchange plan pricing should be unaffected by CSR; price differences between metal levels should remain proportionate to actuarial value at each level.
  2. Enrollees with incomes under 200% of the Federal Poverty Level (FPL), for whom strong CSR is available, should be unaffected. Subsidies will rise to cover the additional premium, and silver plans will continue to offer outsized value, covering 94% (at incomes up to 150% FPL) or 87% (for incomes from 150-200% FPL) of the average user's costs.
  3. Subsidized enrollees in the 200-400% FPL income range will see discounts in bronze and gold plans, since premium subsidies, which are keyed to silver plans, will rise to cover the inflated silver premium.

Let's look at how the expected bronze and gold discounts play out in some of California's 19 rating regions. Because California has standardized plan benefits at each metal level, relatively clean comparisons are possible -- though I would note that last year, relatively expensive PPOs (plans with broader provider networks) were popular in many areas.

In California, bronze plans have single-person medical deductibles of $6300; silver, $2500, and gold, $0. Some services are not subject to the deductible.  Enrollees in the 200-250% FPL range get a weak CSR that reduces the silver deductible to $2200.  A full summary of standardized benefits is available here.

According to enrollment statistics* published by Covered California, as of March of this year, about
183,520 enrollees in silver plans have incomes in 200-400% FPL range, 98% of them subsidy eligible. Most of them should probably buy gold or bronze plans on-exchange, since silver plans are now priced approximately like gold (albeit with a good deal of variation). Let's see how that plays out for individuals in different rating areas.

Charted below are the cheapest available plans at each metal level this year versus last in California's largest rating area, Region 16, which is part of Los Angeles. Note that a wide spread between bronze and silver plans favors bronze, and a narrow spread between silver and gold favors gold. I've made the comparison at an income of $25,000, which is slightly above 200% FPL and so eligible for the weakest level of CSR.**

Metal level choices: LA 91343 (Region 16)
Monthly premiums for 40 year-old with $25,000 income (207% FPL)


Metal level
2017
2018
Cheapest bronze
$ 72
$ 59
Cheapest silver
$128
$134
Cheapest gold
$159
$148
Bronze-silver spread
$ 56
$  75
Silver-gold spread
$ 31
$  14

The spreads favoring bronze and gold are more pronounced in Rating Area 15, also in Los Angeles. (Or at least in part of it; offerings in CA can vary within rating areas. That's why I've included zip codes.)

Metal level choices: LA 90639 (Region 15)
Monthly premiums for 40 year-old with $25,000 income (207% FPL)


Metal level
2017
2018
Cheapest bronze
$  80
$ 42
Cheapest silver
$134
$130
Cheapest gold
$165
$142
Bronze-silver spread
$ 54
$ 88
Silver-gold spread
$ 31
$ 12


I noted two years ago that the wider the spread between cheapest bronze and cheapest silver, the likelier Californians were to choose bronze. This year we'll see whether narrowed silver-gold spreads push more people into gold.

We've looked at the two largest regions by enrollees, with 212,550 and 167,960 enrollees respectively, or a bit more than a quarter of all enrollees in the state (as of March)  What about the smallest? Region 13, the southern desert, comprising Mono, Inya and Imperial counties , has just 12,340 enrollees.  Below is what's available in Imperial, which has the bulk of the enrollees.

Before the chart below makes your head spin, please note that discount insurer Molina, for at least  the second year running, has thrown this region out of whack by massively underselling the competition. That created bizarre discounts this year, and even more bizarre ones in 2018. Molina has 80% of enrollees in Molina county this year.

Metal level choices: Imperial 92222 (Region 13)
Monthly premiums for 40 year-old with $25,000 income (207% FPL)


Metal level
2017
2018
Cheapest bronze
$  1
$1
Cheapest silver
$  1
$1
Cheapest gold
$28
$1
Bronze-silver spread
$  0
$0
Silver-gold spread
$28
$0

It should also be noted that in this region Blue Shield is offering a $1/month bronze PPO to buyers at this income level.  Because the second cheapest silver plan is the benchmark to which the subsidy is pegged, however, and Molina has the cheapest silver offering, there is no cheap silver PPO. Nor is there any cheap gold besides Molina's.

How about a region with mid-sized enrollment? Region 6, which includes Monterey and Santa Cruz, has 63,000 enrollees. Here's how choices have changed in Santa Cruz:

Metal level choices: Santa Cruz 95062 (Region 6)
Monthly premiums for 40 year-old with $25,000 income (207% FPL)


Metal level
2017
2018
Cheapest bronze
$ 24
$    1
Cheapest silver
$137
$137
Cheapest gold
$181
$121
Bronze-silver spread
$113
$136
Silver-gold spread
$  41
$- 16

You might expect some adverse selection here, with bronze being irresistible to the healthy and gold to the sick. Since Kaiser offers cheapest bronze and cheapest gold, that should come out in the wash -- while Kaiser and Blue Shield, just a couple of dollars apart in silver, carve up the CSR-eligible market up to 200% FPL,where the benefit is strong enough to entice most enrollees in that income range.

Prices at the various metal levels are not going to shake out neatly according to paradigm across California. In Monterey, for example -- right next door to Santa Cruz -- Blue Shield has a monopoly, and has maintained an enormous price spread between silver and gold as well as between bronze and silver. No gold discount there, but it's one of the regions in which a person earning just over 200% FPL, as in our example, can get a bronze plan essentially for free (if subsidy exceeds premium, the monthly charge is $1).  Whether there is off-exchange competition for the unsubsidized, I don't know.

Speaking of the unsubsidized, in California 63,000 unsubsidized enrollees as of March of this year were in silver plans. Those who continue to seek individual market coverage should most likely shop off-exchange, where cheaper silver plans should be available.

Update, 10/21: Let's take a look at San Francisco, California's Region 4. There, a local health insurer, Chinese Community Health Plan, has a quarter of the market, and offered the cheapest bronze and cheapest silver plans in both 2017 and 2018 - though this year Kaiser shares "cheapest bronze" status, putting up a plan that also effectively zeroes out after subsidy and so costs a nominal $1 per month.

Metal level choices: SF 94116 (Area 4)
Monthly premiums for 40 year-old with $25,000 income (207% FPL)

Metal level
2017
2018
Cheapest bronze
$  13
$   1
Cheapest silver
$106
$113
Cheapest gold
$191
$120
Bronze-silver spread
$ 93
$112
Silver-gold spread
$ 85
$    7


This year the bronze-silver spread has widened and the silver-gold spread has narrowed -- which should spell lower silver selection (silver selection was a low  57.9% last year vs. 64.1% for the state as a whole, thanks probably to a wide bronze-silver spread). Here, as in Santa Cruz, Kaiser offers cheapest bronze and cheapest gold, as well as benchmark silver (at $140 for our $25k earner).
---
*  See the March 2017 Active Member Profile available on the right margin at the link.

**  CSR (Cost Sharing Reduction) boosts the actuarial value of a silver plan (the percentage of the average user's medical costs the plan is designed to cover) from a baseline of 70% to 94% for enrollees with incomes up to 150% FPL; to 87% in the 150-200% FPL range, and to 73% in the 200-250% FPL range. Gold plans have an AV of 80%, and are now priced more or less comparably to silver plans in CA, enrollees ineligible for CSR or eligible for only the weakest CSR generally stand to get better value from gold than from silver plans. At the same time, huge discounts in bronze plans will likely prove more tempting than the usually relatively modest discounts in gold -- at least as far as this spot check indicates.

Related:
CoveredCA to subsidized enrollees: Gold in them thar hills?
Surprise! When silver plans are cheaper, more people buy them

1 comment:

  1. Great analysis! I was hoping for a surge in gold enrollment, but CSR does nothing to lower the overall gold-bronze spread. It seems to depend a ton on how aggressively insurers want to adjust for the residuals after risk adjustment, "induced demand". What could we do to get away from $7000 deductibles?

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