Saturday, October 07, 2017

Covered California to middle-class enrollees: There (may be) gold in them thar hills

Update (!) Oct. 11, 2017: CoveredCA has gone live with  its 2018 plan preview tool and has implemented the CSR surcharge discussed below -- 12.4% added to silver on-exchange plans only. That makes gold cheaper than silver in some areas, and CoveredCA is indeed in some cases highlighting gold plan offerings ahead of silver.

Back on August 1 Covered California, the California ACA exchange, announced a proactive approach to enable health insurers to cope with the uncertainty over whether the Trump administration (or Congress) would guarantee them continued reimbursement for Cost Sharing Reduction subsidies.

Insurers would file rate requests under the assumption that CSR will continue to be reimbursed. If reimbursement was not guaranteed by a certain date, however, a surcharge (later pegged at 12.4%) would be added to silver plans sold on-exchange. CSR is available to enrollees with qualifying incomes only if they select silver plans, and only if they buy on-exchange. ACA-compliant silver plans sold off-exchange would not include the surcharge. That surcharge is likely to be triggered on or around October 11, CoveredCA tells me (postponed from an original target of Sept. 30).

The likely results have been widely noted (e.g., here). Off-exchange, plan pricing would remain proportionate to the actuarial value offered at each metal level. On-exchange, the only buyers of silver plans should be those with incomes up to 200% of the Federal Poverty Level, for whom CSR raises the value of silver plans roughly to that of platinum.

Subsidized buyers with incomes over 200% FPL (i.e., with incomes in the 200-400% FPL range) would be making a mistake if they bought silver, since silver would be priced at a level appropriate for gold plans, or slightly above. In fact they would get a windfall if they bought gold, because the inflated price of silver would also inflate premium subsidies, which are keyed to the benchmark (second cheapest) silver plan in each region. Gold plans, which have an AV of 80%, would be cheaper or almost as cheap as silver plans at 70% AV.  The effect would be a kind of back-door CSR for subsidy-eligible enrollees with incomes over 200% FPL.

How the gold windfall would play out in California

A 12.4% hike to silver premiums alone is enough to make silver plans more expensive than gold, or roughly equally expensive. A look at 2017 offerings in California bears this out. In Los Angeles, zip code 90013*, the unsubsidized benchmark silver plan premium for a 40 year-old this year is $270. The cheapest gold plan is $287. Add 12.4% to the benchmark, and its premium is $304. The cheapest silver plan premium is $256. A CSR surcharge would put it at $288 -essentially identical to cheapest gold.

How would this play out for a subsidized buyer with an income of $24,000 -- just above the 200% FPL line? Benchmark silver at that income level would cost 6.5% of income, or $130 per month.  The tax credit at present is $140 per month. If the benchmark had the CSR surcharge appended, the tax credit would rise to $173 per month. The cheapest gold plan would cost the buyer $114 per month -- $16 below what the ACA formula deems "affordable."  Under California's standardized plan designs, the foregone silver plan would have a medical deductible of $2200 (reduced from $2500 by the "weak" CSR available at incomes of 201-250% FPL) and a drug deductible of $250. The gold deductible would be zero on both counts.

In San Francisco, zip code 94016, the story is similar (though unsubsidized premiums are much higher). For a 40 year-old, the unsubsidized benchmark silver plan is $446; cheapest silver is $444, and cheapest gold is $492. Add 12.4%, and the benchmark is $501. A subsidized buyer of cheapest gold gets a small discount below the benchmark -- and a $2200 reduction in deductible ($2500 for those with incomes over 250% FPL).

Alerting enrollees: there may be gold in them thar hills

The Covered California website engages in decision support: based on income and the buyer's reported expected level of medical care usage, it foregrounds plans deemed most cost-effective. For buyers with incomes under 200% FPL, this pretty universally means silver plans appear first. That's because CSR adds substantial free actuarial value, boosting a silver plan to 94% AV for buyers with incomes up to 150% FPL, and to 87% AV for buyers in the 150-200% FPL range.

If the CSR surcharge goes through, it stands to reason that for most subsidized buyers with incomes over 200% FPL, the site should foreground gold plans -- or possibly, for those who anticipate low medical care usage, bronze plans, which also will be discounted by the inflation of benchmark silver premiums. CoveredCA confirms:
the best value plans will continue to be shown first.  As you note, if we have to load the CSR-surcharge, that could include Gold plans for consumers with certain income and utilization needs. 
Responding to the massive federal cutback in marketplace outreach and advertising, Covered California has also announced a $5 million increase in its marketing budget for 2018. Advertising should emphasize the need for current enrollees to shop anew, and find a way to suggest that many enrollees should consider switching metal levels.

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* Los Angeles is split into two rating areas -- and even within those rating areas, plan offerings and prices vary. Ditto for San Francisco --- in parts of which a Chinese Community Health Plan (CCHI) is available this year at $407 for an unsubsidized 40 year-old -- $37 per month below the benchmark.

Update, 10/11: In LA zip code 90001, the CoveredCA plan shopper is leading with bronze for an individual  earning $35k, but placing a gold plan before the first silver one even though it's slightly more expensive. The row below (with a bronze high deductible health plan) is preceded by six slightly cheaper bronze plans.


And here's Santa Cruz, for an individual with an income of $30k -- showing also some very cheap bronze options:


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