Saturday, May 05, 2018

Will Trump's cutoff of CSR reimbursement boost ACA enrollment by 2-3 million, per CBO?

Trump's cutoff of federal funding for Cost Sharing Reduction subsidies (CSR) last October created discounts in bronze and gold plans for many subsidized enrollees in the ACA marketplace, as explained below.  The availability of these discounts partly offset other forms of sabotage, so that on-exchange enrollment was down a relatively modest 5%.

On May 3, CBO Director Keith Hall estimated in a blog post that the CSR cutoff has boosted or will boost marketplace enrollment by an astonishing 2-3 million. The verb tense and time frame is ambiguous, per below (my emphasis). The estimate surely does not apply to 2018 -- I doubt the enrollment boost this year exceeded 500,000, for reasons explained below. 

Here's Hall's explanation of how the CSR discounts came about and their likely effects:
On the basis of an analysis of insurers’ rate filings, CBO and JCT estimate that gross premiums for silver plans offered through the marketplaces are, on average, about 10 percent higher in 2018 than they would have been if CSRs were funded through a direct payment. The agencies project that the amount will grow to roughly 20 percent by 2021.
Effect on the Baseline

The size of premium tax credits is linked to the premiums for the second-lowest-cost silver plans offered through the marketplaces: Out-of-pocket payments for premiums for enrollees who are eligible for subsidies are based on a percentage of their income, and the government pays the difference through the premium tax credits. As a result, in CBO’s projections, higher gross premiums for silver plans increase the amount of tax credits paid by the federal government, thereby covering insurers’ costs for CSRs. Higher gross premiums for silver plans do not significantly affect the out-of-pocket payments that subsidized enrollees pay for premiums for silver plans offered through the marketplaces because the structure of the premium tax credit largely insulates them from those increases.For plans besides silver ones, insurers in most states have not increased gross premiums much, if at all, to cover the costs of CSRs.

Because the premium tax credits are primarily based on the income levels of enrollees and not the nature of the plan they choose, enrollees could use those credits to cover a greater share of premiums for plans other than silver ones in those states. For example, more people are able to use their higher premium tax credits to obtain bronze plans, which cover a smaller share of benefits than silver plans, for free or for very low out-of-pocket premiums. Also, some people with income between 200 percent and 400 percent of the FPL can purchase gold plans, which cover a greater share of benefits than do silver plans, with similar or lower premiums after tax credits. As a result of those changes, in most years, between 2 million and 3 million more people are estimated to purchase subsidized plans in the marketplaces than would have if the federal government had directly reimbursed insurers for the costs of CSRs.
That 2-3 million estimate must take into account the stronger CSR discounts forecast in future,and even so may it be high. In 2018, the enrollment gain was probably in the low hundreds of thousands. Here's why I think so.

Recipients of the discounts generated by CSR being priced into silver plan premiums include people with incomes under 200% FPL who obtained free or cheap bronze plans (some of whom would likely have been better off in CSR-enhanced silver plans, i.e. plans with deductibles in the $0-$1000 range vs. $6-7000 for bronze), and people with incomes over 200% FPL who obtained free-to-cheap bronze and heavily discounted gold.

The boost in enrollees under 200% FPL who obtained cheap bronze plans is not huge.  Most enrollees with incomes below that threshold still choose silver, because the CSR boost to actuarial value (in silver plans only) for those with incomes up to 200% FPL  is still usually larger than the discount in bronze and gold generated by CSR cutoff. Even when the discounts are comparable, the enormous deductibles attached to bronze plans render them close to useless for many low income people. It's a different story, as we'll see, at 200-250% FPL, where CSR is negligible and silver enrollment plummeted.

CMS provides more detailed income and metal level selection data for the 39 states using the federal exchange, containing 74% of enrollees, than for the state-based marketplaces. In HealthCare.gov states, the shift away from silver among enrollees with incomes between 100% and 200% FPL in 2018 was pretty modest.

Metal Level Selections at Different CSR-eligible Income Levels (% FPL)
HealthCare.gov states

                              2017

                                Strong CSR                 Weak CSR                
Metal level 
100-150%
150-200%
200-250%
bronze
 9.2%
14.5%
27.1%
silver
89.3%
83.2%
67.6%
gold
< 1%
 1-2%
  4-5%

                              2018

                                Strong CSR                Weak CSR                
Metal level 
100-150%
150-200%
200-250%
bronze
 9.9%
18.2%
36.5%
silver
89.7%
78.4%
53.4%
gold
  0.09 %
  2.5%
  9.5%



The percentage of enrollees with incomes under 150% FPL rose slightly in 2018. At 150-200% FPL, where CSR is somewhat weaker and benchmark silver plans require a higher share of income, there was a modest shift out of silver, from 83% takeup in 2017 to 785 this year. But that represents just 90,000 people taking discounts, mainly in bronze plans. 

In 2017, 57% of enrollees in healthcare.gov states had incomes in the 100-200% FPL range. In 2018, 56% were in that range.  To the extent the CSR cutoff boosted enrollment, it did so almost entirely among enrollees with incomes over 200% FPL -- presumably only the subsidized ones, as no discounts were available to the unsubsidized.

Strong takeup of bronze and gold discounts first appears in the 200-250% FPL income range, where CSR boosts the actuarial value of a silver plan just 3 percentage points, to 73% (vs. 87% at 150-200% FPL and 94% at 100-150%).  In this income bracket, the shift away from silver is substantial. If silver selection had matched the 2017 level, and the overall drop in enrollment at this income level were the same, about 181,000 fewer people would have enrolled in discounted gold and bronze plans.  

Those discounts did apparently boost enrollment. Enrollment was down 7.5% among those in the 100-200% FPL range, and just 2.7% at 200-250% FPL. 

To expand that comparison: in the 200-400% FPL range, enrollment in HealthCare.gov states was up slightly in 2018, with all the increase concentrated in the 300-400% FPL income range (867,198 in 2018 vs. 786,678 in 2017).  Thus the discounts had a real impact on enrollment. Here are the enrollment totals at each of the subsidy-eligible income brackets in which CSR is unavailable or weak:

Enrollment at 200-400% FPL in HealthCare.gov States


Year
200-250% FPL
250-300% FPL
300-400% FPL
Total 200-400% FPL
2017
1,312,520
752,403
786,678
2,851,601
2018
1,277,488
747,165
867,198
2,891,851

If enrollment in the 200-400% FPL range had been down 7.5% in 2018, as it was in the 100-200% FPL bracket, there would be 254,000 fewer enrollee in HealthCare.gov states than there are now. If the impact in the states that run their own marketplaces was proportionate, that suggest 342,000 fewer enrollees had the federal government continued to reimburse insurers for CSR.

Elsewhere, I have calculated that 1.4 million enrollees in HealthCare.gov states were subsidized, had incomes between 200% and 400% FPL and selected bronze or gold plans, usually discounted thanks to the effects of the CSR funding cutoff. That comes to 1.9 million nationally if the effects in state-based marketplaces were proportional. The question is what percentage of those discount beneficiaries would not have enrolled if not for the discounts.

It's possible that the drop-off in enrollment among those in the 200-400% FPL would have been greater than the drop among those under 200% FPL, since takeup has always been better among those eligible for strong CSR. It's hard for me to imagine the loss amounting to more than, say, 700,000, however.

What would be the effects if the inflation of silver plan premiums doubles? I can't model that scenario. Perhaps CBO will. And perhaps, as Charles Gaba suggests, the projected enrollment boost will prompt the Trump administration to ban "silver loading," the practice that generates the discounts and increases the cost of ACA subsidies to the Treasury.

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