Early this month the Congressional Budget Office released an updated ACA baseline that once again reduced projected spending from 2015-2025, to general celebration. Among the items forecast to cost less were Cost Sharing Reduction (CSR) subsidies that reduce deductibles and out-of-pocket costs for low income buyers. Projected CSR spending was forecast at $136 billion over ten years, down $11 billion from from a prior reduction forecast just this January, which CBO based on data suggesting that more low-income buyers than HHS had previously expected were buying bronze plans "that minimize their monthly premium payments, even if the amounts they ultimately pay for health care (including out-of-pocket payments) exceed what they would pay under silver plans."
This particular line item is no cause for celebration. Those costs are simply being shifted to low-income buyers who fail to avail themselves of CSR by buying silver-level plans on the ACA exchanges.
CBO's latest reduced CSR forecast might float on a raft of fresh data released by HHS on March 10 about 2015 enrollment in private health plans offered on ACA exchanges. The percentage of buyers choosing silver plans -- which must be purchased to access CSR -- is down a bit since 2014, from 69% to 67%, and the percentage of bronze plan buyers is up, from 20% to 22%. On healthcare.gov, among subsidy-eligible buyers, bronze plan selection rose from 15% in 2014 to 21% this year. That's not good, since bronze plans carry average per-person deductibles of over $5,000 and the vast majority of buyers on healthcare.gov, the federal exchange, have incomes under 250% of the Federal Poverty Level (FPL).
Bronze plan buyers with incomes under 250% FPL are leaving a valuable benefit on the table, as CSR attaches only to silver plans. CSR subsidies reduce deductibles and out-of-pocket expenses massively for those under 200% FPL, more weakly for those in the 200-250% FPL range.
As readers of this blog know, I have gone to considerable effort to divine CSR takeup rates -- particularly for buyers under 200% FPL, for whom the benefit most strongly boosts the relative value of silver. Evidence has been fragmentary, as in the past HHS did not break out metal level selection by income band, though a handful of states did.
Now HHS has provided income level information, though not specific breakouts of metal level selection by income band. The data for the 37 states using healthcare.gov as I read it is a bit disappointing for two reasons: 1) silver plan selection among subsidy-eligible buyers went down from 2014-2015, and 2) silver selection among buyers eligible for CSR in the 37 states using Healthcare.gov is lower than I had inferred for buyers under 200% FPL -- about 81--83% rather than 88-90%. I had based that inference largely on 2014 data published by the state-run exchange in New York, which seemed to me for reasons explained below likely to be comparable to healthcare.gov on this front, About half that difference is probably due to the uptick in bronze plan selection in 2015, the other half in differences between the New York market and that of the healthcare.gov states.
The numbers
In the 37 states using healthcare.gov in 2015, a (to me) astonishing 83% of buyers for whom HHS has income data had incomes under 250% FPL and so were eligible for CSR if they bought silver. (HHS has income data for 94% of buyers, 8.31 million out of 8.84 million. Larry Levitt of the Kaiser Family Foundation speculates that the "unknowns" likely earn too much to qualify for subsidies, an assumption adopted here. Hence that 83% (of 8.31 million) suggests 6.89 million buyers under 250% FPL.) 60% of all buyers, or 5.3 million, accessed CSR. That is, about 77% of CSR-eligible buyers (5.3m out of 6.9m) bought silver plans and so accessed CSR.
CSR is weak for those in the 200-250% FPL range, raising the actuarial value of a silver plan from 70% to just 73%, as opposed to 87% for those in the 150-200% FPL range and 94% for those under 150% FPL. Accordingly, silver plan selection drops sharply at 201% FPL in those states that track such data. In New York in 2014, 89% buyers under 200% FPL bought silver; just 59% of buyers from 200-250% FPL did so. In Colorado, about 73% of those under 200% FPL bought silver; just 50% of those in the 200-250% FPL range did. (The Colorado state-run exchange does a poor job highlighting CSR to those eligible for it.)
On healthcare.gov, 15% of buyers, or 1.25 million, were in the 200-250% FPL range. If 59% of them bought silver, as in New York, then about 81% of those under 200% FPL (where CSR has really high value) selected silver. If 50% of those in the 200-250% FPL bracket bought silver, then 83% of those under 200% FPL did.
Why New York was an imperfect benchmark
In New York in 2014, by contrast, 89% of buyers under 200% FPL bought silver plans. Lacking income-band data from HHS until now, I used New York as a tentative proxy to infer rates on healthcare.gov. Several factors seemed to suggest that hc.gov would have a comparable or even higher rate of CSR takeup than New York: 1) New York's overall bronze plan selection, 19%, was close to the national average of 20%, and significantly higher than healthcare.gov's 17%. 2) New York's median household income,$53,8k, is close to the national median, $51.9k. 3) 74% of New York buyers who were eligible for any kind of subsidy (e.g., those eligible for premium subsidies but not CSR) chose silver plans -- a bit lower than healthcare.gov's 76% in 2014, and equal to this year's hc.gov total of 74%. That last figure led me to infer that CSR takeup was probably a touch higher on healthcare.gov than in New York.
Those similarities hid important differences, though. In New York last year, 53% of buyers were eligible for CSR, versus 83% on healthcare.gov this year. Part of that difference is because New York accepted the Medicaid expansion and many states on healthcare.gov did not. Eligibility for subsidized private ACA plans begins at 100% FPL in non-expansion states but at 138% FPL in expansion states, where Medicaid eligibility extends from 0 to 138% FPL. In expansion states, just 22% of private plan buyers had incomes in the 100-150% FPL range, versus 47% of buyers in non-expansion states.
Even more to the point, in New York in 2014 fully 30% of CSR-eligible buyers were in the 200-250% FPL range. On healthcare.gov this year, only 18% are. Hence there was a larger "spread" in New York last year between the percentage of all CSR-eligibles who bought silver (79%, close to the 77% on hc.gov this year) and those below 200% FPL (89%, vs. just 81-83% (best estimate) on healthcare.gov this year.
In addition, bronze plan takeup among subsidy-eligible buyers on healthcare.gov rose from 15% last year to 21% this year. Silver selection among subsidy-eligibles dropped from 76% to 74% (gold and platinum choices also went down). That's disappointing. The vast majority of subsidy-eligible buyers were CSR-eligible - 6.9 million out of 7.7 million. Too many of the 1.9 million bronze buyers were CSR eligible, and too many -- perhaps about a million (18% of 5.65 million) -- were under 200% FPL. CSR takeup was probably 2 or 3 percentage points higher in 2014 -- that is, around 83-85%, or about five points lower than I estimated based mainly on the New York benchmark.
The heavy concentration of low-income buyers in healthcare.gov explains why my prior estimate was off, but not why CSR takeup was lower in hc.gov states than in New York and (based on somewhat skimpy 2015 evidence, explained here and here) Connecticut and Rhode Island. On the whole, lower income states have higher CSR takeup. That''s partly why I thought that hc.gov would have a takeup rate equal to or higher than New York's, given its higher rate of silver plan selection among all subsidy-eligible buyers.
How the federal exchange can do better
The difference may be due largely to site design. New York, Connecticut and Rhode Island all actively steer CSR-eligible buyers toward silver plans: they strongly signpost CSR, and they"default to silver" -- that is, show silver plans first -- when CSR-eligible buyers view available plans and prices. All have CSR takeup in the 88-90% range for buyers under 200% FPL (at least, New York did in the ACA's first open season and Connecticut and Rhode Island did midway through the second).
Healthcare.gov does warn CSR-eligible buyers who start to select a plan in any metal level other than silver that they're foregoing a benefit. But if the buyer clicks on "keep shopping," the results do not default to silver -- and the warning does not clearly highlight that silver is the only level at which CSR is available. Nonetheless, the warning is probably somewhat effective: healthcare.gov has higher CSR takeup than many state exchanges, such as those of Washington and Colorado (at least as of 2014).
In my view HHS should also change its marketing orientation. As I've noted before, the agency keeps touting low premiums -- plans to be had for under $100 per month or under $50. The report released yesterday reflects this focus. One of its bullet-point boasts is this (my emphasis):
That is the wrong metric. HHS does not even track the percentage of buyers who access available CSR in each income band -- and CSR eligibles probably account for almost all of those who could have bought a plan for under $50 or $100 per month but decided not to. That can be a tough decision. A person earning $23k would pay $118 per month for the benchmark silver plan in 2015, versus $75 or $50 or even $0 for bronze, depending on age and location. But for most, it's a good deal.
Leaving CSR on the table
For those under 200% FPL, CSR radically boosts the actuarial value of the plan -- that is, the percentage of the average user's annual medical costs covered by the plan. Without CSR, silver plans have an actuarial value of 70%. For those with incomes under 150% FPL -- 43% of those who bought via healthcare.gov -- CSR raises the actuarial value to 94%. For those from 150-200% FPL, the AV is 87%. A platinum plan on the ACA exchanges has an AV of 90%. So buyers under 200% FPL get platinum-plus or platinum- (slightly) minus for the price of silver. That's alchemy
To get a sense of how this plays out, take the case of Al Chemy, a 40 year-old Chicagoan (zip code 60647) earning $23,000 per year, a bit under 200% FPL The cheapest bronze plan will cost Al $73 per month; it has a deductible of $6,000, a yearly out-of-pocket maximum of $6,000, and no benefits that kick in before the deductible (other than free preventive services). The cheapest silver plan will cost him $116 per month, or 6% of his income. But its deductible is $100, its OOP max $2250, and its co-pays just $10 for a primary care visit, $50 for a specialist and $0 for generic drugs. That's at least the value of the cheapest platinum plan at $197 per month, with a $0 deductible, a $4000 OOP max, and $5 for a primary care visit, $20 for a specialist, $500 for ER and $4 for generics. Aactuarially, with other copays figured in, the silver plan is mandated to have the higher value. By the insurance companies' own calculation, the silver plan buyer is getting an extra $1,000 per year in benefits at no extra cost. A user who gets seriously ill or injured will save much more.
Healthcare.gov's 81-83% silver selection rate for buyers under 200% FPL is lower than it should be. Fully 68% of private plan buyers on healthcare.gov have household incomes under 200% FPL. Bronze may work for some in that income range who are young and relatively healthy, or who have access to a bronze plan that provides moderate copays for needed services before the deductible is reached, or who have low incomes but personal or family resources to cover $5000-6600 in the event of a medical emergency. Most, though, should not be buying bronze plans with deductibles in the $5,000-6,600 range and in many cases no benefits at all until the deductible is reached, other than the free preventive services mandated by the ACA.
The CBO originally assumed that almost everyone who qualified for CSR would buy silver, apparently based on HHS projections. HHS should get back in touch with those expectations and try to make them a reality -- or else, perhaps, make CSR available with bronze plans at proportionately lower AV levels. CBO's reduced spending forecast for CSR is not a budget triumph. It reflects a shifting of cost onto those little able to bear it.
UPDATE 10/9/15: For more posts analyzing CSR takeup, including 9 state profiles, see this post compendium: The ACA's uncertain shield against underinsurance
This particular line item is no cause for celebration. Those costs are simply being shifted to low-income buyers who fail to avail themselves of CSR by buying silver-level plans on the ACA exchanges.
CBO's latest reduced CSR forecast might float on a raft of fresh data released by HHS on March 10 about 2015 enrollment in private health plans offered on ACA exchanges. The percentage of buyers choosing silver plans -- which must be purchased to access CSR -- is down a bit since 2014, from 69% to 67%, and the percentage of bronze plan buyers is up, from 20% to 22%. On healthcare.gov, among subsidy-eligible buyers, bronze plan selection rose from 15% in 2014 to 21% this year. That's not good, since bronze plans carry average per-person deductibles of over $5,000 and the vast majority of buyers on healthcare.gov, the federal exchange, have incomes under 250% of the Federal Poverty Level (FPL).
Bronze plan buyers with incomes under 250% FPL are leaving a valuable benefit on the table, as CSR attaches only to silver plans. CSR subsidies reduce deductibles and out-of-pocket expenses massively for those under 200% FPL, more weakly for those in the 200-250% FPL range.
As readers of this blog know, I have gone to considerable effort to divine CSR takeup rates -- particularly for buyers under 200% FPL, for whom the benefit most strongly boosts the relative value of silver. Evidence has been fragmentary, as in the past HHS did not break out metal level selection by income band, though a handful of states did.
Now HHS has provided income level information, though not specific breakouts of metal level selection by income band. The data for the 37 states using healthcare.gov as I read it is a bit disappointing for two reasons: 1) silver plan selection among subsidy-eligible buyers went down from 2014-2015, and 2) silver selection among buyers eligible for CSR in the 37 states using Healthcare.gov is lower than I had inferred for buyers under 200% FPL -- about 81--83% rather than 88-90%. I had based that inference largely on 2014 data published by the state-run exchange in New York, which seemed to me for reasons explained below likely to be comparable to healthcare.gov on this front, About half that difference is probably due to the uptick in bronze plan selection in 2015, the other half in differences between the New York market and that of the healthcare.gov states.
The numbers
In the 37 states using healthcare.gov in 2015, a (to me) astonishing 83% of buyers for whom HHS has income data had incomes under 250% FPL and so were eligible for CSR if they bought silver. (HHS has income data for 94% of buyers, 8.31 million out of 8.84 million. Larry Levitt of the Kaiser Family Foundation speculates that the "unknowns" likely earn too much to qualify for subsidies, an assumption adopted here. Hence that 83% (of 8.31 million) suggests 6.89 million buyers under 250% FPL.) 60% of all buyers, or 5.3 million, accessed CSR. That is, about 77% of CSR-eligible buyers (5.3m out of 6.9m) bought silver plans and so accessed CSR.
CSR is weak for those in the 200-250% FPL range, raising the actuarial value of a silver plan from 70% to just 73%, as opposed to 87% for those in the 150-200% FPL range and 94% for those under 150% FPL. Accordingly, silver plan selection drops sharply at 201% FPL in those states that track such data. In New York in 2014, 89% buyers under 200% FPL bought silver; just 59% of buyers from 200-250% FPL did so. In Colorado, about 73% of those under 200% FPL bought silver; just 50% of those in the 200-250% FPL range did. (The Colorado state-run exchange does a poor job highlighting CSR to those eligible for it.)
On healthcare.gov, 15% of buyers, or 1.25 million, were in the 200-250% FPL range. If 59% of them bought silver, as in New York, then about 81% of those under 200% FPL (where CSR has really high value) selected silver. If 50% of those in the 200-250% FPL bracket bought silver, then 83% of those under 200% FPL did.
Why New York was an imperfect benchmark
In New York in 2014, by contrast, 89% of buyers under 200% FPL bought silver plans. Lacking income-band data from HHS until now, I used New York as a tentative proxy to infer rates on healthcare.gov. Several factors seemed to suggest that hc.gov would have a comparable or even higher rate of CSR takeup than New York: 1) New York's overall bronze plan selection, 19%, was close to the national average of 20%, and significantly higher than healthcare.gov's 17%. 2) New York's median household income,$53,8k, is close to the national median, $51.9k. 3) 74% of New York buyers who were eligible for any kind of subsidy (e.g., those eligible for premium subsidies but not CSR) chose silver plans -- a bit lower than healthcare.gov's 76% in 2014, and equal to this year's hc.gov total of 74%. That last figure led me to infer that CSR takeup was probably a touch higher on healthcare.gov than in New York.
Those similarities hid important differences, though. In New York last year, 53% of buyers were eligible for CSR, versus 83% on healthcare.gov this year. Part of that difference is because New York accepted the Medicaid expansion and many states on healthcare.gov did not. Eligibility for subsidized private ACA plans begins at 100% FPL in non-expansion states but at 138% FPL in expansion states, where Medicaid eligibility extends from 0 to 138% FPL. In expansion states, just 22% of private plan buyers had incomes in the 100-150% FPL range, versus 47% of buyers in non-expansion states.
Even more to the point, in New York in 2014 fully 30% of CSR-eligible buyers were in the 200-250% FPL range. On healthcare.gov this year, only 18% are. Hence there was a larger "spread" in New York last year between the percentage of all CSR-eligibles who bought silver (79%, close to the 77% on hc.gov this year) and those below 200% FPL (89%, vs. just 81-83% (best estimate) on healthcare.gov this year.
In addition, bronze plan takeup among subsidy-eligible buyers on healthcare.gov rose from 15% last year to 21% this year. Silver selection among subsidy-eligibles dropped from 76% to 74% (gold and platinum choices also went down). That's disappointing. The vast majority of subsidy-eligible buyers were CSR-eligible - 6.9 million out of 7.7 million. Too many of the 1.9 million bronze buyers were CSR eligible, and too many -- perhaps about a million (18% of 5.65 million) -- were under 200% FPL. CSR takeup was probably 2 or 3 percentage points higher in 2014 -- that is, around 83-85%, or about five points lower than I estimated based mainly on the New York benchmark.
The heavy concentration of low-income buyers in healthcare.gov explains why my prior estimate was off, but not why CSR takeup was lower in hc.gov states than in New York and (based on somewhat skimpy 2015 evidence, explained here and here) Connecticut and Rhode Island. On the whole, lower income states have higher CSR takeup. That''s partly why I thought that hc.gov would have a takeup rate equal to or higher than New York's, given its higher rate of silver plan selection among all subsidy-eligible buyers.
How the federal exchange can do better
The difference may be due largely to site design. New York, Connecticut and Rhode Island all actively steer CSR-eligible buyers toward silver plans: they strongly signpost CSR, and they"default to silver" -- that is, show silver plans first -- when CSR-eligible buyers view available plans and prices. All have CSR takeup in the 88-90% range for buyers under 200% FPL (at least, New York did in the ACA's first open season and Connecticut and Rhode Island did midway through the second).
Healthcare.gov does warn CSR-eligible buyers who start to select a plan in any metal level other than silver that they're foregoing a benefit. But if the buyer clicks on "keep shopping," the results do not default to silver -- and the warning does not clearly highlight that silver is the only level at which CSR is available. Nonetheless, the warning is probably somewhat effective: healthcare.gov has higher CSR takeup than many state exchanges, such as those of Washington and Colorado (at least as of 2014).
In my view HHS should also change its marketing orientation. As I've noted before, the agency keeps touting low premiums -- plans to be had for under $100 per month or under $50. The report released yesterday reflects this focus. One of its bullet-point boasts is this (my emphasis):
Overall, more than half (55 percent) of the 8.8 million individuals with 2015 plan selections through the Marketplaces in the HealthCare.gov states have 2015 plan selections through the Marketplaces with a monthly premium of $100 or less after applying the advance premium tax credit; about 8 in 10 had the option of selecting such a plan.A subsequent chart breaks out the percentages of buyers who could have selected a plan with a premium under $50 (less than half of subsidized buyers did) or under $100 (about three quarters did so).
That is the wrong metric. HHS does not even track the percentage of buyers who access available CSR in each income band -- and CSR eligibles probably account for almost all of those who could have bought a plan for under $50 or $100 per month but decided not to. That can be a tough decision. A person earning $23k would pay $118 per month for the benchmark silver plan in 2015, versus $75 or $50 or even $0 for bronze, depending on age and location. But for most, it's a good deal.
Leaving CSR on the table
To get a sense of how this plays out, take the case of Al Chemy, a 40 year-old Chicagoan (zip code 60647) earning $23,000 per year, a bit under 200% FPL The cheapest bronze plan will cost Al $73 per month; it has a deductible of $6,000, a yearly out-of-pocket maximum of $6,000, and no benefits that kick in before the deductible (other than free preventive services). The cheapest silver plan will cost him $116 per month, or 6% of his income. But its deductible is $100, its OOP max $2250, and its co-pays just $10 for a primary care visit, $50 for a specialist and $0 for generic drugs. That's at least the value of the cheapest platinum plan at $197 per month, with a $0 deductible, a $4000 OOP max, and $5 for a primary care visit, $20 for a specialist, $500 for ER and $4 for generics. Aactuarially, with other copays figured in, the silver plan is mandated to have the higher value. By the insurance companies' own calculation, the silver plan buyer is getting an extra $1,000 per year in benefits at no extra cost. A user who gets seriously ill or injured will save much more.
Healthcare.gov's 81-83% silver selection rate for buyers under 200% FPL is lower than it should be. Fully 68% of private plan buyers on healthcare.gov have household incomes under 200% FPL. Bronze may work for some in that income range who are young and relatively healthy, or who have access to a bronze plan that provides moderate copays for needed services before the deductible is reached, or who have low incomes but personal or family resources to cover $5000-6600 in the event of a medical emergency. Most, though, should not be buying bronze plans with deductibles in the $5,000-6,600 range and in many cases no benefits at all until the deductible is reached, other than the free preventive services mandated by the ACA.
The CBO originally assumed that almost everyone who qualified for CSR would buy silver, apparently based on HHS projections. HHS should get back in touch with those expectations and try to make them a reality -- or else, perhaps, make CSR available with bronze plans at proportionately lower AV levels. CBO's reduced spending forecast for CSR is not a budget triumph. It reflects a shifting of cost onto those little able to bear it.
UPDATE 10/9/15: For more posts analyzing CSR takeup, including 9 state profiles, see this post compendium: The ACA's uncertain shield against underinsurance
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