Friday, July 03, 2015

Alabama's Obamacare buyers ride a Silverado

Spotlight here is on Alabama in my continuing close look at how many low income ACA private plan buyers accessed Cost Sharing Reduction (CSR) subsidies by buying silver plans. (Yesterday, HHS released detailed county-level data about buyers of private plans on, the federal exchange, enabling a close look at state stats.)

CSR is available to buyers with household incomes below 251% of the Federal Poverty Level (FPL), and strongest for buyers under 201% FPL. It is available only with silver plans, the second-cheapest of four metal levels available on ACA exchanges -- a fact that's less than obvious to the average shopper, Buyers under 201% FPL are leaving a really strong benefit on the table if they don't buy silver plans (see the note at bottom for more detail). I consider the percentage of buyers under 201% FPL who select silver an important measure of how well the exchange is functioning in a given state. (Those in the 201-250% FPL range are likelier to have good cause to forego the relatively negligible CSR provided at that level.)

Generally, there are two predictors of how high CSR takeup will be in a given state -- three if you include the state-based exchanges now serving just 13 states.  The first is the percentage of buyers in low income bands. The second, a major determinant of the first, is whether the state accepted the ACA's Medicaid expansion, rendered optional by the Supreme Court in 2012.. In states that refused the expansion, eligibility for subsidized private plans begins at 100% FPL rather than 138%, the threshold for Medicaid eligibility in expansion states. In "non-expansion" states, buyers with incomes from 100-138% FPL flooded the private plan market, comprising about a third or more of buyers in those states. The third factor is how good a job a given exchange does in steering CSR-eligible buyers toward silver. is better some state exchanges on this front and worse than others. Since it's used by all but one of the states that refused to expand Medicaid, it has higher CSR takeup in aggregate than most states that built their own marketplaces.

High CSR takeup in Alabama

Anyway, on to Alabama, which ranks 47th among states in median household income. The 171,621 private plan buyers* for whom statistics are available skew heavily toward the lower end of the income range eligible for subsidies (100-400% FPL). 53% of Alabama buyers have incomes under 150% FPL, slightly higher than the overall total for states that refused the Medicaid expansion. Probably two thirds of that group would be eligible for Medicaid if the state had expanded Medicaid.  Fully 85% of all buyers, 146,482 out of the 171,621 total, have incomes under 251% FPL and so are eligible for CSR.

Of all those eligible for CSR, 84% (122,624) chose silver and so accessed the benefit. That's considerably higher than the 77% CSR takeup recorded for the 37 states in aggregate. Again, though, takeup is generally higher in states that refused the Medicaid expansion, because silver plans are most affordable for those who would have been eligible for Medicaid had their states expanded it. For those under 138% FPL, the premium for the benchmark silver plan in their area is capped at 2% of income. Below 150% FPL, CSR raises the actuarial value of a silver plan to 94% -- better than gold or platinum plans. Bronze plans have an AV of just 60% and deductibles generally north of $5,000 -- versus a norm of $0 or $250 for silver at this highest level of CSR. It's almost always a terrible decision for a buyer under 200% FPL to choose bronze -- though for some at the upper end of that income range, silver plan premiums can be a hard swallow.

Because CSR weakens sharply at 201% FPL, raising the actuarial value of a silver plan to just 73% from a baseline of 70%, silver plan selection generally falls off sharply at 201% FPL. We don't know how sharply in the states, as HHS doesn't break out metal level selection by income. But some states do, and based on that information, 55% silver selection for those in the 201-250% FPL range is a middle range estimate. If that's the takeup rate for the 17,905 buyers with incomes in the 201-250% range in Alabama, then about 88% of those with incomes under 201% FPL chose silver and so accessed the stronger CSR available below that threshold. That's close to the rate achieved by top state-based exchanges in Connecticut and New York -- though for those states a high takeup rate is harder to achieve, since they expanded Medicaid and so lack the 100-138% FPL cohort that's likeliest to choose silver.

Overall, just 9% of Alabama's private plan buyers selected bronze plans, and 81% chose silver. That compares to 22% bronze and 67% silver selection for the country as a whole. Alabama also had the second-highest ratio of CSR buyers to all buyers, at 72.9% behind only Mississippi, at 76.3%. Because Mississippi had a higher percentage of buyers eligible for any kind of subsidy than Alabama did, however (94.5% to 90.7%), Alabama may have had a higher percentage of CSR-eligible buyers who chose silver and accessed the benefit. I will check on that when I go through Mississippi's numbers. (Mississippi has the nation's second-lowest median household income, 40,850 compared to Alabama's 41,381, as of 2013.)

It's not particularly remarkable that Alabama has one of the highest CSR takeup rates (and therefore one of the highest overall silver plan selection rates). Given the low income range of its private plan buyers, it would be bad news indeed if it didn't.

Afterthought of the day: While CSR may seem a rather boring preoccupation, I consider its takeup a key measure of how many people in the ACA private marketplace are getting access to genuinely affordable healthcare. I consider bronze plans, with their 60% AV and $5-6.6k deductibles, an abomination for most low-income people -- and silver plans with no CSR or weakest-level CSR leave an awfully high cost burden to the plan holder as well.

Note on CSR: Buyers with incomes under 250% of the Federal Poverty Level (FPL) are eligible for CSR. But CSR is negligible for buyers at the upper end, from 201-250% FPL, for whom it raises the actuarial value of a silver plan to just 73% from a baseline of 70%. For those with incomes from 150-200% FPL CSR raises AV to 87%, and for those under 150% FPL, to 94%. Since subsidized silver premiums take a much smaller bite at lower income levels, the general rule of thumb is the poorer the buyer, the likelier she is to buy silver and access CSR. Since bronze plans generally have deductibles north of $5,000 and no CSR, they are close to worthless for most low income buyers.

* [Update, 7/6]  The demographic information that HHS released last week (early July 2015) is based on enrollment as of the end of open season in mid-February. In May, HHS released updated enrollment numbers that accounted for attrition -- mainly those who never paid their first month's premium -- as of March 31. In Alabama, the update dropped total enrollment from 171,641 to 145,763, 85% of the initial total.  We don't know whether dis-enrollment was concentrated in particular income groups.

Update 2: Richard Mayhew at Balloon Juice asks to what extent the federal money foregone by states that refuse the Medicaid expansion is offset by federal funding of QHP subsidies for those who should have been in Medicaid.  That question leads me to wonder what proportion of those who would have been eligible for Medicaid in non-expansion states ended up in QHPs, as compared to those stuck in the "Medicaid gap" -- that is, denied any aid because their household income is under 100% FPL. Kaiser has state-by-state estimates of residents who fall in the Medicaid gap. For Alabama, the estimate is 176,000. By comparison, I would estimate QHP enrollees in the 100-138% FPL range -- those who should have been in Medicaid -- at about 51,000. Here's how that works. As of March 31, Alabama had 145,763 total enrollments through Of those, per above, say 53% have incomes in the 100-150% FPL range (if a disproportionate number of never-paids wasn't in that income range). Of that 77,254, approximately 2/3 (per my calculation here) are probably in the 100-138% FPL range. Perhaps more, as generally the poorer the state, the higher the proportion of enrollees at the lowest income levels. That would suggest that about 22% of those who should have been eligible for Medicaid are now in QHPs.

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