In ACA marketplace, low-hanging fruit is more than half picked

My long two-pointed ladder's sticking through a tree

Toward heaven still,

And there's a barrel that I didn't fill

Beside it, and there may be two or three*

Apples I didn't pick upon some bough.

Goddamn it, don't stop apple-picking now!

(Apologies, Robert Frost)

* or 7 or 8 million

Gearing up for the ACA's third enrollment season, HHS has released an analysis estimating 10.5 million uninsured individuals are eligible to buy private plans in the ACA marketplace. In a separate brief, HHS forecasts that between 2.8 and 3.9 million from this pool  will select marketplace plans in 2016 -- which sounds low until you pick through the numbers a bit.

HHS estimates that 48% of the 10.5 million live in households with incomes under 250% of the Federal Poverty Level (FPL) -- qualifying them for both premium subsidies and Cost Sharing Reduction (CSR) subsidies. Another 30% have incomes between 250% and 400% FPL and so "may qualify" for premium subsidies. But not all of them do.*  And buyers in that range, who are expected to pay at least 8% of income for the benchmark second-cheapest silver plan in their region, have proved a tough sell to date.

About three quarters of all current marketplace enrollees and 88% of subsidized enrollees -- about 7.4 million -- (as of June 30) have incomes under 250% FPL*  If half of the estimated 5 million marketplace-eligible uninsured people with incomes under 250% FPL enroll in plans, and if they constitute about 75% of new enrollees (as they do of current ones), that suggests 3.3 million new enrollees -- almost exactly the midpoint in HHS's forecast range.


The rule of thumb in marketplace enrollment thus far has been 'the lower the income the higher the takeup rate.'  Avalere Health estimated in March that 76% of eligible uninsureds with incomes under 150% FPL selected plans, with takeup dropping off steeply at higher income levels:

We don't know the mix in HHS's estimated 5 million under 250% FPL. But the estimate of those in the 100-138% FPL range  (who are eligible for private plans only in states that refused the Medicaid expansion) is about half of my own estimate for current enrollees at that income level. HHS pegs that income bracket at 8% of the whole marketplace-eligible uninsured population, or 900,000.** If, per above, three quarters of them enroll, and 35% of the remaining 4.1 million under 250% FPL do, that suggests just 2.1 million new enrollees under 250% FPL, and 2.8 million new enrollees from among the uninsured overall. In other words, to the extent that Avalere's estimates were on point (and they precede the attrition recorded in the months following open enrollment), HHS's lower end estimate assumes reaching about the same proportion of the uninsured as the marketplace reached last year.

More broadly, the low-hanging fruit is more than half-picked. As of June, again, about 7.4 million enrollees had income under 250% FPL. HHS now estimates that about 5 million marketplace eligible uninsureds are below that threshold. The percentage of those for whom marketplace offerings are most affordable and attractive -- those with incomes up to somewhere between 150% and 200% FPL -- is doubtless tilted even more strongly toward the already enrolled.

Under 400% FPL and unsubsidized

While the HHS brief places 78% of its target market among the uninsured in subsidy range, a good portion of those in the 250-400% FPL bracket are likely not to be subsidy eligible. While marketplace shoppers are potentially eligible for subsidies if their incomes are below 400% FPL, they qualify only if the unsubsidized cost of the benchmark second-cheapest silver plan exceeds 9.5% of their income. Since unsubsidized plans are much cheaper for young buyers than for older ones (three times cheaper for a 21 year-old than for a 64 year-old), subsidies tend to fade out at under 300% FPL for buyers under 30. More to the point, buyers with incomes over 250% FPL are expected to pay at least 8% of their income for the benchmark plan, whether or not they get a subsidy.

While buyers in the 18-34 year-old age bracket made up 28% of 2015 enrollees, HHS estimates that almost half of the 10.5 million in the marketplace target market are in that age range. The percentage of young adults among those over 250% FPL is likely even higher, since lower income eligibles are likelier to have already bought plans. The 30% in the 250-400% FPL range are a likely tough sell, as they have proved to date. That's all the more true for the 22% over 400% FPL.

The HHS brief examines two factors holding back the subsidy-eligible uninsured: unaffordability and ignorance. The brief cites multiple surveys showing that, while the subsidy-eligible uninsured overwhelmingly cite affordability as the reason they remain uninsured, a large majority of the subsidy-eligible don't know that they are eligible for help.

I have pondered before the extent to which genuine unaffordability and ignorance of what's on offer might be weighted. To oversimplify, unaffordability is likely to be the main factor for those over 250% FPL (or more likely, for those somewhere between 150 and 200% FPL) and ignorance for those in the lower range of subsidy eligibility., Below 150% FPL, CSR raises the actuarial value of a silver plan from a base of 70% to 94%, and at 150-200% FPL, to 87% -- both better than the average employer-sponsored plan. On the other hand, silver plans start getting quite hard to afford in the 150-200% FPL range, as subsidies leave the buyer paying 4.0 - 6.3% of income in that range.

An recent Urban Institute analysis posited that both the subsidies themselves and outreach to the uninsured are underfunded. Linda Blumberg, co-author (with John Holahan) of that study, suggested in today's Wall Street Journal that HHS's projection was "a cautious assessment but one that was largely in keeping with her group’s projections." She also sounded somewhat more sanguine than the warnings in her report might seem to warrant:

“Nothing here’s worrying me about long-term stability,” said Ms. Blumberg. “Is the administration being cautious? They are, but that doesn’t bother me.”

On that note, let's see what open season brings.

--
* The last marketplace enrollment update showed 5.6 million buyers who had accessed cost-sharing reduction subsidies, 8.3 million with premium subsidies, and 9.9 million total enrollees. I have estimated that 76% of CSR-eligible buyers selected silver plans and accessed the benefit (quibbling with Avalere Health's estimate of 73%). That suggests 7.4 million current buyers with incomes under 250% FPL.

** The Kaiser Family Foundation's analysis of the uninsured population, released earlier this week, suggests a higher percentage of potential marketplace customers at 100-138% FPL. Kaiser contrasts the uninsured universe in states that accepted the ACA Medicaid expansion with that of states that refused it, and estimates that while 17% of the uninsured in "expansion" states are eligible for premium subsidies in the private market, 27% (4.35 million) are thus eligible in "nonexpansion" states. If we assume that the percentage of uninsureds in the 139-400% FPL range is currently the same 17% in nonexpansion as in expansion states, then about 1.6 million in the 100-138% are subsidy-eligible.  It we assume, say, that the uninsured population in nonexpansion states is 2 million larger than it would have been had they expanded, and that those in 138-400% FPL range make up 17% of the smaller pool, then there might be more like 1.9 million (by Kaiser's estimate) in the 100-138% FPL range -- about twice what HHS is assuming.

Related: The shrinking subsidizable ACA private health plan market