Friday, October 16, 2015

Rational choice in the ACA marketplace - Santa Cruz edition


Attention, ACA shopper #1: You can buy a silver health plan  for $117 per month with a $500 deductible, or a bronze plan that costs $22 per month -- with a $5,000 deductible. What'll it be?

Attention, ACA shopper #2: Same choice as for shopper #1, but in your case the silver plan is just $88 per month, and the bronze, $22.

Those are actual choices facing ACA private plan buyers, age 40 and earning $23,000 per year, in two adjacent California counties, Monterey and Santa Cruz.*  The choice is not an even tradeoff between price and coverage, because the silver plan deductibles are lowered by Cost Sharing Reduction (CSR) subsidies, available only with silver plans and only to buyers with household incomes below 250% of the Federal Poverty Level (FPL). Without CSR, the silver plan deductibles would be $2,000, and the premium-versus-out-of-pocket-cost tradeoff would be more proportionate.

Nationwide and in California, a touch more than three quarters of CSR-eligible private plan buyers on ACA exchanges choose silver plans and so access the benefit. CSR takeup varies considerably from state to state and even zip code to zip code, however. The Monterey/Santa Cruz contrast offers almost a naturally occurring random control trial of the extent to which the price spread between the cheapest available bronze and silver plans affects CSR takeup.

Covered California, the state ACA marketplace, released detailed enrollment data last week that makes a comparison possible (click on "June 2015 Profile" here)

The two counties have nearly identical numbers of  residents who bought private plans on Covered California -- 13,600 in Monterey, 13,780 in Santa Cruz. California benefits are standardized at each metal level (and each CSR level), allowing an apples-to-apples benefits comparison at the contrasting price points.

Here, then, are the takeup rates in the two counties, for CSR-eligible buyers and for all buyers**:

Cheapest silver plan monthly premium
Cheapest bronze plan monthly premium
Bronze-Silver spread
Silver selection - CSR eligibles
Silver selection - all incomes
Santa Cruz
$  88

                        2015 prices                                                                                Active enrollees as of June 2015

The bronze-silver price spreads can vary from county to county because the benchmark against which ACA premium subsidies are calculated is the second cheapest silver plan in each region. Every buyer in the country with an income of $23,000 (a shade below 200% FPL) will pay $117 for the second cheapest silver plan (or in practice, within $3 of that amount). In many if not most zip codes nationwide, the cheapest silver plan is within a couple of dollars of the benchmark. But in some regions -- including many in California -- the cheapest silver plan steeply undersells the benchmark and so offers a significant discount.

The "CSR discount" in Santa Cruz has an especially strong effect for buyers with incomes in the upper range of CSR eligibility:

Silver selection 138-150% FPL
Silver selection 150-200% FPL
Silver selection 200-250% FPL

Santa Cruz

As you move up the income scale, CSR becomes weaker and harder to afford. Subsidized premiums for the benchmark silver plan rise from 3% of income at 139% FPL to 8.1% at 250% FPL. CSR, meanwhile, keeps silver plan deductibles in California at $0 for those with incomes under 150% FPL, $500 for those from 150-200% FPL, and $1,600 for buyers in the 200-250% FPL range.***

For a buyer earning $29,000, or just under 250% FPL, the cheapest silver plan in Monterey costs $192 per month, and in Santa Cruz, $96. Cheapest bronze is $97 in Monterey, $96 in SC. The price spread is basically the same as at the $23,000 level, but the extra money buys less. For the $29k earner, the silver plan deductible is $1100 closer to the bronze deductible than it is for the $23k earner -- and copays move up proportionately.

For subsidized buyers, the bronze-silver price spread increases with the buyer's age. That's because while unsubsidized premiums can be up to three times higher for the oldest buyers as for the youngest, premium subsidies cover the difference for the benchmark silver plan. An older buyer's subsidy may twice as large as a younger buyer's -- big enough to swallow the whole difference between a silver plan and a bronze, rendering the bronze plan free or close to it. In Santa Cruz and Monterey, though, the age profiles are nearly identical -- so age does not account for differences in silver takeup.

In fact the "elasticity" of CSR, as economists like to call responsiveness to price difference, is evident throughout California's 19 health insurance regions. In those with narrow price spreads, silver takeup is higher. In most of  Region 15, encompassing half the private plan buyers in Los Angeles, the bronze-silver spread for a 40 year-old earning $23k is just $20. Accordingly, 70.5% of Region 15 enrollees have silver plans and just 18.3% have bronze. In Region 13, in contrast -- the eastern counties Mono, Inyo and Imperial -- the spread is $101. A state-high 55% of enrollees are in bronze plans, and just 41.5% in silver. I'll look more closely at the regional pattern in a future post.

Update, 10/24: The Covered California Active Member Profile, available here, also shows enrollees' selections by insurer. In Santa Cruz, Blue Shield offers the cheapest bronze and silver plans and has 70.2% market share. In Monterey, Anthem Blue Cross has the cheapest plan at both metal levels -- and a 99.6% market share.

Surprise! When silver plans are cheaper, more people buy them
Some sidelights on California's modest rate increases
The ACA's uncertain shield against underinsurance: a CSR compendium


Originally posted 10/13/15

* In a handful of Santa Clara counties, the silver-bronze spread for a 40 year-old earning $23k is a bit different:  $57 for cheapest silver, $1 for cheapest bronze.

** A couple of caveats: First, these enrollment numbers include those who enrolled in 2014 and renewed in 2015. Fortunately, the bronze-silver price spread was comparable in 2014: 71-7 for Santa Cruz, 118-21 for Monterey. Second, on the county level, Covered California reports the number of enrollees at each income level, whereas on the state level it reports that 3% of buyers with incomes in CSR range are unsubsidized. For the counties, I therefore subtracted 3% from the enrollment totals for buyers under 250% FPL.

*** Nationwide, CSR raises the actuarial value of a silver plan from a baseline of 70% to 94% for buyers up to 150% FPL, 87% for those in the 150-200% FPL range, and just 73% for buyers from 200-250% FPL. Not surprisingly, CSR selection drops at each level. In California, it's 91% for those from 138-150% FPL, 79% for those from 150-200% FPL, and 56% for those from 200-250% FPL.

**** The silver takeup at 138-150% FPL is an estimate, in that we know how many buyers in each county obtained "Silver 94"(that is, silver at the CSR level available up to 150% FPL), but we don't know how many "Silver 94" enrollees have incomes below 138% FPL. Statewide, we know that (oddly, disturbingly), just 63% of buyers under 138% FPL were subsidy-eligible. If 85% of them bought silver, that's 53% of buyers below 138% FPL. In Monterey and Santa Cruz, I therefore multiplied the number of buyers under 138% FPL (400 in Monterey, 360 in SC) by .53 and subtracted that amount from the total enrolled in "Silver 94" to estimate the silver takeup at the 138-150%  FPL level.  A further complication is that about 1% of buyers in the 138-150% FPL band would probably be unsubsidized (unsubsidized buyers at subsidy-level incomes are concentrated below 138% FPL).

1 comment:

  1. It has been a number of years since I visited Santa Cruz, but from what I remember it was not really possible to live there on $23,000 a year. Maybe if you had four co-operative roommates, otherwise you were nearly homeless.
    It is sad to me that the ACA is really all about two expansions of Medicaid: the official expansion, in the states that accepted federal dollars, and the closet expansion through CSR's and silver plans.

    This is better than no ACA but it is effectively just more welfare.