Wednesday, December 30, 2015

Two reasons the proportion of young adults in ACA marketplace may be rising

Sarah Kliff has marshaled good evidence that the individual mandate is working over time to pull more young adults into the ACA marketplace. As the penalty ratchets up each year, the proportion of young enrollees increases. The evidence in brief: 1) that's how it worked in Massachusetts; 2) young adults identify the mandate as a chief motivator in polling data; 3) HHS and Enroll America have brought the mandate to the fore in marketing messages; and 4) the proportion of enrollees under 35 (including children) has risen modestly this open season, from 35% in OEII to 38% so far this time around.

All of this is convincing. But the perspective of Anne Filipic, of Enroll America, also indirectly highlighted something I've put forward as a secondary cause of this year's modest spike in young enrollment: Because prices are higher this year, more young adults qualify for subsidies. Here's Filipic:
Filipic and her team already think the mandate could play a bigger role in their messaging going forward. Right now, Enroll America has a calculator that lets potential enrollees see how much financial help they'd be eligible to receive if they signed up for coverage.

The group is experimenting with changing that calculator to also display the size of the fine the individual would pay if they didn't buy coverage.

"The calculator is consistently the most visited page on our site, so we're testing different ways to incorporate that information," she says. "We want to give consumers specific information, related to their own situation, rather than generalities."
That visual of penalty vs subsidy does not yet exist. But the ratio on which it's built has shifted in favor of buying coverage on-exchange. Here's how.

Marketplace shoppers are theoretically eligible for subsidies if their incomes are below 400% of the Federal Poverty Level (FPL).  But because unsubsidized premiums for older adults are two to three times higher than for young ones, subsidies for young adults fade out at lower incomes. If the unsubsidized premium of the benchmark silver plan in your area costs less than 9.66% of your income -- or in some cases, less than a bit over 8% --  no subsidy for you.

According to the Kaiser Family Foundation subsidy calculator, on average in 2016, premium subsidies fade out at an income of about 278% FPL for a 27 year-old - that is, at an income a shade under $32,500 per year. That means that the average unsubsidized  price of a benchmark silver plan for a 27 year old is $245 per month. Benchmark silver plans are up an average 7.5% from last year, according to HHS, suggesting that subsidies would fade out at $226 per month for a 27 year-old in 2015, or at an income of about $31,400 (269% FPL) -- about $1100 lower.*

That increase in subsidy eligibility may have a quite modest effect, if any. It might push a few people who bought coverage off-exchange last year into the ACA exchanges. It would be interesting to see if the proportion of young buyers on eHealth, the largest commercial online health insurance broker, goes down this year.

And by the way, imagine if young adults really were usually subsidized up to 400% FPL. There'd be a hell of a lot more of them in the exchanges.

Update: a subsidy calculator at HealthSherpa, also available at my writing home, does set the subsidy against the penalty, based on age, zip code and income.

* These numbers are slightly corrected (from 2015 subsidy fadeout at $228 per month,  268% FPL and $32.5k) thanks to  Larry Levitt pointing me to Kaiser's 2015 calculator. Originally I worked backwards using the 2016 calculator. The difference is probably due to slight adjustments in income thresholds for 2016.

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