ACA marketplace plans work reasonably well for a majority of subsidy-eligible buyers -- but leave far too many underinsured, or paying premiums they can't readily afford. There's virtually a progressive consensus on that point by now.
The latest crystallization of this consensus is in an analysis of ACA plan holders' costs by the Urban Institute's* Linda Blumberg, John Holahan and Matthew Buettgens, which spotlights high combined premium and out-of-pocket costs for the sickest, oldest and wealthiest of subsidized plan holders in the ACA marketplace (as well as for those a notch above subsidy eligibility).
Among the subsidy-eligible, median costs are most acute for buyers with incomes over 200% of the Federal Poverty Level (FPL), the threshold at which strong Cost Sharing Reduction (CSR) subsidies phase out while subsidized premiums as a percentage of income rise. Median combined premium and out-of-pocket costs for marketplace customers with incomes ranging from 200-500% FPL range from 10,8% to 13.4%, according to the study authors. The spike in costs at the 200% FPL threshold is reflected in ACA takeup rates, which according to a cited study,** fall off a cliff at 200% FPL, from 62% of eligible individuals to 29%.
The authors recommend, as Blumberg and Holahan have previously, that ACA subsidies be enriched across the board, and that tax credits be added above the current 400% FPL cap. While the cost would be relatively modest -- covered, in fact, by reduced spending projections for the ACA and Medicare-- the political lift is plainly impossible for the foreseeable future.
There may, however, be revenue-neutral steps that would boost affordability and so, takeup. If so, they will have to be taken at the state level. That's not only because Congress is incapable of constructive action where the ACA is concerned. It's also because the ACA benefit structure militates against any realized cost savings being passed directly to the consumer.
The underlying problem is the cost of medical care in the U.S. -- specifically, the rates paid by most private insurers, which are typically about 165-200% of Medicare rates. ACA subsidies that would be affordable to the federal treasury were calculated, I assume (checking....), on the basis of private insurance rates.
A core premise of the ACA is that competition among insurers will push down, or at least hold down, rates, rendering coverage more affordable over time if the cost of care rises more slowly than it has in the past. That may be happening, or at least the potential is demonstrated in some markets. Insurers with experience in Medicaid managed care, such as Molina and Centene, are fielding Medicaid-like narrow networks on the ACA exchanges -- and probably paying providers rates not far above those paid for Medicaid managed care.
Those low rates are visible in the discount insurers' unsubsidized premiums. In Albuquerque, New Mexico, Molina offers the lowest-priced silver plan in the country, at $148 per month for an unsubsidized 27 year-old. That's 27% below the median silver plan in the region. In Chicago, Centene's Ambetter offers the cheapest silver plan at $160 -- 32% below the median silver plan and 22% below the nearest competitor's cheapest offering (BCBS,at $204). In St. Louis, where there's no cut-rate insurer, the cheapest silver plan for a 27 year-old is $222, offered by Cigna; the median silver is $258, from Anthem.
Low rates from discount providers are good news for the federal treasury, as they lower subsidies keyed to the benchmark second cheapest silver. They're also good for unsubsidized buyers who can tolerate the narrow networks that make them possible. But they don't help subsidized buyers, except in the relatively rare cases in which the cheapest silver plan in a given market is much cheaper than the benchmark second-cheapest plan.
Subsidized buyers are locked into the ACA subsidy schedule, which sets benchmark silver premiums at 6.41% of income for buyers with incomes at 200% FPL, 8.15% of income at 250% FPL, and 9.66% of income at 300% FPL. That's a lot of money at those income levels. And over 200% FPL, silver plans are pretty skimpy, covering just 73% of the average user's yearly costs (the so-called actuarial value, or AV) for buyers with incomes in the 200-250% FPL range, and just 70% for buyers with incomes over 250% FPL.
States, however, have the freedom to remix the ACA subsidy and private market structure, or even bypass it entirely. They can do by applying for "innovation waivers," which empower them to propose alternative schemes that meet the ACA's coverage and affordability standards without increasing the federal deficit. If accepted, waiver proposals can go into effect on Jan. 1, 2017.
The state challenge can be viewed as an opportunity to leverage low payment rates achieved by any insurer in order to lower costs for subsidized plan members. The ACA provides one way to do this by giving states the option of offering a Basic Health Plan (BHP) to residents with incomes between 138% FPL (the cutoff for Medicaid eligibility) and 200% FPL. BHPs offer Medicaid-like benefits to enrollees at minimal cost.
So far only Minnesota and New York have created BHPs. (Minnesota adapted an existing program, MinnesotaCare, that contracts with managed care providers). Both states provide comprehensive coverage at very low cost. MinnesotaCare offers coverage with an actuarial value of 96-99%, with premiums topping out at $80 per month for those earning 200% FPL (compared to about $125 per month for benchmark silver in the ACA marketplace). New York's BHP will be free to applicants with income ranging from 100-150% FPL, with zero copays. For those in the 150-200% FPL range, the premium is $20 per month, with very low copays for specific services.
The problem with a BHP is that it drains the private plan market of customers from the income group most likely to buy, and does nothing for buyers with incomes north of 200% FPL, where benefits thin out and takeup is low. But what if a state went whole hog and offered the BHP to buyers from 200-400% FPL -- or, for that matter, to all buyers in the state lacking access to employer-sponsored insurance or insurance from other public programs? That would require a waiver, and there would be no point if the BHP could not offer richer coverage at lower cost than that stipulated by the ACA to buyers over as well as under 200% FPL. It might eviscerate the private market -- and it might not work if most buyers found the network unacceptably narrow.
Ironically, a waiver to extend a BHP to the broader market is more feasible for a state with high current premiums than for one that has successfully contained costs to date. That's because federal funding for waiver proposals will be based on the current cost of premium subsidies paid in the state. Since those subsidies are designed so that everyone in the country at a given income level pays the same price for benchmark silver, they're much higher in high-premium states. The cheapest silver plan premium in New York is $353 for a 27 year-old; in Minnesota, it's $193. Minnesota would thus have far less funding for a BHP extension than New York. Perhaps New York must also pay higher rates to its BHP plan providers, however.
Two states, Vermont and Colorado, have considered or are considering a statewide "single payer" system, with a public program insuring everyone in the state. Vermont suspended the effort after scoping out its cost. Colorado has placed the proposal on the ballot for 2016, and proposes steep taxes on businesses and individuals to pay for it.
No state, as far as I know, has considered a single payer program for the nongroup market alone -- that is, for all adults 18-64 who lack access to ESI or existing programs such as Medicaid or disability Medicare. Maybe there's good reason for that. But if the state paid healthcare providers at a rate somewhere between rates paid by Medicaid and Medicare, a BHP-for-all-who-need-it might be a means of offering more affordable and comprehensive coverage than an ACA marketplace.
Richard Mayhew has a different state waiver proposal that finds other ways to remix benefits, pass some narrow network savings to plan buyers and increase enrollment. I'll also be floating different ideas in days and/or weeks to come.
UPDATE: Minnesota is considering extending eligibility for its BHP, MinnesotaCare, to 275% FPL, which is effectively to most subsidy-eligible prospective exchange customers. I have a post about it up on healthinsurance.org.
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* The study is under the auspices of the Robert Wood Johnson Foundation as well as the Urban Institute.
** Buettgens M, Kenney GM, and Pan CW. Variation in Marketplace Enrollment Rates in 2015 by State and Income. Washington: Urban Institute, 2015.
The latest crystallization of this consensus is in an analysis of ACA plan holders' costs by the Urban Institute's* Linda Blumberg, John Holahan and Matthew Buettgens, which spotlights high combined premium and out-of-pocket costs for the sickest, oldest and wealthiest of subsidized plan holders in the ACA marketplace (as well as for those a notch above subsidy eligibility).
Among the subsidy-eligible, median costs are most acute for buyers with incomes over 200% of the Federal Poverty Level (FPL), the threshold at which strong Cost Sharing Reduction (CSR) subsidies phase out while subsidized premiums as a percentage of income rise. Median combined premium and out-of-pocket costs for marketplace customers with incomes ranging from 200-500% FPL range from 10,8% to 13.4%, according to the study authors. The spike in costs at the 200% FPL threshold is reflected in ACA takeup rates, which according to a cited study,** fall off a cliff at 200% FPL, from 62% of eligible individuals to 29%.
The authors recommend, as Blumberg and Holahan have previously, that ACA subsidies be enriched across the board, and that tax credits be added above the current 400% FPL cap. While the cost would be relatively modest -- covered, in fact, by reduced spending projections for the ACA and Medicare-- the political lift is plainly impossible for the foreseeable future.
There may, however, be revenue-neutral steps that would boost affordability and so, takeup. If so, they will have to be taken at the state level. That's not only because Congress is incapable of constructive action where the ACA is concerned. It's also because the ACA benefit structure militates against any realized cost savings being passed directly to the consumer.
The underlying problem is the cost of medical care in the U.S. -- specifically, the rates paid by most private insurers, which are typically about 165-200% of Medicare rates. ACA subsidies that would be affordable to the federal treasury were calculated, I assume (checking....), on the basis of private insurance rates.
A core premise of the ACA is that competition among insurers will push down, or at least hold down, rates, rendering coverage more affordable over time if the cost of care rises more slowly than it has in the past. That may be happening, or at least the potential is demonstrated in some markets. Insurers with experience in Medicaid managed care, such as Molina and Centene, are fielding Medicaid-like narrow networks on the ACA exchanges -- and probably paying providers rates not far above those paid for Medicaid managed care.
Those low rates are visible in the discount insurers' unsubsidized premiums. In Albuquerque, New Mexico, Molina offers the lowest-priced silver plan in the country, at $148 per month for an unsubsidized 27 year-old. That's 27% below the median silver plan in the region. In Chicago, Centene's Ambetter offers the cheapest silver plan at $160 -- 32% below the median silver plan and 22% below the nearest competitor's cheapest offering (BCBS,at $204). In St. Louis, where there's no cut-rate insurer, the cheapest silver plan for a 27 year-old is $222, offered by Cigna; the median silver is $258, from Anthem.
Low rates from discount providers are good news for the federal treasury, as they lower subsidies keyed to the benchmark second cheapest silver. They're also good for unsubsidized buyers who can tolerate the narrow networks that make them possible. But they don't help subsidized buyers, except in the relatively rare cases in which the cheapest silver plan in a given market is much cheaper than the benchmark second-cheapest plan.
Subsidized buyers are locked into the ACA subsidy schedule, which sets benchmark silver premiums at 6.41% of income for buyers with incomes at 200% FPL, 8.15% of income at 250% FPL, and 9.66% of income at 300% FPL. That's a lot of money at those income levels. And over 200% FPL, silver plans are pretty skimpy, covering just 73% of the average user's yearly costs (the so-called actuarial value, or AV) for buyers with incomes in the 200-250% FPL range, and just 70% for buyers with incomes over 250% FPL.
States, however, have the freedom to remix the ACA subsidy and private market structure, or even bypass it entirely. They can do by applying for "innovation waivers," which empower them to propose alternative schemes that meet the ACA's coverage and affordability standards without increasing the federal deficit. If accepted, waiver proposals can go into effect on Jan. 1, 2017.
The state challenge can be viewed as an opportunity to leverage low payment rates achieved by any insurer in order to lower costs for subsidized plan members. The ACA provides one way to do this by giving states the option of offering a Basic Health Plan (BHP) to residents with incomes between 138% FPL (the cutoff for Medicaid eligibility) and 200% FPL. BHPs offer Medicaid-like benefits to enrollees at minimal cost.
So far only Minnesota and New York have created BHPs. (Minnesota adapted an existing program, MinnesotaCare, that contracts with managed care providers). Both states provide comprehensive coverage at very low cost. MinnesotaCare offers coverage with an actuarial value of 96-99%, with premiums topping out at $80 per month for those earning 200% FPL (compared to about $125 per month for benchmark silver in the ACA marketplace). New York's BHP will be free to applicants with income ranging from 100-150% FPL, with zero copays. For those in the 150-200% FPL range, the premium is $20 per month, with very low copays for specific services.
The problem with a BHP is that it drains the private plan market of customers from the income group most likely to buy, and does nothing for buyers with incomes north of 200% FPL, where benefits thin out and takeup is low. But what if a state went whole hog and offered the BHP to buyers from 200-400% FPL -- or, for that matter, to all buyers in the state lacking access to employer-sponsored insurance or insurance from other public programs? That would require a waiver, and there would be no point if the BHP could not offer richer coverage at lower cost than that stipulated by the ACA to buyers over as well as under 200% FPL. It might eviscerate the private market -- and it might not work if most buyers found the network unacceptably narrow.
Ironically, a waiver to extend a BHP to the broader market is more feasible for a state with high current premiums than for one that has successfully contained costs to date. That's because federal funding for waiver proposals will be based on the current cost of premium subsidies paid in the state. Since those subsidies are designed so that everyone in the country at a given income level pays the same price for benchmark silver, they're much higher in high-premium states. The cheapest silver plan premium in New York is $353 for a 27 year-old; in Minnesota, it's $193. Minnesota would thus have far less funding for a BHP extension than New York. Perhaps New York must also pay higher rates to its BHP plan providers, however.
Two states, Vermont and Colorado, have considered or are considering a statewide "single payer" system, with a public program insuring everyone in the state. Vermont suspended the effort after scoping out its cost. Colorado has placed the proposal on the ballot for 2016, and proposes steep taxes on businesses and individuals to pay for it.
No state, as far as I know, has considered a single payer program for the nongroup market alone -- that is, for all adults 18-64 who lack access to ESI or existing programs such as Medicaid or disability Medicare. Maybe there's good reason for that. But if the state paid healthcare providers at a rate somewhere between rates paid by Medicaid and Medicare, a BHP-for-all-who-need-it might be a means of offering more affordable and comprehensive coverage than an ACA marketplace.
Richard Mayhew has a different state waiver proposal that finds other ways to remix benefits, pass some narrow network savings to plan buyers and increase enrollment. I'll also be floating different ideas in days and/or weeks to come.
UPDATE: Minnesota is considering extending eligibility for its BHP, MinnesotaCare, to 275% FPL, which is effectively to most subsidy-eligible prospective exchange customers. I have a post about it up on healthinsurance.org.
---
* The study is under the auspices of the Robert Wood Johnson Foundation as well as the Urban Institute.
** Buettgens M, Kenney GM, and Pan CW. Variation in Marketplace Enrollment Rates in 2015 by State and Income. Washington: Urban Institute, 2015.
Another excellent article!!! The people who run this blog do not pay you enough.
ReplyDeleteBut seriously folks, I love the concept of buy-ins. I favored (with Jeff Goldsmith of Health Affairs) the idea of a Medicare buy-in as the national pubic option. I was even interested in Kerry's proposal to let small businesses buy into the Federal Employee insurance plan.
Minnesota Care (which you reference) is a great program. My son and two of my friends are on it. Here are some interesting figures.
Minnesota Care covers 105,000 people and costs $565 million, so about $435 a month in average costs.
Its funding comes about $265 from a federal program of some kind, $265 from a 2% state tax on medical providers, and only about $35 million in premiums.
The premiums are based solely on income, not age. There are no premiums to cover children. Deductibles and copays are under $10 (I kid you not.)
If this were introduced broadly, it would probably kill the private individual insurance carriers. A person aged 60 could pay $435 a month for a crappy bronze plan with a $6850 deductible, or pay $435 a month for no deductible. And maybe less than $435 if they had tax credits to apply.
Given how many carriers are losing money on ACA plans, or at best breaking even, they might not mind being priced out of the ACA.
However, as my earlier comments suggested, the funding of a plan like Minnesota Care must be firmed up before the plan goes on Broadway. The 2% provider tax is a quirk that barely survives legislative challenges every two years.
Bob, when MinnesotaCare became a BHP, it must have become funded by the feds to the level that QHP premiums would have cost for Minnesotans up to 200% FPL. Do you know for sure that the state still partly funds?
DeleteBob, when MinnesotaCare became a BHP, it must have become funded by the feds to the level that QHP premiums would have cost for Minnesotans up to 200% FPL. Do you know for sure that the state still partly funds?
Deletegood question, here you go
ReplyDeleteIn fiscal year 2014, the MinnesotaCare program paid $520 million for medical services provided to enrollees. Forty-seven percent of this cost was paid for by the state, 47 percent by the federal government, and 6 percent by enrollees through premium payments (this last category also includes enrollee cost-sharing).
Through 2014, the state received federal funding at the MA match rate for health care services provided to enrollees under a federal waiver. Since January 1, 2015, the state has received from the federal government a payment for each enrollee equal to 95 percent of the subsidy that the individual would have otherwise received through MNsure.
State funding for MinnesotaCare and other health care access initiatives is provided by a tax of 2 percent on the gross revenues of health care providers and a tax of 1 percent on the premiums of nonprofit health plan companies. The tax on health care provider revenues is scheduled to sunset January 1, 2020. Prior to that date, the Commissioner of Management and Budget is required to reduce the rate of the tax on health care provider revenues if c
Thanks, Bob. Yesterday MN DHS tells me that this year, the fed contribution, boosted when MinnesotaCare became a BHP, accounted for 70% of costs. If the state opts to extend the program up to 275% FPL via a 1332 waiver, the overall percentage paid by the federal government may increase. It should also increase because of the spike in private plan prices, which means higher subsidies, increasing the estimate of costs the feds pay 95% of (or possibly 100% if MN gets a 1332 waiver proposal accepted).
DeleteGiven that I am one of America's few buy-in wonks, can you expand on how Minnesota could expand its Minnesota Care program to the entire indivdual market?
DeleteSay the cost remains $5200 a year per adult person.
If my ACA subsidy would have been $2400 a year, do I just pay the difference of $2800 a year myself?
I do see a big problem in that I am not sure it is feasible to have a community rated plan like Minnsota Care compete with age rated plans.
Comments welcome!
5
I'm not sure where you got the $5200/yr figure, but if you're in your 60s that's not a bad rate if you earn too much to qualify for subsidies. What if MinnesotaCare allowed you to buy in at cost? It's a high-AV plan.
Delete