Saturday, June 11, 2016

"Most people can find plans for under $100 per month with a deductible under $1000 per month"

I have long been irritated by an apparent mindset at HHS expressed in factoids such as this, from the final enrollment report for 2016:
Nearly 7 in 10 of the consumers who selected, or were automatically enrolled into, a plan in the states had the option of selecting a 2016 Marketplace plan with a net premium of $75 or less per month after the advance premium tax credit.
You'd think that all that mattered was premium price -- never mind if that $75 plan is bronze level with a $6,600 deductible. HHS marketing reflects this bias. Here's an email from last December:
Get covered and save: 8 out of 10 people who enrolled in a health insurance plan qualified for financial help. In fact, most people can find plans for $75 or less per month. 
I could go on about this, but as I already have, twice, let's move on. Perhaps a better if not so simple marketing point might be crafted after determining: What's the median price that marketplace enrollees pay for a silver plan? Given the low income skew of the marketplace customer base, that median plan will come with Cost Sharing Reduction that reduces the deductible to perhaps a tenth of the typical bronze plan's and raises the plan's actuarial value to 87%, compared to 60% for the bronze .

So, what do most enrollees pay for silver? The median, I believe, is in the neighborhood of $90 per month. We don't know the precise median income for marketplace enrollees, but we can get a pretty close estimate. In 2016, 61% of enrollees in the 38 states using had incomes up to 200% of the Federal Poverty Level (FPL), and 38% had incomes up to 150%  FPL*. If those who had incomes between 150% and 200% FPL were evenly distributed at points in between, the median income of a enrollee would be 176% FPL, or $20,715. At that income level, the benchmark silver plan premium is $91 per month.  Since the benchmark  plan, which determines the premium subsidy, is the second-cheapest silver plan in any given area, the cheapest silver plan available may offer a discount -- usually a modest one, but sometimes quite a large one.

It would be fair to say that "most" buyers in states can get a silver plan for under $90 a month -- with a deductible under $750. In the twelve state-based marketplaces, which enrolled about a quarter of all marketplace customers in 2016, the average enrollee income is a bit higher. But it's still under 200% FPL, which means that the median silver plan buyer will get a plan with an actuarial value of 87%.**

In fact, more than two thirds*** of current silver plan enrollees on have incomes up to 200% FPL and so have plans with an actuarial value of either 94% (if income is up to 150% FPL) or 87 (if income is in 150-200% FPL range).

So, for the sake of marketing simplicity, and to leave a truth-in-marketing safety margin, maybe the message is:
Most people can find plans for under $100 per month with a deductible under $1000.
The catch is that marketplace offerings are much skimpier for those with incomes over 200% FPL -- and if they weren't, the average enrollee income would be higher and the market would be healthier. But at present it would still be accurate, and feasible, to stress that "most" buyers can get coverage more comprehensive than that offered by the average employer-sponsored plan  -- for under $100.
Update: This response from the ever-caustic broker Joseph Snable set me thinking about the bounds of permissible marketing spin:
When HHS asserts what "most people" can find in the marketplace, I assume that's based on what most enrollees have obtained to date.  That's obviously the case for my claim above.  But strictly speaking, what most enrollees have gotten so far is not the same as what most prospective buyers may find. Takeup has been higher among the lowest-income eligible uninsured because the offerings enhanced by strong CSR (up to 200% FPL) are more attractive than what's available to those above that threshold. "Most people who shop" is not the same as "most people who buy."

* HHS breaks out the percentage of enrollees by income level for the 93% of enrollees who provided income information. I've adjusted the reported income percentages to account for those who did not report income -- virtually all of whom, I assume, have incomes above subsidy range. 66% of those for whom income is known have incomes up to 200% FPL; that comes to 61% of all enrollees.

**As I've noted before, the weighted average actuarial value obtained by marketplace enrollees is 79%; the average among the subsidized on is a bit over 81%; and among those with incomes up to 200% FPL, 86%.

*** 71% of enrollees, or 6.8 million, bought silver plans. 60%, or 5.78 million, accessed CSR. Something over 80% of those with CSR have incomes below the 200% FPL threshold. At 200-250% FPL, CSR is weak, raising the actuarial value of a silver plan to just 73% from a baseline of 70%.

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