Wednesday, August 24, 2016

HHS markets to the lower income brackets

I have complained more than once about HHS's mantra that most ACA marketplace shoppers can find a plan for under $75 per month. My beef has been that the message overemphasizes premium price at the expense of balancing premium with out-of-pocket costs. That's particularly perverse since most shoppers have to buy silver plans to access Cost Sharing Reduction subsidies that render silver a better value than bronze.

Well, CMS is at it again, and in light of the marketplace's recent travails -- insurer losses, insurer exits, premium price spikes -- I was struck by another problem with the "most can get plans for under $75" assurance.

Today HHS released a brief emphasizing that since 85% of enrollees qualified for premium tax credits in 2016, that same overwhelming majority will be protected from premium price hikes in 2017. The premise is simple: if you're subsidy-eligible, you pay a fixed percentage of your income for the benchmark silver plan in your area, regardless of its sticker price. When prices rise, subsidies rise, and the spread between benchmark silver plans and cheaper bronze plans will widen slightly, slipping slightly more applicants in under the $75 and $100 thresholds.* Hence this highlight:
In a hypothetical scenario in which all Marketplace qualified health plan premiums
were to increase by 25 percent from 2016 to 2017:
          o 73 percent of consumers could find coverage for $75 or less.
          o 78 percent of consumers could find coverage for $100 or less.
Okay, but all this "most-people" messaging also brings home the fact that HHS anticipates marketplace enrollment remaining concentrated in lower income brackets -- mainly under 200% of the Federal Poverty Level (FPL). In 2016, somewhere between 61% and 66% of enrollees had incomes below that level.   HHS estimates that 70% of enrollees could have bought plans for under $75 per month, which suggests that about 70% had incomes under, say, 220% FPL.**

A major growth hurdle for the marketplace has been the reluctance of those with modestly higher incomes to buy plans. Cost Sharing Reduction (CSR) subsidies phase out at 250% FPL and weaken to almost nothing at 200% FPL. Buyers above those thresholds are looking at high out-of-pocket costs in silver plans, and often nearly prohibitive OOP in cheaper bronze plans.***

Of course premium hikes slam those who are not eligible for subsidies -- they bear the full brunt of sticker price increases, as Charles Gaba emphasizes, That's bad for the off-exchange market, and so for risk pools: losing unsubsidized buyers hurts the market as much as losing subsidized buyers. About half of the buyers of ACA-compliant plans are unsubsidized -- 17% of those who buy in the federal and state exchanges, and all of those who buy off-exchange.

In 2013, according to Census surveys, 55% of the uninsured had incomes under 200% FPL. About one third of the U.S. population is below that threshold. The ACA serves them fairly well, mainly through Medicaid but also through CSR-enhanced marketplace plans. For those above that threshold, the pickings are leaner. And that remains a problem.

* A solo buyer with an income of 200% FPL ($23,540 this year) pays about $125 for benchmark silver. For such a buyer, the price of cheapest bronze varies with region and age. $75 per month for cheapest bronze might be about typical at this income level.

** Since unsubsidized premiums rise with age, while subsidies rise to keep the buyer's share of the benchmark silver plan at a fixed percentage of income, older buyers' larger subsidies often cover a larger chunk of cheaper bronze plans premiums.

*** While this year's price hikes will make bronze plans cheaper for some subsidized buyers, especially older ones, there is no indication the the cheapest silver plans in each region are seeing smaller price hikes than the benchmark (second cheapest) silver plans. Hence the price hikes probably will not, on average, increase the "CSR discounts" sometimes available when the cheapest silver plan is significantly cheaper than the benchmark, enabling buyers to obtain CSR subsidies for significantly less than the amount the ACA deems affordable.


  1. I have said this before, but the persons making less than 200% of poverty ($23K for a single person) do not constitute a voting bloc.

    Sitting here in central MN, it is hard to believe that this contingent constitutes one third of the US population.

    The deep south and far west must be very different from here.

  2. When you have a GOP Congress hell bent on destroying the ACA aka Obamacare...there is nothing that can be done to make the needed changes to the ACA...#WethePeople must change the makeup of Congress to see the change we need!