Monday, February 06, 2017

ACA doctors (of the law): What would you do with $3-5 billion per year?

Republicans in power certainly don't want the ACA marketplace to thrive. But for the most part they don't want it to precipitously collapse, either -- though it's not hard to imagine the Trump administration pushing it off a cliff and then trying to blame Democrats ("it was collapsing already...").

While Republicans have no real wish to make adequate health insurance affordable for lower income people, they may prove somewhat receptive to the wishes insistences of insurers, out of long habit and because, again, they don't want the market to collapse. The Trump administration is reportedly considering a package of short-term stabilizers that includes enabling by administrative fiat a minor increase to age banding (the multiple by which older enrollees can be charged more than younger ones); allowing insurers to cut off coverage for late payers after just 30 days instead of the current 90; and tightening the standards and verification for those seeking "Special Enrollment Periods" (SEPS) outside of open enrollment.

It also seems likely that in one legislative package or another Republicans in Congress will more thoroughly increase allowable age-banding from the ACA's 3-to-1 ratio (meaning a 64 year-old pays three times as much as a 21 year-old) to the pre-ACA industry standard of 5-to-1. That would increase the proportion of young adults in the market, while raising subsidy costs for the Treasury (which would have to cover the premium difference for subsidy-eligible near-elderly buyers) and raising the cos of insurance to the subsidy-ineligible near-elderly to truly horrific heights. A 2015 RAND analysis estimated that the increased age banding would bring 4.4 million younger adults into the ACA marketplace, 40% of them switching over from employer sponsored insurance, while driving out 400,000 older adults. The net gain in the nation's insured population would be 1.8 million at an annual cost to the Treasury of $9.3 billion annually, according to RAND. [Update, 2/1: I missed that on January 27, House Republicans introduced bills to widen age banding, tighten SEPs, and reduce the nonpayment grace period.

From a progressive point of view the best way to stabilize the marketplace (and so the wider individual market) would be to increase subsidies, reducing both premiums and out-of-pocket costs for enrollees. It was obvious from the start that the ACA subsidy structure would leave coverage unaffordable for a considerable percentage of those who need to find coverage in the individual market.  The Kaiser Family Foundation estimates that as of March 2016, 64% of those who were potentially eligible for marketplace subsidies were enrolled -- a percentage that will drop slightly this year in the wake of Trump administration efforts to suppress signups in the last days of open enrollment.

In the lost days before we entered our current dystopia, namely August 2015, Urban Institute scholars Linda Blumberg and John Holahan proposed a package of ACA subsidy boosters, largely if vaguely adopted by Hillary Clinton in her doomed campaign. The revised subsidy schedule would reduce the percentage of income required to buy a benchmark plan at every income level; raise the actuarial value of benchmark plans on which the subsidies were based, and cap premiums at any income level at 8.5% of income. Blumberg and Holahan estimated the total cost of these sweeteners at $221 billion over 10 years, roughly a 50% increase over current costs as estimated in mid-2015. Like good progressives they suggested a series of pay-fors for their larger proposal package.

At this point, that kind of federal spending increase is about as likely as Trump vowing to defend eastern NATO countries from Russian attack. Far more modest spending increases appear almost equally Utopian. Nonetheless, given the estimated price tag of increased age-banding (okay, one estimate), I find myself wondering: If a few billion dollars per year -- say, a mid-single-digit billion amount -- could be appropriated to improve the individual market, what would be the best way to spend the money?

Candidates would include fixing the family glitch, i.e., allowing those whose employers offer single coverage deemed affordable by ACA standards but for whom family coverage is unaffordable to obtain subsidized coverage in the marketplace. That change would barely budge the uninsured rate but would render coverage much more affordable for several million currently in employer-sponsored plans, while strengthening the marketplace risk pool. Another several-billion-per-year option would be to fund and extend the expired risk corridor program, the premature defunding of which cost insurers an estimated $8 billion and may have driven some coops and other insurers out of the market. Ditto for the expired reinsurance program.

If I had 3-5 billion dollars, I would shore up ACA subsidies where I believe they're weakest: for the subsidy-eligible population with incomes in the 200-300% FPL range. Takeup is poor in this income range, where 19% of the uninsured are concentrated, according to the Current Population Survey. Specifically, I would strengthen and extend Cost Sharing Reduction (CSR) subsidies at this moderate income level, so that a benchmark silver plan had an actuarial value of 80%, rather than the current 73% for those in the 200-250% FPL band and 70% for those above 250% FPL.  That would reduce average deductibles from the $2,000-4,000 range to about $1,000.

Holahan and Blumberg proposed a more sweeping boost to CSR and AV, extending further down the income chain:

They priced their CSR boost at $39 billion over 10 years. Mine would be cheaper -- and targeted, I believe, to where the ACA subsidy structure falls off most precipitously and falls most short.  (I would also love to see Blumberg and Holahan's 8.5%-of-income cap instituted, but I have no concrete hint as to how much that would cost, other than the global $222 billion/10 yr estimate for the whole package, which includes premium subsidy increases across lower income levels).

I should do a better job justifying (and in the process perhaps altering) why I'd concentrate a limited boost at this income level, and why I'd focus it on OOP rather than premium. Perhaps I will, in a followup.  It's something of a gut reaction to the ACA's coverage cliff at 201% FPL, where benchmark silver AV tumbles from 87% to 73% and thence to 70%, leaving out-of-pocket costs just too high for the non-affluent.


  1. I cannot agree with this sentence...
    "I would shore up ACA subsidies where I believe they're weakest: for the subsidy-eligible population with incomes in the 200-300% FPL range. Takeup is poor in this income range, where 19% of the uninsured are concentrated, according to the Current Population Survey."

    Subsidies are weakest where they do not exist, i.e. for persons who make over the 400%-poverty limit.
    They have to face brutal premiums, especially over age 55, with no assistance. Today i quoted a man aged 61 in a St Cloud.....$930 a month for a crap ass bronze plan. The only carrier left in his county is Blue Cross, which now only offers an HMO. The man lives almost 120 miles from a network hospital.

    These are people who often voted for Trump and who really hate the ACA. Let's help them!

    1. I agree with that -- I think a cap on individual market premiums as a percentage of income would be great, as noted above. 8.5% is the Urban proposal; 10% might be realistic. I don't know what it would cost -- I assume considerably more than a CSR boost in the 200-300% FPL range.

    2. Let me do a very rough calculation.

      7 million persons do not get subsidies. (of course some are couples)

      Assume their average annual income is $60,000.

      Assume they are currently paying an average of $700 a month.

      A 10% cap would top off their share of premiums at $500 a month.

      So they would be getting a subsidy of $200 a month, or $2400 a year.

      $2400 times 7 million equals $16.8 billion a year.

      (notice that I never quote budget numbers in 10 year estimates -- this is a very bad practice.)