Saturday, July 01, 2017

The real cost of "benchmark silver" for low income BCRA enrollees

For ACA marketplace enrollees with incomes under 200% FPL -- over half of all enrollees -- benchmark silver plans have an average actuarial value of about 91%, i.e. roughly platinum equivalent. This post accordingly looks at the likely cost of AV 90% plans for low income enrollees under the BCRA. If you want to cut to the chase see the two charts at bottom.

Senate Republicans' bill to eviscerate Medicaid, advertised as an ACA repeal and replace bill, provides for income-based  private market premium subsidies that superficially look something like those of the ACA marketplace, but with these differences:
  • Subsidy eligibility begins at zero income, rather than at 100% or 138% of the Federal Poverty Level (FPL) as in the ACA. Theoretically, these private market subsidies for the poor and near-poor are meant to compensate for repeal of the ACA Medicaid expansion.
  • Subsidy eligibility ends at 350% FPL compared to 400% FPL in the ACA.
  • The benchmark against which subsidies are calculated is a plan with an actuarial value (AV) of 58%, compared to AV 70% for the ACA's benchmark silver plans. AV refers to the percentage of the average user's medical costs the plan is designed to cover.
  • Subsidy size, calculated to leave the enrollee paying a fixed percentage of income for a benchmark plan, varies by age as well as income.
  • There are no Cost Sharing Reduction (CSR) subsidies to reduce out-of-pocket expenses (boosting AV) for low income enrollees, as in the ACA.
  • "Age-rating" is increased from the ACA's 3:1 to the pre-ACA individual market norm of 5:1, meaning that a 64 year-old's plan will cost five times as much as a 21 year-old's plan rather than three times as much.
Of these, the difference in the value of a benchmark plan (AV 58% vs. 70%) has gotten the most attention, as analysts are at pains to make apples-to-apples comparisons. Both the Brookings Institute and the Kaiser Family Foundation have put out papers highlighting the cost of AV 70% coverage under the Senate bill, the so-called Better Care Reconciliation Act (BCRA).

These comparisons are appropriate in that insurers price silver plans under the ACA at 70% actuarial value. But Cost Sharing Reduction (CSR) subsidies, tacked on separately and reimbursed separately to insurers, dramatically alter the actual AV accessed by marketplace enrollees. As of April 2016, in the 39 states using the federal marketplace, healthcare.gov, silver plans purchased in-marketplace had an average weighted AV of 85% (see note at bottom here).  Among enrollees with incomes below 200% FPL -- about 60% of all on-marketplace current enrollees -- the average AV for a silver plan is 91% . About 85% of enrollees below that income threshold select silver plans and so access CSR.

With that in mind, let's look at Kaiser's analysis of what prospective enrollees of various incomes and ages would pay for a "silver" (AV 70%) plan under the BCRA. We'll focus on the left side of the chart, enrollees with incomes under 200% FPL, since that is the upper threshold for "strong" CSR (AV 94% or 87%).


Table 2: Monthly Premium for a Silver Plan Among Exchange Enrollees (By Income and Age), 2020
Income Below 200% of PovertyIncome 200% of Poverty or Above
AgeACA Premium After Tax CreditBCRA Premium After Tax Credit% ChangeACA Premium After Tax CreditBCRA Premium After Tax Credit% Change
< 18$26$58121%$176$170-4%
18-34$57$10382%$247$2470%
35-44$69$149117%$296$36925%
45-54$67$215223%$323$55672%
55-64$69$272294%$399$78296%
65 +$76$296288%$439$86296%
Overall$61$168177%$311$48957%
Source: Kaiser Family Foundation
Regarding prospective BCRA enrollees under 200% FPL, the first thing to recognize about them is that at present a large percentage -- possibly a majority -- are enrolled in Medicaid, which generally has zero premium zero deductible and minimal co-pays. They would lose this coverage under the BCRA. At present, about 15 million Medicaid enrollees have their premiums paid by the ACA's enhanced federal match rate, according to Charles Gaba's estimate.

As for marketplace enrollees in silver plans, those with incomes up to 150% FPL are in plans with AV 94%, and those in the 150-200% FPL range have AV 87%.  Together they constitute just under half of all Marketplace enrollees, about 5 million in total, about 3/5 of them in AV 94%. To calculate what equivalent coverage would cost them under the BCRA, we need to calculate what they would pay for a platinum plan, not a silver plan.

I can't plug in the cost of platinum as calculated by Kaiser into the chart above, because I don't have the underlying unsubsidized premiums in their calculation (if it weren't a holiday weekend I'd ask them for that info.). Instead, we can look at average ACA premiums in 39 healthcare.gov states this year for bronze and platinum, as published by HealthPocket. The silver premiums posted by HealthPocket are 14% higher than average silver premiums as reflected in Kaiser's Marketplace Calculator.* I am guessing that the Kaiser average is weighted according to where enrollees are concentrated, whereas HealthPocket's are a simple average of all plans in a given metal area. Conversely, Kaiser's cost chart above is based on premiums estimated for 2020, so one difference may cancel another to some degree. In any case, the ratio between bronze (BCRA benchmark) and platinum (ACA effective benchmark under 200% FPL) should be illustrative.  The Kaiser comparison assumes an average FPL slightly over 150% FPL for older ages, and slightly under that level for the 18-34 age group.

Here are the 2017 average premiums for bronze (AV 60%, slightly above the BCRA benchmark) and platinum (AV 90%, slightly below the ACA benchmark for enrollees under 200% FPL), according to HealthPocket:

Bronze plans (AV 60%) 













Platinum plans (AV 90%)












To approximate BCRA unsubsidized premiums, we need to convert the age rating to 5:1. Here's a conversion chart from Milliman (page 14 here):


And here is the conversion for this year's bronze and platinum averages.

2017 unsubsidized monthly premiums at 5:1 age rating
            Bronze = approximate BCRA benchmark
            Platinum = approximate ACA benchmark for enrollees under 200% FPL


Enrollee age
Avg bronze premium
Avg platinum premium
Difference (added to subsidized BCRA premium)
30
$261
$  465
$204
40
$322
$  573
$279
50
$529
$  940
$411
60
$915
$1627
$712

Now,  let's look at what a BCRA enrollee would pay for ACA and BCRA benchmark plans at an income of 150% FPL (under both systems, the benchmark costs just about 4% of income at this level).

Cost of ACA Benchmark Plan Under BCRA at 150% FPL Income
            ACA benchmark for enrollees below 200% FPL is platinum equivalent


Enrollee age
Avg unsubsidized premium - BCRA
benchmark
Avg unsubsidized premium - ACA benchmark  below 200% FPL
ACA premium after tax credit - ACA benchmark
(AV ~ 90%)
BCRA premium after tax credit - ACA benchmark AV~90%
BCRA premium after tax credit - BCRA benchmark AV ~60%
30
$261
$  465
$61
$263
$59
40
$322
$  573
$61
$310
$59
50
$529
$  940
$61
$470
$59
60
$915
$1627
$61
$771
$59


Finally, let's use Kaiser's framing and consider the percentage increase a low income (150% FPL) BCRA enrollee would have to pay to access coverage comparable to benchmark silver under the ACA:

Monthly Premium for Benchmark Silver Plan (Platinum Equivalent) - 150% FPL


Enrollee age
ACA premium after tax credit
BCRA premium after tax credit
% increase
30
$61
$263
 331%
40
$61
$310
 408%
50
$61
$470
 670%
60
$61
$771
 1163%

It should be noted that the high-AV benchmark coverage offered to low income ACA enrollees is a necessity, not a luxury. Lots of studies show that even small copays are a major deterrent obtaining needed care for low income people. Kaiser polling and focus groups indicate that ACA expansion enrollees are much happier with their coverage than low income marketplace enrollees. CSR is not particularly generous relative to the population it serves.

To conclude a post focused on the BCRA effect on the individual market, I think it's important not to lose sight of the fact that the BCRA is above all a massive cut to Medicaid -- starting with a rollback of the ACA Medicaid expansion but also including particularly harsh per capita caps on federal spending for all Medicaid programs beginning in 2025 (with somewhat less Draconian caps beginning in 2020). No discussion of the bill should begin and end without highlighting this massive assault on a program that meets the vital needs of 75 million people.

The BCRA cuts federal Medicaid funding by 26% over ten years and by 35% over 20 years, according to CBO estimates. What the bill does to the individual market is secondary, though that harm -- above all, the elimination of CSR -- compounds the damage to Medicaid.

--
* CBO forecasts that in 2020 premiums under the BCRA would 30% below where they would be under current law -- partly because of the drop in benchmark value and partly because of two stability funding programs. Re the benchmark difference, average premiums for bronze plans (AV 60%) are 17% below average silver premiums in the ACA marketplace this year, according to HealthPocket. Stability funding might reduce premiums by about 10%. On an apples-to-apples basis, they will doubtless be higher under either scheme than they are in 2017.

Update: I originally miscalculated the age-rating conversion for bronze at age 40 at $294 rather than $322. I've corrected the age-40 results throughout.

No comments:

Post a Comment

Share