CSR windfall: Will it have bronze or gold cast?

Those of us who have been anticipating the paradoxical effects for subsidized ACA marketplace shoppers of Trump's cutoff of CSR reimbursement have to split our gaze more between shiny objects.

Designed as an add-on benefit, CSR (Cost Sharing Reduction) radically reduces out-of-pocket costs for silver plan enrollees with incomes under 200% of the Federal Poverty Level (and much more modestly for enrollees in the 200-250% FPL range). Until this month, the federal government reimbursed insurers for the extra benefit. In 2018, insurers will price it in.

What excited folks like David Anderson, Charles Gaba and I* (though we're also appalled by the premium hikes for the unsubsidized) was the prospect that in many states and regions, gold plans would be cheaper than silver. That's because 38 states (according to Charles Gaba's tracking) instructed insurers to load the cost of CSR onto silver plans only, since CSR is only available in silver plans.

This has, um, panned out -- as we now know, since prices have been posted for almost all states. The cheapest gold plan is cheaper than the cheapest silver plan in Pennsylvania, Kansas, New Mexico, Wyoming, most of Texas and Wisconsin, much of Michigan and Florida (including Miami, which has the heaviest concentration of marketplace enrollees in the country), much of California, and parts of several other states. In other regions, the price of gold plans is closer to the price of silver plans than it used to be.

Alert: HealthCare.gov "plan preview" tool is malfunctioning [FIXED as 10/28]

UPDATE, 10/28/17: The main glitch identified in this post -- the HealthCare.gov "preview plans" tool's failure to calculate the subsidy accurately for households in which not all members are seeking marketplace insurance - was fixed in the late hours of 10/27.  The second glitch identified below, pertaining to CSR, is unlikely to be fixed.
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People concerned with the functioning of the ACA marketplace were pleasantly surprised yesterday when HealthCare.gov's "Preview 2018 Plans & Prices" tool went live a week in advance of the launch of Open Enrollment. And as I noted a couple of weeks ago, the information flow on the site is streamlined and well-designed, routing visitors as appropriate to check their eligibility for a special enrollment period for 2017, preview 2017 plans and prices, prep for 2018 enrollment, or apply for Medicaid if their income and state of residence indicates it. It has seemed so far that Trump administration sabotage of the marketplace has not so far extended to the federal exchange.

There are, however, important glitches in the functioning of the preview tool that are likely to seriously mislead some visitors.

The most important glitch was pointed out to me on Twitter (when I pointed out a somewhat more understandable one described below):

Try a married couple with spouse on Medicare. Subsidy estimate is way too big and every plan is free, even if more expensive than benchmark.

— Brian Setzler (@BrianSetzler) October 26, 2017

Like the Alka Seltzer guy, I tried it, and Mr. Setzler is right. If you enter info for a married couple,  and one has access to other insurance, the estimated subsidy is the same. In Essex County, NJ, for a married couple ages 40 and 38 with an income of $33,000 --- slightly over 200% of the Federal Poverty Level -- the estimated subsidy is $633, whether or not one has outside coverage.

We already have the high deductibles...so would adding HSAs hurt?

In my last post I suggested that among the destructive White House demands to alter the Alexander-Murray ACA stabilization bill, one concept -- encouraging takeup of High Deductible Health Plans linked to HSAs -- might be a reasonable concession for Democrats to consider.

My reasoning boiled down to this: Once you have a deductible higher than the HDHP threshold of $1350 individual/$2700 family  -- as well over half of individual market enrollees do -- it doesn't hurt to add the tax-free HSA to help people cope with the expense.

Today I asked Yevgeniy Feyman, a Manhattan Institute adjunct fellow and senior research assistant at the Harvard School of Public Health, for ways to encourage HDHP/HSA takeup in the ACA marketplace. His suggestions:

• Create a seamless process for establishing an HSA -- so that once you sign up for an HSA eligible HDHP, you would be redirected into a pipeline for creating an HSA.


• Simplify the rules by which a high deductible plan can be eligible for linkage to an HSA. At present, no services except the ACA-mandated free preventive services can be covered until the medical deductible is reached. In a family plan, the full family deductible has to be reached before coverage kicks in. These rules could be loosened. At the far end of easing, "you might end up permitting anyone to have an HSA, and just cap contributions at their deductible or max OOP."

Mulvaney's ACA demands: Give him one out of three?

As David Anderson argued in The New York Times on Saturday, at this point Republicans need an ACA stabilization deal more than Democrats do, so Democrats have no real imperative to accede to Trump's ridiculous demands,

In brief: the damage from CSR uncertainty in 2018 is already done; CSR is priced into premiums; most states have adopted a "silver load" strategy to mitigate the damage (concentrating the premium increases in silver plans, the plans with which CSR is available); and pricing in CSR over the longer term actually produces a fiscally wasteful but genuine boost to subsidies for the more affluent among the subsidy-eligible, who really need extra help (making gold plans available for roughly the cost of silver).

The chief motive for Democrats to push for a deal is to win a measure of Republican buy-in and ownership, and therefore stability. That should keep more insurers in. And an appropriation for federal CSR reimbursement in 2019 should drive premiums down, dramatically, i.e. by almost as much as CSR uncertainty (and then stiffing) drove them up this ear. That's potentially a political win for Republicans. But Democrats are inhibited in their political calculations by a desire to, you know, make good insurance affordable for more people.

Given that desire, Democrats would be crazy to yield on repeal of the individual mandate, which would trigger another premium surge and more adverse selection, or on enabling a parallel market in non-comprehensive and medically underwritten insurance, which would also damage the risk pool for comprehensive plans.

There is, however, one White House ask that Democrats might consider addressing in some form. As reported by Axios' Sam Baker, OMB Director Mulvaney made these demands on Fox News Sunday:

Bronze and gold plan discounts in California, 2018

As I noted recently, Covered California has acted on its plan to shield marketplace enrollees from the effects of Republicans' CSR sabotage.  For 2018, a surcharge averaging 12.4% has been loaded onto silver on-exchange plans only (the only plans with which CSR is available) to cover the cost that until now has been reimbursed by the federal government.

We can now examine the effects of the surcharge, which I've done below.  The effects should theoretically be as follows (more detail here):

1. Off-exchange plan pricing should be unaffected by CSR; price differences between metal levels should remain proportionate to actuarial value at each level.
2. Enrollees with incomes under 200% of the Federal Poverty Level (FPL), for whom strong CSR is available, should be unaffected. Subsidies will rise to cover the additional premium, and silver plans will continue to offer outsized value, covering 94% (at incomes up to 150% FPL) or 87% (for incomes from 150-200% FPL) of the average user's costs.
3. Subsidized enrollees in the 200-400% FPL income range will see discounts in bronze and gold plans, since premium subsidies, which are keyed to silver plans, will rise to cover the inflated silver premium.

Let's look at how the expected bronze and gold discounts play out in some of California's 19 rating regions. Because California has standardized plan benefits at each metal level, relatively clean comparisons are possible -- though I would note that last year, relatively expensive PPOs (plans with broader provider networks) were popular in many areas.

Does the Alexander-Murray bill adequately protect vulnerable groups?

The changes to the ACA's Section 1332 state innovation waivers in the Alexander-Murray marketplace stabilization bill  have broad support, having been proposed by multiple HELP Committee hearing participants and endorsed by bipartisan outside advocates including  former acting CMS director Andy Slavitt, one of the ACA's most vocal defenders. These include providing for an expedited waiver process, an emergency waiver process, and the creation of "cookie cutter" waiver templates that multiple states may opt to adopt. (There are dissenters, however, as discussed below.)

Also a matter of broad consensus: easing the terms by which states meet the requirement that a waiver proposal be budget-neutral by 1) allowing states to combine Section 1332 waivers with Medicaid and CHIP waivers and using savings from one to offset extra spending on another, and 2) considering budget impact over the 6-year term of the waiver and a ten-year budget plan.

There is one alteration, though, that gets to the crux of the debate over state flexibility, and was probably a matter of intense negotiation. That is a change to the so-called "guardrails" pertaining to quality and affordability of coverage.

Wrong, wrong, wrong, wrong, wrong

Quick, ACA marketwatchers: what's wrong with the headlines below?

Trump didn't end the Cost Sharing Reduction benefit,  of course, He didn't end government funding for CSR, either -- he just redirected it into a less efficient channel that will cost the Treasury hundreds of billions, hurt unsubsidized enrollees in states that don't make insurers price in CSR in the most efficient way, and provide a windfall for many more affluent subsidized enrollees in states that do concentrate the premium hike where it belongs, in on-exchange silver plans.

Those headlines did a real disservice. A lot of people in this country must be under the impression that a major ACA benefit has been stripped away.  The ledes in many cases did not repair the damage.

60% of ACA marketplace enrollees with CSR are in nonexpansion states

In February of this year I noted that the 19 states that refused to implement the ACA Medicaid expansion comprised 38% of the U.S. population but 53% of ACA marketplace enrollment and 60% of enrollees who accessed Cost Sharing Reduction (CSR) subsidies.

That seems relevant now that Trump has abruptly cut off federal funding for CSR, stiffing insurers for the remainder of this year and leaving them to price the benefit into their 2018 premiums. I've pasted the whole of the post below. Enrollment stats are as of March 31, 2016. There's a state-by-state breakout at bottom of population, CSR enrollment and APTC (premium tax credit) enrollment. This year's enrollment breakout would be roughly proportionate: nationwide, the same 57% of enrollees access CSR. As of the end of the first quarter 2017, CMS reported 10.3 million total enrollees (which, per Charles Gaba, may well have been an undercount, leaving out up to a half million late enrollees), compared to 11.1 million at the same point in 2016.

Before getting to the repost below, a few notes:

1. Many observers are drawing a somewhat misleading conclusion from the high concentration of CSR enrollees in red states. They will be hurt by the CSR funding cutoff only insofar as insurers pull out of the market -- and, longer term, by the thinning of the risk pool caused by unsubsidized enrollment dropping off, which will reduce competition and so plan choice. Unsubsidized enrollees bear the brunt of the premium increases driven by the cutoff of federal funding for CSR. And most of the damage on that front is already done, as most insurers in most states filed rates assuming that CSR would not be reimbursed in 2018 (and/or accounting for more general politically induced uncertainty).

Trump is stiffing health insurers for three months in 2017. States can make Treasury eat the cost.

Oregon's last-minute adjustment to enable insurers to cover the cost of Cost Sharing Reduction (CSR) subsidies for ACA marketplace enrollees in 2018 after Trump abruptly cut off federal reimbursement for those subsidies gave me an idea for how states could also make insurers whole for the last quarter of this year.

Trump is cutting off federal reimbursement for the subsidies, which insurers are obliged to provide but until now have not been able to price into their premiums, later this month.  In most states, insurers have been able to or will be able to adjust premiums to cover CSR in 2018. But they have  to eat the cost for the rest of the year. Unless....

Here's how Oregon will make insurers whole in 2018:

In order to ensure carriers can continue to offer coverage in Oregon, DCBS is ordering health insurance companies offering plans on HealthCare.gov to increase their already approved silver metal tier 2018 plan rates by 7.1 percent.

Can blue states protect their health insurance markets from Trump's executive order?

Can a state that wants to preserve ACA consumer protections protect itself from the executive order Trump signed today, which opens paths to segmenting the risk pools in the individual and small group markets? Consider the case of New Jersey, which had guaranteed issue (and, with no individual mandate, sky-high premiums) pre-ACA.

The Trump EO instructs Treasury, DOL and HHS to expand availability of short-term insurance, allowing it "to cover longer periods and be renewed by the consumer."  That's understood to mean allowing coverage for up to a year -- and so, via renewal, indefinitely, though subject to medical underwriting at renewal as well as at first purchase.  Short-term plans are not subject to ACA coverage rules.

At present, plan duration is limited to three months. Since  that rule only went into effect this April, extending the term to up to a year is not a radical shift from the ACA status quo.  But combined with weak enforcement of the individual mandate, and more exemptions from the mandate stemming from rising premiums, temporary plans available continuously are likely to weaken the ACA risk pool.

Temporary plans are subject to state regulation, however, and health law scholar Nicholas Bagley expects that to continue:

13/ The states should still retain authority to regulate short-term plans -- and to require them to adhere to ACA rules.

— Nicholas Bagley (@nicholas_bagley) October 12, 2017

States vary in their responses to CSR uncertainty

By David Anderson, Charles Gaba, Louise Norris, Andrew Sprung

Note: this post is a joint effort with colleagues who have closely tracked the CSR chaos induced by Trump and Republicans in Congress. Dave Anderson is a former health insurance analyst, now a healthcare scholar at Duke, and a blogger at Balloon Juice; Charles Gaba is the fabled chronicler and analyst of ACA enrollment, marketplace pricing, and healthcare policy; Louise Norris is co-owner with her husband Jay of a health insurance brokerage for individual market customers, and a top source of marketplace information and analysis at her own blog (link in byline) as well as at healthinsurance.org and elsewhere.

Note 2 Today, the Maryland and California exchanges opened their plan preview tools for 2018, with premiums listed. California has implemented its planned CSR surcharge, adding 12.4% to the premium of silver on-exchange plans only. In some regions, the cheapest gold plan is cheaper than the cheapest silver.

Update, 10/14: David Anderson has mapped out the choices states have made to cope with CSR uncertainty (and now, CSR cutoff) here, and Charles Gaba is charting them here.

The open enrollment period for the 2018 ACA Marketplace that begins on November 1, 2017 is likely to confront enrollees with more challenges than any open enrollment since the troubled launch of the ACA Marketplace in October 2013. The time period is shorter, the outreach will be far less robust, and the pricing of plans will behave in ways that people do not expect.  Much of the pricing variance will be a result of choices that states and insurers have made in response to the uncertainty over whether the federal government will continue to reimburse insurers for the Cost Sharing Reduction (CSR) subsidies that insurers are legally obligated to provide to qualified exchange enrollees.  

"X" is for ten: An anniversary for xpostfactoid

Over the weekend, it dawned on me that xpostfactoid's tenth anniversary was coming up. I checked, and indeed, I started blogging continuously on October 10, 2007, after a couple of false starts.

The thought made me rather sad, in that the blog started as Obama came into full focus and is tied up with my hopes of political and national renewal that gained steam throughout 2008  -- as first the seeming miracle of Obama's nomination drive came to fulfillment and then the wonder of the United States electing an African American whose rhetoric and thought was imprinted with Lincoln's took hold. And look where we are now -- in danger of turning that legacy, if not the whole world, to ashes after electing a lifelong fraudster and vicious demagogue, someone an emotionally grounded six-year-old would run from screaming.

But the blog's first posts from fall 2007 feel strangely contemporary. Back then, in the Later Bush Era, I wondered whether American democracy had lost its ability to self-correct -- precisely the capability that Obama spent the next nine years spotlighting as the nation's defining virtue. If you'll indulge a pair of early snippets:

Covered California to middle-class enrollees: There (may be) gold in them thar hills

Update (!) Oct. 11, 2017: CoveredCA has gone live with  its 2018 plan preview tool and has implemented the CSR surcharge discussed below -- 12.4% added to silver on-exchange plans only. That makes gold cheaper than silver in some areas, and CoveredCA is indeed in some cases highlighting gold plan offerings ahead of silver.

Back on August 1 Covered California, the California ACA exchange, announced a proactive approach to enable health insurers to cope with the uncertainty over whether the Trump administration (or Congress) would guarantee them continued reimbursement for Cost Sharing Reduction subsidies.

Insurers would file rate requests under the assumption that CSR will continue to be reimbursed. If reimbursement was not guaranteed by a certain date, however, a surcharge (later pegged at 12.4%) would be added to silver plans sold on-exchange. CSR is available to enrollees with qualifying incomes only if they select silver plans, and only if they buy on-exchange. ACA-compliant silver plans sold off-exchange would not include the surcharge. That surcharge is likely to be triggered on or around October 11, CoveredCA tells me (postponed from an original target of Sept. 30).

The likely results have been widely noted (e.g., here). Off-exchange, plan pricing would remain proportionate to the actuarial value offered at each metal level. On-exchange, the only buyers of silver plans should be those with incomes up to 200% of the Federal Poverty Level, for whom CSR raises the value of silver plans roughly to that of platinum.

How well will healthcare.gov function for 2018?

Everyone who follows the fate of the ACA is by now familiar with the Trump administration's multi-pronged sabotage of the individual market: the constant threat to stop CSR reimbursements to insurers, which in itself has likely driven up 2018 premiums by upwards of 20%; the threats not to enforce the individual mandate, which will likely depress enrollment; the radical cutbacks in enrollment outreach and assistance; the propaganda denigrating marketplace offerings; the shortened enrollment period and gratuitous Sunday shutdown; and now, Trump's looming threat to undermine the risk pool, state authority and ACA consumer protections by giving carte blanche to association health plans.

This multi-pronged assault led me to wonder whether healthcare.gov, the federal exchange, will function adequately. I took a look at the website yesterday, and again today. And I must say, what's there is somewhat reassuring. In fact, today new prompts went up to start preparing people for open enrollment. The array of options on the home page is clear and well designed:

It is easy to get to the initial tasks that people in different situations will want to undertake:

The ACA is London after the Blitz

Trump administration sabotage of the ACA has done serious damage and will likely do more. Uncertainty over CSR reimbursement and enforcement of the individual mandate have themselves driven premiums up by over 20% in 2018 (Gaba's estimate) and driven many insurers out of the individual market.

Those premium hikes will probably knock several million unsubsidized buyers out of the individual market.  Weakened mandate enforcement, real or perceived, will probably reduce the numbers of people enrolled not only in the individual market but also in employer-sponsored insurance and Medicaid. An increased percentage of unsubsidized enrollees in the individual market who do stay in will probably be underinsured, pushed into bronze plans and/or overburdened by the combination of rising premiums and out-of-pocket costs. Poor-to-nonexistent outreach from HHS may result in many current marketplace enrollees failing to shop anew and so re-enrolling in a suboptimal plan. Trump's threat to issue an executive order that reportedly would empower association health plans to evade state regulation via ERISA could bleed health enrollees out of the individual market.

Red states, meanwhile, are lining up to accept HHS's invitation to propose work requirements, time limits and more frequent enrollment redeterminations on Medicaid enrollees, which will likely reduce Medicaid takeup.

It's worth keeping in mind, though, that as long as Republicans fail to pass a repeal bill or cap federal Medicaid spending, the damage thus far can be contained, and reversed if and when Democrats regain power -- or, under divided government, Republicans tire of sabotage. Maintaining the ACA's taxes (to fund benefits), the enhanced federal match rate for the Medicaid expansion (and pre-ACA match rates for the rest of Medicaid), the marketplace infrastructure and subsidy structure -- all of that would have been a January dream come true for any ACA advocate.