Tuesday, April 24, 2018

A free silver plan with a $0 deductible...What's not to like?

I have been fond of noting that notwithstanding the complexity of health insurance, most enrollees in the ACA marketplace seem to get the most consequential choice right: metal level. In particular, most people eligible for strong Cost Sharing Reduction (CSR), which is available only with silver plans, chose silver and access it.

This year, subsidized enrollees' responses to the anomalous discounts generated by Trump's cutoff of federal funding for CSR (see note at bottom if you're unfamiliar with this) reinforce this narrative. In some states where the cheapest gold plans are cheaper than the cheapest silver, gold enrollment quadrupled or tripled. In the 200-250% FPL income band, where CSR is negligible, silver enrollment fell off a cliff in states where "silver loading" the cost of CSR generated large bronze/gold discounts (on HealthCare.gov, silver selection in this income band dropped from 68% in 2017 to 53% in 2018).

But when it comes to plan complexity, there are layers within layers -- literally, in the form of tiers. While I was working on a post about rational choice in Pennsylvania, where CSR takeup remained fairly strong even as gold enrollment more than tripled to 27% of total enrollment, I came across a mystery.

Gold plan enrollment north of 30%  in populous counties such as Allegheny (e.g., Pittsburgh), Lancaster and York made sense, as the cheapest gold plans in these counties, offered by dominant insurers UPMC (in Allegheny) and  Geisinger (in York and Lancaster) were cheaper than cheapest silver. I was somewhat mystified, however, by high gold takeup compared to prior years in Philadelphia, Montgomery and Bucks counties, ranging from 9%-14%. In these regions,the cheapest silver plan offered by sole insurer Independence Blue Cross was considerably cheaper than the cheapest gold. In Philadelphia, gold selection was 9% -- compared to 3% in 2017.

In Philly, for an unsubsidized 40 year-old, the cheapest silver plan was $73 cheaper than the cheapest gold -- a pretty conventional-looking difference (pre CSR funding cutoff). At the same time, a huge price gap between cheapest silver and benchmark silver made silver plans free far up the food chain - e.g., for a solo 40 year-old with an income of $27,000; for a 50 year-old at $32,000, and for a 60 year-old clean up to $46,000.

Moreover, those Keystone Proactive HMO Silver plans sport a deductible of...$0.  What's not to like? Who was buying gold, and why?

The riddle was read for me by Antoinette Kraus, director of the Pennsylvania Health Access Network. There are two parts to the answer. First, that huge gap between cheapest and second-cheapest (benchmark) silver made gold plans free to many buyers -- e.g., a 40 year-old with an income of $21,000, a 50 year-old with an income of $24,000, and a 60 year-old with an income of $30,000. This cheapest gold also has a $0 deductible.  For those ineligible for CSR, the out of pocket maximum is the same as for silver -- $7350, the highest allowable. Copays are lower in gold than silver for those who don't get CSR.

But there's another factor that pulled even some of those eligible for strong CSR into gold, and with good reason, Kraus explained. While cheapest silver and cheapest gold share the same provider network, and that network is tiered in both metal levels, the deductible is tiered only in silver. For a silver enrollee with strong CSR, the deductible for an individual  is $1000 in tiers 2 and 3. For an enrollee with no CSR, the deductible in those tiers is $5500.

When you look at the silver plan summary, Kraus noted, "HealthCare.gov will tell you it's a $0 deductible, but you really have to learn to navigate those tiers.That's why people lean toward the gold -- you still have those tiers, and the copay still goes up, but you don't have it for your deductible."

In Philadelphia, Montgomery and Bucks counties, Kraus emphasized, desired facilities are in the higher tiers: University of Pennsylvania and Mainline Health, the latter key to the suburbs, are both in Tier 3. Doctors are generally affiliated with one health system or another. If you anticipate medical care, Kraus said, "you're worried that you'll have to go to the hospital and have those deductibles."

I've seen tiered deductibles in health plans, e.g., the one my wife and I are enrolled in through her employer. But, I said, "It never occurred to me that there could be tiered deductibles within CSR."

"It doesn't occur to a lot of people," Kraus said. "That's why it's important to read the fine print."

Yeah. Or get help from PHAN. They've been around the block a few times.

I would note in conclusion that for enrollees with incomes below 201% FPL, the yearly out-of-pocket maximum remains much lower in silver plans -- $1000 for those with incomes up to 150% FPL, $2450 for those in the 150-200% FPL range, versus $7350 in gold, the maximum allowable for any plan. That out-of-pocket max holds for any tier.  But a $1000 deductible at a low income can be a formidable barrier.

*          *          *

Note on Effects of CSR funding cut-off 

When Trump cut off federal reimbursement of insurers for the Cost Sharing Reduction subsidies they're legally required to provide to lower income ACA marketplace enrollees who select silver plans (57% of marketplace enrollees in 2017), most states allowed or required insurers to concentrate the cost of CSR in premiums for silver plans only. States in which 70% of individual market enrollees live concentrated the cost of CSR in on-exchange silver plans only, allowing for cheaper silver plans to be sold off exchange.

Since ACA premium subsidies are keyed to the price of the benchmark (second cheapest) silver plan in each rating area, subsidies rose to cover inflated silver premiums, generating often dramatic discounts in non-silver plans, i.e. gold and bronze (platinum availability and purchase is negligible). In many states, steep increases in silver plan premiums resulted in zero-premium bronze plans becoming available to many buyers (or nominal $1-3/month premiums), and gold plans that were either cheaper than silver or close in price.

Cheap gold plans were a particular boon to enrollees with incomes between 200% and 400% of the Federal Poverty Level (FPL). These buyers are not eligible for strong CSR, which makes silver plans roughly equivalent to platinum plans for buyers up to the 200% FPL threshold. Normally,  enrollees in the 200-400% FPL range would pay between 6% and 10% of their income (percentage rising with income) for a benchmark silver plan with an actuarial value of 70%, i.e. with an average deductible of around $3600). With CSR priced into silver plans in 2018, gold plans  (80% AV, with an average deductible of around $1100) came within reach of many in this income range.  Gold plan selection quadrupled in Maryland in 2018.

Rational choice in the ACA Marketplace, Pennsylvania 2018 edition


  1. The Republican strategy to overturn the ACA has always looked for ways to maximize and publicize the number of people who are hurt by the ACA.

    They told 50 million seniors on Medicare that they would be hurt by the ACA, and this was a very successful tactic in the 2010 elections.

    They publicized and often exaggerated the stories of individuals who could not keep their old health insurance.

    Not funding the CSR's would certainly cause insurers to raise prices, which the Repubs assumed would hurt people both above and below the subsidy cliffs.

    Instead as you demonstrate well, those below the cliff actually have done better. Those above the cliff are really hurting, and there is a real death spiral in many states for that group. Democrats like Dianne Feinstein have finally woken up and are advocating for subsidies to be extended to citizens above the cliff.

    That is the only troubling aspect of your article. When I finished it, I had the queasy feeling that I was watching a festive party in the 200% of poverty compound, and kind of a wake in the unsubsidized middle class.

    That is .not your fault, of course. But I will again offer the reminder that the middle class votes more frequently than the poor, and in my view the Democrats have to offer more to the likely voters.

    1. Bob:

      I agree with your comments; but, the story remains untold in any of the scenarios described. Most people do not realize the canceling of the CSRs actually helped for those <200% FPL in obtaining less costly Silver plans, allowed others with weaker CSR subsidy to move into Gold from Silver plans, and stuck it to those >400% FPL (~ 9 million unsubsidized [Gaba says 6.5 million], I believe). The loudest and most focused complaints are coming from those >400% FPL, unsubsidized, and who should complain; but, they do not tell the full story of what has happened here. Their current pain is not the result of the ACA. If Repubs are quiet other than to denigrate the ACA, Dems are even more silent on the issue. Dems need to explain the story behind what has happened.

      Besides writing on Angry Bear, I read MedPage Today which contains many of the usual naysayers; but, I also catch many of the issues on the medical side. The April 30 article was this; "CMS Chief Slams Administration Critics." Seema Verma comes out and defends Trump and Repubs sabotaging the ACA. Amongst the three of us, we understand what is happening Xpost more so than I.

      The positive and negative story needs to be told.