Friday, May 25, 2018

Trump's CSR cutoff is still reverberating

There is a kind of settled wisdom by now about the effects of Trump's cutoff of federal reimbursement of insurers for the Cost Sharing Reduction (CSR) subsidies they are obligated to provide to qualifying low-income enrollees in the ACA marketplace.

The story line: 1)states and insurers reacted swiftly and rationally by "silver loading" (explained below); 2) confining silver loading (explained in note at bottom) to on-exchange plans holds the unsubsidized harmless from the pricing in of CSR; 3) virtually all states and insurers will arrive at this solution; so silver-loaded CSR is now baked in, benefiting subsidized enrollees and not harming the unsubsidized. 4) Only further administration sabotage -- banning silver loading -- can disrupt this new normal.

The story line is essentially on target. About two million subsidized enrollees took advantage of bronze/gold discounts in 2018. The availability of those discounts probably helped offset other shocks to the system -- a halved enrollment period, radical cuts in outreach and enrollment assistance; insurer uncertainty as Republicans came within a whisker of repealing the core programs of the ACA.  Going forward, CBO estimates that silver loading will boost enrollment by 2-3 million per year (though I'm pretty sure the boost was in the low-to-mid hundred thousands in 2018, when silver premiums rose almost twice as much as gold and bronze). Further, some 70% of enrollees were in states where silver loading was concentrated on-exchange.

But that's not the whole story. Trump's threat to cut off CSR payments loomed for nine months before he pulled the trigger and was a major component of the general uncertainty insurers faced while filing rate proposals or deciding whether to participate in the marketplace. The effects of that uncertainty on premiums is, I suspect, not entirely captured by the calculated priced-in cost of CSR.  And now, here cometh the Congressional Budget Office to remind us that sudden policy changes have lingering effects, and the CSR shakeout isn't fully shaken out.
In its just-released forecast of federal subsidies for all forms of insurance from 2019-2028, CBO projects that marketplace premiums will rise 10% per year from 2019-2023 and by roughly 5% per year from 2024-2028. The difference is due to the phase-in of both the pricing in of CSR and the effect of individual mandate repeal. The effects of the CSR cutoff on silver plans sold on-exchange is not done yet:
On the basis of an analysis of insurers’ rate filings, CBO and JCT estimate that gross premiums for silver plans offered through the marketplaces are, on average, about 10 percent higher in 2018 than they would have been if CSRs were funded through a direct payment. The agencies project that the amount will grow to roughly 20 percent by 2021...

CBO and JCT estimate that the effects of the lack of a direct payment for CSRs will continue to phase in over the next few years, putting upward pressure on premiums for silver plans offered through the marketplaces. 
CBO does not explain why they expect the pricing in of CSR to spread out over several years. Is it because not all states yet silver load (all but a handful do), and not all that do confine the pricing-in of CSR to on-exchange plans only? Or because insurers may not have fully accounted for the cost of CSR, though they've had four years' experience reporting CSR costs and getting reimbursed for them? Or both?

Over time, if not disrupted, silver loading is forecast to have pretty dramatic results:
The fast premium growth of silver plans is projected to make those plans increasingly unattractive over time to people not eligible for subsidies. By the end of the coming decade, gross premiums for gold plans are projected to be lower than gross premiums for silver plans, and the gold plans will provide more generous benefits for people not eligible for CSRs.
That is an anomalous state of affairs, and one does wonder whether the Trump-punched metal level scheme can be frozen in amber. More likely, I suspect, marketplace structure will be swamped by more dramatic changes, ranging from ACA repeal to a sweeping Democratic redesign/replacement with something like Medicare Extra -- just as, more broadly, our next national chapter could range from autocracy to a Democratic sweep.

Meanwhile, the cumulative impact of multiple rounds of ACA marketplace sabotage, on top of re-accelerating medical inflation, leads to truly appalling premium projections. How does $25,700 per year for a gold plan for a single 64 year-old in 2028 sound? Gold is cited because CBO projects it to be cheaper than benchmark silver.

Not exactly what the ACA framers had in mind.

--
Note: What is silver loading?

Silver loading refers to concentrating the cost of CSR (footed by the federal government as stipulated by the ACA until Trump stopped payment in October 2017) in the premiums of silver plans, since CSR is available only with silver plans. Since premium subsidies, designed so that the enrollee pays a fixed percentage of income, are set to a silver plan benchmark (the second cheapest silver plan), inflated silver premiums create discounts for subsidized buyers in bronze and gold plans. And in states that allowed insurers to offer silver plans off-exchange with no CSR load, unsubsidized enrollees were protected from CSR costs, theoretically at least.

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