Sunday, June 24, 2018

Actuarial Value in the ACA Marketplace: Down a bit

In 2018, CMS has for the first time ever published data making it possible to calculated the average weighted actuarial value of health plans sold in the 39 states that use the federal marketplace,

The actuarial value is the percentage of the average enrollee's costs a health plan is designed to pay, calculated according to a fixed formula mandated by CMS. Take that with a grain of salt, sprinkled on in a couple of caveats at bottom. Still, AV is a standardized measure that makes comparisons possible. Average AV for both employer plans and Medicare has been calculated to be a bit over 80%.

The ACA mandated specific AV for each of four metal levels (with some wiggle room, per below): 60% for bronze plans, 70% for silver, 80% for gold, 90% for platinum. But secondary Cost Sharing Reduction (CSR) subsidies, available to enrollees with incomes up to 250% of the Federal Poverty Level, complicate the formula. CSR, available only with silver plans, raises AV: to 94% for those with incomes up to 150% FPL; to 87% for those in the 151-200% FPL range; and to 73% at 201-250% FPL.

This year, for the first time, CMS reported exactly how many people were enrolled at each CSR level, albeit only in states, which account for just about three quarters of marketplace enrollees.* So who obtained what in the ACA marketplace this year? Here's the data.

Actuarial value obtained by enrollees on, 2018 

Metal level
Actuarial value
Total enrolled
% enrolled
Weighted AV
Silver - CSR1
Silver - CSR2
Silver - CSR3
Silver - no CSR


* There were just 16,731 platinum (90% AV) enrollees on, and 58,176 catastrophic plan (57% AV) enrollments. Combined, that comes to a weighted AV of 64%, used above to avoid splitting percentages.

Average weighted actuarial value obtained has dropped somewhat this year.  Overall enrollment was down 4%, and 5% in states, and down more sharply among lower income enrollees, where CSR is available. In past years, almost 90% of those with incomes up to 200% FPL selected silver plans and so obtained CSR. While CSR takeup held pretty steady this year at the highest CSR level (among those with incomes up to 150% FPL), it fell off a bit at 150-200% FPL.  Bronze enrollment was up several points, a shift offset to a degree by a spike in gold plan enrollment.

Both gold and bronze plans were available at a discount this year as a result of Trump's cutoff of federal reimbursement to insurers for CSR, which was then priced into plan premiums for the first time. Most states allowed or instructed insurers to price CSR into silver plans only, since that's where CSR is available. Since income-based premium subsidies are keyed to silver plans, "silver-loading" created discounts in bronze and gold (and theoretically in platinum, but that's a vanishingly rare metal in the marketplace).

In many states, for those eligible for the weakest level of CSR (73% AV, at 201-250% FPL), gold offered better value. In Pennsylvania, 42% of enrollees in the 201-250% FPL band chose gold, as did 43% of those from 251-4005 FPL.

In mid-2016, CMS did break out CSR enrollments by level for states using, albeit only in rounded percentages. Below is the breakout as of April 2016. By my own calculations (which preceded CMS's), average AV by that point (after the first-month no-pays were weeded out) was a point or two higher than at the end of open enrollment, which is what we're looking at above for 2018. So the comparison is not quite apples-to-apples; first quarter attrition may be have been lower among those obtaining strong CSR. Here's the 2016 breakout for states.
Average deductible,, 2016
That comes to a weighted average AV of 81%.  Again, it was probably 80% at the end of OE.

Also in 2016, I estimated average AV for the unsubsidized at about 69%, on-exchange and probably off. That too has probably degraded somewhat, as soaring premiums -- particularly in silver plans -- have pushed a lot of enrollees down into bronze plans, though in some states silver loading may also have given a push to off-exchange gold.

Now for the caveats about AV. First, the "average" includes enrollees who blow past the yearly out-of-pocket maximum, which tops out at $7350. For the seriously ill or injured, that can push AV into the high nineties. Thus the average on which AV is based is a bit like average income when Bill Gates walks into a bar.

Second, the Trump administration has opened up insurers' wiggle room on AV. A silver plan can legally go as low as 66%. That's pretty different from 70%. I suspect that average weighted AV should therefore be discounted a point or two -- perhaps David Anderson can supply an estimate as to how much.

Third, as average costs per user rise, out-of-pocket costs rise even as AV remains fixed. In the marketplace, they're probably rising not only in keeping with medical inflation but because but also because several waves of sabotage have degraded (and will continue to degrade) the risk pool.

In sum, enrollees are getting less comprehensive coverage than they did in 2016. But because the basic ACA subsidy structure has remained intact, and because of the paradoxical effects of the Trump CSR spitefest, average AV has remained in range of that offered by employers.

* I argued in the post at the second link below that average weighted AV is about the same in state-based exchanges as in states:
What about the 24% of marketplace enrollees who bought their plans on the 13 state-run marketplaces? It's true that the percentage of bronze plan buyers was higher in the SBMs -- but so was the percentage of gold and platinum buyers. And in most of those states that provide their own detailed enrollment data -- including California and New York, the two largest -- silver selection among CSR-eligible buyers is generally higher than in the federal marketplace, or at least was in past years (2014 and 2015).
A major divide in the ACA individual market
On average, ACA marketplace plans are gold equivalent

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