Saturday, June 16, 2018

Virginia's CSR load should be cut more than in half in 2019

David Anderson makes a valuable point about an after-effect of latter day Medicaid expansions like Virginia's -- that is, expansion following Trump's cutoff of federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are obligated to provide to qualifying ACA marketplace enrollees.  

It's this: now that insurers have to price CSR into premiums, Medicaid expansion will reduce premiums for unsubsidized enrollees by removing much of the CSR load.
Virginia — like many other states — had its insurers load the cost of providing CSR into the premiums for silver plans, which are the plans that set the local benchmark from which all premium subsidies are calculated. This led to a significant spike in silver benchmark premiums. Other plans saw significant but far lower premium increases. On average, CSR workarounds led to an extra $960 to $1,040 in premiums for silver plans.

The data shows us that people who were previously eligible for an ACA health plan and will now be eligible for Medicaid under the expansion were the highest per-capita recipients of the cost-sharing reduction subsidies. As these individuals move to Medicaid expansion, the cost of funding CSR through silver premiums will decline.
As it turns out, we know just about how many current Virginia enrollees with CSR will be eligible for Medicaid if their income doesn't change. CMS data shows that, of Virginia's 400,015 enrollees as of the end of Open Enrollment last December, 222,305 obtained CSR. Of those, 120,898 obtained the highest level of CSR, which raises the actuarial value of a silver plan from a baseline of 70% (which is what silver plans without the CSR load would price for) to 94%.

That highest level of CSR (94% AV) is available to enrollees with incomes in the 100-150% FPL range. Once Medicaid expansion takes effect, those with incomes up to 138% FPL will be eligible for Medicaid and not for marketplace subsidies.

As I noted recently, in 2016 alone, HHS provided enrollment stats for the 100-138% FPL income band (i.e., those who would be in Medicaid in expansion states). In Virginia, the total was 82% of those in the 100-150% FPL band. That suggests 99,000 current enrollees with 94% AV silver (before first-quarter attrition, in any case), or 44% of all CSR enrollees.   Since this cohort has the highest level of CSR, and since the poorest enrollees tend to be the sickest enrollees*, well over half of the CSR load should disappear from next year's pricing.

The downside is that discounts for subsidized buyers generated by silver-loading will also diminish. Very briefly, when the cost of CSR is priced into silver plans only, premium subsidies rise disproportionately, since income-based subsidies are keyed to the price of a silver plan benchmark. Inflated silver premiums create discounts in bronze and gold plans. In many states, gold plan enrollment rose by 100-300%, and bronze enrollment also spiked. This was not the case in Virginia, however.  Gold plan enrollment crept up to just 4% in 2018 from 3% the year before. While bronze enrollment rose from 21% to 26%, that is nothing to cheer about.

When marketplace coverage is cheaper than Medicaid (in Virginia)
Virginia Medicaid expansion will cut ACA marketplace enrollment by 100,000-plus

* As Anderson points out, in nonexpansion states, since no help is available to people with incomes under 100% FPL, people with incomes near that line may be motivated to stretch their reporting to meet the threshold - and those so motivated are likely to have medical needs. 

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