Tuesday, August 07, 2018

Did CMS just bless silver loading? Or prepare to end it?

Last week, CMS released a bulletin that openly invited insurers in the ACA-compliant individual market to offer off-exchange plans that are free of the CSR load:
To address increases in premiums of qualified health plans (QHPs) on account of the cessation of federal funding for cost-sharing reduction (CSR) payment to issuers, or “loading,” and its effect on unsubsidized enrollees, the Centers for Medicare & Medicaid Services (CMS) is encouraging states to allow Exchange issuers to offer individual market plans that do not include this load, and that will only be available outside the Exchange. Thus, CMS encourages the offering of unloaded silver plans outside the Exchange in states where the issuer has placed the load on silver QHPs on the Exchange, and encourages the offering of unloaded plans of all AV levels outside the Exchange in states where the issuer has placed the load on all AV level plans.
To translate, briefly: President Trump accidentally created a windfall for many subsidized ACA marketplace enrollees last fall when he cut off direct reimbursement of insurers for Cost Sharing Reduction (CSR) subsidies they are required to provide to qualifying ACA marketplace enrollees, forcing insurers to price the CSR benefit into premiums. Most states allowed or encouraged insurers to concentrate the CSR cost in silver plans only, since CSR is available only in silver plans (and in many cases to offer silver plans free of the CSR load off-exchange). Since  the ACA's premium subsidies are income-adjusted and set to a silver benchmark, "silver loading" created discounts in other metal levels, varying considerably by state and rating area, but substantial in most states.

David Anderson of Duke, who recognized the potential unintended benefits of Trump's long-threatened CSR cutoff back in May 2017, has also worried that CMS will ban silver loading, which seems to have boosted ACA marketplace enrollment by several hundred thousand this year, while increasing Treasury costs by inflating premium subsidies. Anderson welcomes last week's bulletin as a kind of all-clear on the silver load front:
This is interesting.  This improves the customer experience.  It also gives a hint that Silver Loading is here to stay.  I am updating my priors from Friday morning.  I think Silver Loading is far more likely to be around for the 2020 plan year than I thought last week.
I'm not so sure. The CMS embrace of off-exchange CSR-free plan offerings can just as easily be read as prepping the ground to ban silver loading in 2020.

The CMS "encouragement" cited above gives equal grammatical weight to silver loading and broad loading. The language describing the "Off-Exchange-Only Option" in more detail makes no reference either to silver loading or broad loading. The focus is entirely on holding unsubsidized enrollees harmless for the cost of CSR priced into marketplace plans. There is no reference to the discounts that silver loading generates for subsidized enrollees.

CMS can make a credible public policy case for mandating broad loading the cost of CSR onto on-exchange plans only.  The cutoff of CSR reimbursement directly harmed only those who are not eligible for subsidies. Silver loading distorts the design of the ACA marketplace, increasing the relative value of bronze and gold plans compared to silver. Sweetening the subsidy structure is sorely needed, as the ACA inadequately subsidized insurance for those not eligible for strong CSR in particular -- but it is not a policy goal of the Republican HHS. And silver loading is very expensive. CBO estimated the cost at $194 billion over ten years.

I would call this bulletin a feint, but that's not really fair. To the extent an HHS answerable to Trump is capable of rational policy, this is it. It makes sense in Republican policy terms. And it  may presage the end of a windfall that was foreseeable but unintended.

Anderson's "priors" laid out in the earlier post he links to are well worth reading, by the way. He sketches a realistic scenario of how a battered but functioning ACA marketplace would muddle through under a divided Congress. I wouldn't revise the broad load expectation expressed therein.

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