Wednesday, November 21, 2018

Lower benchmark premiums may contribute to reduced on-exchange enrollment in 2019

Three weeks into open enrollment for 2019, ACA marketplace enrollment in the 39 states that use is down 11%. compared to this time last year (adjusting for one less open day so far this year).  There's a lot of potential reasons for that: further draconian cuts to advertising and enrollment assistance, repeal of the individual mandate in tandem with allowing medically underwritten short-term plans to provide full-year renewable insurance, election distraction, etc.

One less recognized factor that could have a measurable impact on on-exchange enrollment for 2019 is a likely drop in the subsidy-eligible population at higher income levels, mainly 300-400% FPL.

Though marketplace enrollees are theoretically eligible for subsidies if their incomes are below 401% FPL, subsidies are only credited if the unsubsidized benchmark silver plan premium exceeds the percentage of income deemed affordable. At 300-400% FPL, that's 9.86% of income. Historically, many young enrollees in particular with incomes below 400% FPL did not qualify for subsidies (because unsubsidized premiums are lower for younger adults).

In 2018, benchmark premiums shot up 34%, due in large part to various forms of Republican sabotage. That spike doubtless helped drive a 10% increase in on-exchange enrollment at the 300-400% FPL income level in states, while enrollment dropped at every other income level.

Enrollment by income level, 2017 vs. 2018 

Total enrollment
100% to 150% FPL
151% to
200% FPL
201% to 250% FPL
251% to 300%  FPL
301%- 400%  FPL
Other FPL*

"Other FPL" is comprised mostly of unsubsidized enrollees. About one quarter are likely enrollees with incomes under 100% FPL, most of whom are likely legally present noncitizens time-barred from Medicaid, who are subsidy-eligible.

The enrollment spike at 300-400% was further juiced by silver loading -- the pricing-in of Cost Sharing Reduction subsidies into silver plans only (see explanation below), which created discounts in bronze and gold plans. Those discounts were of value mainly to people in the 201-400% FPL income range (below that level, Cost Sharing Reduction, a free added benefit attached only to silver plans, generally outstripped the value of the discount). Wider spreads between the benchmark and cheaper plans juiced the value of otherwise marginal subsidies.

But the spur to on-exchange enrollment at the upper reaches of subsidy eligibility went somewhat into reverse for 2019, as insurers proved to have overshot with their huge premium spikes in 2018 and adjusted for the coming year.

This year, the average premium for benchmark silver is down 1%. In some places, benchmark silver is down sharply -- 15% in New Jersey, for example, thanks to a combination of a newly implemented reinsurance plan and state individual mandate.  When the benchmark is down, unsubsidized benchmark premiums cost less than 9.86% of income for more people, who become ineligible for subsidies. [See update/chart of states with large benchmark premiums drops at bottom.]

Thanks also to silver loading, unsubsidized enrollees in many states can find cheaper ACA-compliant plans off-exchange. Silver plans that are sold off-exchange only do not have to price in CSR; they are free of the silver load. This too is the case in New Jersey, where the cheapest silver plan offered off-exchange is 11% cheaper than the cheapest on-exchange silver.

In New Jersey, on-exchange enrollment is down 14% compared to this time last year. The state reports off-exchange enrollment on a quarterly basis, so sometime next spring we'll know whether off-exchange enrollment outperforms on-exchange. Premiums are down an average of 9% in the state, which helps unsubsidized but not subsidized enrollees.

Other states and counties where benchmark silver premiums dropped sharply (e.g., states that had reinsurance plan waivers approved) may see a significant shift from on- to off-exchange enrollment -- particularly in those states  where cheaper silver plans are available off-exchange. I will fill in other examples as I find them.

Two ancillary points. First, as my last post noted, enrollment in the lower range of subsidy eligibility may be dropping because the population at lower incomes is dropping. In 2013, 33.5% of the population was in households with incomes up to 200% FPL; in 2017, the percentage was down to 30.5%. Second, as the state enrollment chart in Gaba's post (first link above) highlights, Virginia enrollments are down because the state is in the process of implementing the Medicaid expansion, which should reduce marketplace enrollment by about 100,000 this year. That transition to Medicaid among Virginia enrollees probably accounts for about 10% of this year's decrease of about 225,000 to date.

UPDATE: Kaiser's Cynthia Cox kindly points me to a Kaiser table showing that benchmark silver premiums rose an average of more than 10% in eight states.

UPDATE 2: There does seem to be a correlation between steep drops in benchmark silver and drops so far in enrollment, though correlation doesn't necessarily know. Here are the 10 states with the steepest average drops in benchmark silver premiums, set beside the enrollment drop to date in that state.

Drops in average benchmark and marketplace enrollment: Week 3 2017-2018
in states

Avg. benchmark drop 2018-19
Average enrollment drop, 2018-2019
New Hampshire
New Jersey
New Mexico
- 9%
- 8%
 -1% (all U.S. states)
-11% (all 39 states)

UPDATE 3: A warning from Larry Levitt that the correlation above may be pretty random. And indeed, most states have enrollment drops above the -11% mean, which is held down by the two biggest states on the platform, Florida (enrollment +3.5%) and Texas (-5.9%). It seems plausible that fewer subsidizable enrollees at 300-400% FPL would be a factor but not a dominant one.

A note on silver loading

Last year, when Trump cut off direct federal reimbursement for Cost Sharing Reduction (CSR) subsidies, most states and insurers coped  by loading the cost of  CSR into silver plans only, since CSR is available only in silver plans. Since premium subsidies vary by income and are keyed to a silver benchmark, this had the effect in many states and rating areas of creating large discounts for subsidized enrollees in bronze and gold plans. In some cases, gold plans were cheaper than benchmark silver for subsidized buyers. This windfall boosted enrollment at the upper income range of subsidy eligibility, where CSR is weak to nonexistent. Gold plan enrollment quadrupled in some states, and bronze enrollment rose from 23% of total enrollment in 2017 to 29% in 2018.

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