Wednesday, December 12, 2018

Is New Jersey's unsubsidized marketplace enrollment migrating off-exchange?

Politico and Modern Healthcare have both wondered why ACA marketplace enrollment for 2019 is down in New Jersey, as in most of the 39 states using HealthCare.gov. As MH's Shelby Livingston put it, New Jersey "did everything right" to boost enrollment -- swiftly passed a state individual mandate and implemented a reinsurance program that brought 2019 premiums an average of 9% below 2018 levels. Yet 5 weeks into Open Enrollment for 2019, enrollment is down 13% compared to 2018. In all 39 HealthCare.gov states, it's down 10.4%.

One hope is that lower premiums are driving more enrollees whose incomes are too high to qualify for subsidies into the off-exchange ACA compliant market. There should be at least some movement in that direction, for two reasons.

First, benchmark silver plan premiums dropped a long way -- 15% in much of the state. Consequently, fewer people with incomes at the upper end of subsidy eligibility qualified for subsidies this year, because the unsubsidized premium cost less than the "affordability" threshold, 9.86% of income at 300-400% FPL. In 2018 in New Jersey, 37,991 enrollees as of the end of Open Enrollment had incomes in the 300-400% FPL range.

Second, this year New Jersey's Department of Banking and Insurance actively encouraged insurers to use on-exchange-only "silver loading" (see note below) to offer cheaper silver plans off-exchange only. AmeriHealth and Oscar responded. AmeriHealth's three cheapest silver are offered off-exchange only; the cheapest one, a narrow network HSA, costs a 46 year-old $108 per month less than the cheapest on-exchange silver.  Oscar's cheapest off-exchange silver plan is $39 per month less for a 46-year old than its cheapest on-exchange silver.  And in Jersey, an unusually high percentage of off-exchange enrollees do choose silver -- 65% in 2018.

As of the end of Open Enrollment for 2018, New Jersey had 62,360 unsubsidized enrollees on-exchange. Some of those enrollees, plus a significant share of the 38k in the 300-400% FPL band, may have some incentive to move off-exchange.

A closer look at off-exchange enrollment in New Jersey, however, suggests that such movement may be limited.

Sticky Horizon

First, although AmeriHealth offerings are much cheaper than those of the state's dominant insurer, Horizon Blue Cross, Horizon dominates the market generally and the off-exchange market in particular.  Horizon has 82% of the off-exchange market and 54% on-exchange. In Q1 2018, Horizon had 28,530 active silver plan contracts; AmeriHealth had 3,883 and Oscar 453 (there's more than one enrollee per contract). This despite the fact that AmeriHealth's cheapest silver plan was 10% cheaper than Horizon's cheapest. Its cheapest bronze plan was 15% cheaper than Horizon's -- in a year when premiums soared more than 20% -- and its market share in bronze was somewhat higher, 23%, compared to Horizon's 71%. The difference is primarily a matter of provider network. The networks in AmeriHealth's low-priced plans are quite limited.

A widening premium gap

In 2019, the price gap between AmeriHealth and Horizon has widened. In response to the new reinsurance program AmeriHealth dropped its premiums about twice as far as did Horizon -- in the range of 13-15% vs. 6-8% for Horizon. Further, AmeriHealth used silver loading to post three off-exchange silver plans that are cheaper than its cheapest on-exchange offering; Horizon offers none. The cheapest silver AmeriHealth plan is now 25% cheaper than the cheapest silver Horizon plan -- $360 a month versus $485 a month for a 46 year-old.

Will that yawning price gap move many unsubsidized current enrollees who enrolled via HealthCare.gov to enroll off-exchange for 2019, switching either from Horizon to AmeriHealth or Oscar, or from AmeriHealth to a cheaper AmeriHealth plan offered off-exchange only? Thus far, New Jersey on-exchange enrollment is lagging last year's pace by about 13,000.

Perhaps not. Horizon's customer base has proved quite sticky. Lynda Feder, a Cranford-New Jersey based broker who serves individual market as well as small group clients, saw huge churn last year, when premiums spiked more than 20%. "Last year, everyone was alarmed," Feder recalls. "About 75% changed plans." But they didn't change carriers -- they downsized from silver to bronze.  This year, Feder says that her Horizon customers look at their renewal letters, see that premiums have dropped, and stand pat.

Feder's client base is likelier wealthier than the roughly 100,000 on-exchange New Jersey enrollees (as of the end of OE for 2018*) with incomes over 300% FPL, about 60% of whom chose silver plans. And AmeriHealth does have 43% market share on-exchange. Perhaps 15-20,000 might have cause to move from AmeriHealth online silver to AmeriHealth offline, as may some Horizon customers -- but how many will do so?

Some, perhaps. Migration offline may be a contributing factor to this year's enrollment lag, but likely not a dominant one. Meanwhile, lower premiums may lure new enrollees into the off-exchange market, which shrank 14% last year. We'll know some time after the end of  Q1 2019.

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* Attrition following the end of Open Enrollment is considerable. As of Q1 2018, New Jersey's DOBI reported 239,738 on-exchange enrollees, vs. 274,782 reported by CMS as of the end of OE. But the available year-over-year comparison is with the week-by-week open enrollment totals.

Note: What is silver loading?

Silver loading refers to concentrating the cost of Cost Sharing Reduction subsidies (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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