Saturday, February 09, 2019

Medicaid expansion to just 100% FPL: What's the effect on marketplace risk pool?

Utah legislators voted this week to contravene the will of Utah voters, expressed in a 2018 referendum, by limiting the ACA Medicaid expansion to adults with incomes up to 100% of the Federal Poverty Level, instead of the 138% FPL threshold stipulated by the ACA statute and the referendum.

The more limited expansion would be bad for Utahns in the 101-138% FPL range, as explained below, though it would save the state some outlays (if approved by CMS), since the federal government pays 100% of marketplace subsidies and "only" 90% of premiums for the Medicaid expansion population.

Leaving aside for a moment the effect on low income Utahns, and on state finances, I want to consider a tertiary question: How would expansion affect the risk pool in the state's ACA marketplace? (David Anderson has touched on this, at least on Twitter, and may be looking at it in more depth.)

In 2016 the answer would have been straightforward: the 101-138% FPL population is less healthy on average than higher income enrollees, and so raises costs and premiums. A 2016 CMS study estimated that premiums are about 7 percent lower in expansion states, controlling for a variety of other factors.

Does silver loading improve the risk pool?

The picture has been clouded, however, by "silver loading" -- state marketplaces' adaptation to Trump's cutoff of direct reimbursement of insurers for Cost Sharing Reduction subsidies that they are obligated to provide to low income enrollees who select silver plans. Those subsidies are highest in the 100-150% FPL range, where they raise the actuarial value of a silver plan from a baseline of 70% to 94%.

In response to Trump's cutoff, almost all states have by now instructed or allowed insurers to price  the cost of CSR into the premiums of silver plans only, since CSR is available only with silver plans.  Since ACA premiums subsidies are set against a silver plan benchmark, and adjust so that an enrollee pays a fixed percentage of income for that benchmark, silver loading has created large (if haphazard and uneven) discounts in bronze and gold plans.  Bronze plans are now on offer for free to millions of prospective enrollees, and gold plans are cheaper than benchmark silver in over 1100 counties nationwide.

Silver loading effects are stronger in nonexpansion states, because there's more CSR to load. Marketplace takeup is higher at lower income levels, and enrollees with incomes under 139% FPL pay just 2% of income for a benchmark silver plan. Nonexpansion states also tend to be low income states. In 20178, 43.5% of marketplace enrollees in nonexpansion states had incomes in the 100-150% FPL range -- and about 90% of them selected silver plans. That's a lot of CSR to load.  The net result may (or may not) be a wealthier and therefore healthier risk pool.*

Silver loading primarily benefits those at the upper range of subsidy eligibility, 201%-400% FPL. For enrollees up to 200% FPL, the value of CSR mostly outstrips the value of discounts in bronze and gold generated by silver loading. In 2018, the percentage of HealthCare.gov enrollees at 100-150% FPL who selected silver plans actually rose slightly, from 89.3% to 89.7%. In contrast, at 200-400% FPL, silver selection plummeted from 60% in 2017 to 43% in 2018. Bronze selection in that income range rose from 34% to 45%, and gold from 5% to 12%.

At the same time, HHS's massive cuts to marketplace enrollment assistance and advertising hit low income enrollment hardest -- while silver loading discounts apparently offset that sabotage at higher subsidized income levels. In HealthCare.gov states, enrollment at 100-200% FPL was down 7.5% in 2018, whereas at 200-400% FPL it was up slightly -- or rather, down very slightly at 200-300% FPL and up 10% at 300-400% FPL -- where silver loading, driving up the unsubsidized price of silver, rendered more people subsidy-eligible than in the past.

The net effect was a shift in the income distribution among subsidized enrollees. The percentage of enrollees with incomes in the 100-200% FPL range in HealthCare.gov states dropped from 60% to 58%, while the percentage at 200-400% FPL rose from 31% to 33%.

On the other hand, Trump's CSR cutoff drove up unsubsidized premiums and so reduced enrollment among the unsubsidized, on-exchange and off-exchange. On HealthCare.gov in 2018, the drop in "other FPL," which is mostly unsubsidized, was 10%. First-quarter attrition was also much steeper in this category than in reported FPLs. Off-exchange enrollment in ACA compliant plans has fallen even more steeply. Unsubsidized enrollees are wealthier and therefore presumably healthier.

On yet another hand...most states now allow or encourage insurers not only to "silver load" but to offer off-exchange silver plans with no CSR load, theoretically holding unsubsidized buyers harmless from CSR costs. Theoretically, then, after the initial jolt to premiums in 2018, the CSR cutoff should not be driving further premium increases (though CBO anticipated that the effects would take five years to shake out completely).

If silver loading continues to boost enrollment at 200-400% FPL, and keeping the marketplace open to enrollees at 100-138% FPL boosts silver loading, then limiting expansion to those up to 100% FPL may not harm the marketplace risk pool.

Penny wise...

It does probably harm those at 100-138% FPL, however. Research indicates that Medicaid, which usually has no premiums or copays (though conservative states are changing that), is more appropriate than marketplace coverage for people near the poverty level. Kaiser Family Foundation surveys and focus groups show higher satisfaction with Medicaid than with even high-CSR marketplace coverage. State waiver proposals anticipate that fewer people at 101-138% FPL will enroll in marketplace coverage than in Medicaid. At this income level, even relatively low copays  deter people from seeking needed care.

That's despite the fact that marketplace coverage is relatively generous for people in this income range. which tops out at $16,753 for a single person and $34,638 for a family of four. They pay 2% of income for the benchmark (second cheapest) silver plan, which at this income level has an actuarial value of 94%, meaning it's designed to cover 94% of the average enrollee's medical costs. The average deductible at this income level was $255 in 2017 and so is probably about $300 now. In Salt Lake City, the benchmark silver plan at this income level has a $0 deductible, $10 copays for primary care visits, $20 for specialists and $10 for generic drug prescriptions. Moreover, at an income of $16,000, the cheapest silver plan costs just $5 per month, as opposed to $30 for the benchmark.

To expand to 100% FPL only, Utah needs a waiver from CMS, which refused a similar request from Arkansas last year but, Utah legislators claim, has signaled it will green-light the limited expansion this time. CMS approval is needed to get the ACA's 90% federal match rate for the expansion population.

Limiting the expansion to those with incomes below 101% FPL saves the state money, at least in the short term, because the federal government pays 100% of subsidies for ACA marketplace enrollees, sparing the state its 10% Medicaid share for those in the 101-138% FPL income range. But failing to increase the insured rate for this population, or any population, is a short-sighted way to "save money."

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* The silver load effect should be weaker in expansion states. On HealthCare.gov, just 15% had incomes in the highest CSR category (100-150% FPL, which in these states is almost entirely limited to 138-150% FPL). 

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