Tuesday, June 11, 2019

Just how much does Medicaid expansion lighten the silver load?

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Picking up on a premise explored last week...
Actuaries Greg Fann and Daniel Cruz have pointed out that the effects of silver loading [see note at bottom*] in the ACA marketplace should intensify over time (as CBO forecast), with silver plan premiums rising relative to those of other metal levels, increasing discounts in gold and bronze. Fann and Cruz argue that regulators should help the process along by stipulating that insurers must price plans proportionate to actuarial value, with only limited adjustment for their estimates of "induced demand," the higher usage prompted by lower out-of-pocket costs.
...and on a complicating factor: silver plan AV is substantially lower in states that have expanded Medicaid, because those states have far fewer low income enrollees for whom CSR has boosted silver plan AV to 94%:
In states that have refused to expand Medicaid, silver loads are larger, because eligibility for marketplace subsidies begins at an income of 100% of the Federal Poverty Level (FPL), as opposed to 139% FPL in expansion states. More than one third of enrollees in nonexpansion states have incomes below 139%, which qualifies them the for highest level of CSR -- and close to 90% in this income range select silver plans. Hence the estimated cost of CSR, priced into silver plans, should be higher, rendering bronze and gold plans relatively cheaper.
Most recently I noted that in New Jersey in 2019, silver plan enrollees obtained an average actuarial value of 80%, compared to  87% for the 39 HealthCare.gov states taken together. Today I want to sharpen that contrast with a measure of just how much more silver load the nonexpansion states have to work with generally than the expansion states.

In New Jersey, just 48% of silver plan enrollees have incomes that qualify them for the highest levels of CSR, which raise the AV of a silver plan from the baseline 70% to 94% or 87%.  For all expansion states* on HealthCare.gov taken together, silver plan enrollees with 94% or 87% AV accounted for 58% of all silver plan enrollees. In nonexpansion states on the platform, 83% of silver plan enrollees obtained 94% or 87% AV.

Silver loading commenced in 2018, as a reaction to Trump's cutoff of direct reimbursement to insurers for CSR. Not surprisingly, it has offset more successful forms of ACA sabotage (e.g, massive cuts to advertising and enrollment assistance) more in nonexpansion states than in expansion states. Enrollment in expansion states on HealthCare.gov has dropped 14% since 2017, compared to just 5% in nonexpansion states.

The chart below shows what percentage of total silver enrollment is in high-AV CSR-enhanced silver plans in each state.

Silver load intensity in HealthCare.gov states*, 2019

*Excluding Virginia and Maine, which were expanding or scheduled to expand Medicaid as Open Enrollment for 2019 proceeded. Source: CMS state-level PUF files (2019, 2017)

Many other factors affect individual states' enrollment performance. Insurer pricing does not always track with AV. In some states, or in select counties within states, monopoly insurers used premium spreads to create huge discounts, sometimes in cheapest silver** as well as gold or bronze, regardless of the degree of inherent silver load. In Pennsylvania, new competition in 2019 obliterated spreads that produced enormous bargains in the Philadelphia area in 2018. And most strikingly, the 12 state-based exchanges have collectively kept enrollment losses virtually nil since 2017, notwithstanding that 11 of them have expanded Medicaid. Maintaining their budgets for advertising and enrollment assistance -- gutted by the Trump administration in HealthCare.gov states -- and maintaining longer enrollment seasons have made a decisive difference.

State insurance regulators in expansion states who want to boost silver loading effects by mandating that insurers price plans proportionately to real AV at each metal level will have less silver load to work than regulators in nonexpansion states. Perhaps that's all the more reason for those in nonexpansion states to maximize what's available to work with.

Here is a fuller picture of high-AV silver as a percentage of silver enrollment and total enrollment in each HealthCare.gov state, excepting Virginia and Maine.

Silver loading is the byproduct of Trump's October 2017 cutoff of direct federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are required to provide to low income marketplace enrollees who select silver plans. Faced with the cutoff at the brink of open enrollment for 2018, most state insurance departments allowed or encouraged insurers to price CSR into silver premiums only. 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. The effect is further concentrated when insurers offer off-exchange silver plans with no silver load. In 2019, more states green-lighted silver loading -- 45 at last count -- and more switched to on-exchange-only silver loading.

** ACA premium subsidies are keyed to the benchmark -- second cheapest -- silver plan in each rating area. If the cheapest silver plan is much cheaper than the benchmark, that creates a silver plan discount.

The problem with silver loading in New Jersey
Silver is platinum. Insurers should price it as such. Regulators should make them.
Silver loading is just getting started

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