Mining the silver lode (or not): A tale of two blue states

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I have argued in recent posts that

1. State insurance regulators should take the advice of actuaries Greg Fann and Daniel Cruz and force the silver loading spring -- that is, pretty much mandate that insurers price on-exchange gold plans below or at least only slightly above on-exchange silver plans. Fann and Cruz recommend that regulators require insurers to price silver plans more or less as if their actuarial value is 87% or higher, as it is for enrollees with incomes up to 200% FPL. If they do so, no one at incomes above 200% FPL will buy silver, so the AV estimate will become a self-fulfilling prophecy. (See note at bottom for a brief explanation of silver loading, which began in 2018.)


2. New Jersey enrollment has suffered since 2017 from a lack of discounts in bronze and gold plans that silver loading has produced in many other states. 

States that have refused to expand Medicaid have a built-in silver loading advantage. Since eligibility for marketplace subsidies in nonexpansion states begins at 100% FPL rather than the 139% FPL threshold in expansion states,  the nonexpansion states have a high concentration of silver plan enrollees who obtain the highest level of CSR, which raises the actuarial value of a silver plan 94%.  Still, some expansion states have enjoyed pronounced silver loading effects, while others have seen almost none.

Below, I contrast the experience of two expansion states, New Jersey and California. All enrollment figures are derived from the 2019 state-level Public Use Files published by CMS, unless otherwise noted.  I am going to indulge in a bit of shorthand in this post and neglect to provide definitions and back story, excepting the note on silver loading at bottom.

1. While the income distribution of on-exchange enrollees in the two states is similar...

Enrollment by income in New Jersey and California, 2019 (by FPL)

State	100-150%	151-200%	201-250%	251-300%	301-400%	Other
NJ	15%	24%	16%	10%	14%	20%
CA	16%	28%	17%	13%	14%	12%

"Other" is a combination of those not reporting income and those with income over 400% FPL or under 100% FPL

...the concentration of silver plan enrollees at high-CSR levels is much higher in California. In New Jersey, just 48% of silver plan enrollees have incomes between 100% and 200% FPL, where CSR raises the AV of a silver plan to 94% (up to 150% FPL) or 87% (at 151-200% FPL). In California, 62% of silver plan enrollees have income in that range. It's not that silver plan selection is higher at low incomes in California, but rather that silver selection at higher incomes is much reduced -- because there are better discounts to be had in bronze and gold.

2. Consequently, the actuarial value of silver plans in California is about four percentage points higher than in NJ:

New Jersey silver enrollment, 2019

Enrollee income	Actuarial value - silver	Share of  silver enrollment
0-150% FPL	CSR       94%	21%
151-200% FPL	CSR       87%	28%
201-250% FPL	CSR       73%	15%
> 250% FPL	No CSR 70%	36%
All incomes	avg              80%

California silver enrollment, 2019

Enrollee income	Actuarial value - silver	Share of  silver enrollment
0-150% FPL	CSR       94%	28%*
151-200% FPL	CSR       87%	38%
201-250% FPL	CSR       73%	15%
> 250% FPL	No CSR 70%	19%*
All incomes	avg         84%

Silver loading is a self-fulfilling prophecy: the higher silver is priced relative to bronze and gold, the fewer people at higher incomes select silver, which should raise its relative price further in the next year. A state like New Jersey with a light silver load needs to take positive action to increase it.

3. New Jersey plans are not priced proportionately to actuarial value. Gold is priced out of reach, and bronze plan discounts are not nearly as good as in many states.

Cheapest plans available by metal level - 40 year old, income $31,000

Essex County, NJ, 2019 (mirrored in most of state)

Insurer	Cheapest Bronze (60% AV)	Cheapest Silver (avg. 80% AV)	Cheapest Gold (80% AV)
All insurers	$151	$214	$411
AmeriHealth	$151	$214	$586
Oscar	$183	$254	$411
Horizon BCBS	$227	$312	$513

Source: HealthCare.gov see plans and prices 

4.  Compare metal level pricing in Essex County, NJ above with that of Los Angeles County, CA, which accounts for 28% of total California enrollment. (LA is split into two rating areas, Nos. 15 and 16 , both represented below.) Price distributions vary considerably throughout California. Discounted gold and bronze plans are available in many but not all rating areas (sampling here).

Cheapest plans available by metal level - 40 year old, income $31,000, Los Angeles County, CA, 2019

CA rating area	Cheapest Bronze	Cheapest Silver	Cheapest Gold
LA - 15 (90804)	$145	$219	$234
LA - 16 (91343)	$101	$199	$213

 Source: CoveredCA shop and compare

5. Compare metal level selection in California and New Jersey (on-exchange), excluding platinum (not available in NJ) and catastrophic plans. Gold is priced out of reach in NJ.

State	Bronze enrollment	Silver enrollment	Gold Enrollment
New Jersey	24%	73%	2%
California	29%	55%	11%

For enrollees with incomes up to 200% FPL, Silver, enhanced by strong CSR, is almost always the best metal choice.  Discounts in bronze and gold plans have their chief impact at incomes above 200% FPL. Here is how metal level choice shook out at the upper end of subsidy eligibility, 201-400% FPL, in New Jersey and California. In California, gold is selected at ten times the New Jersey rate at income levels where CSR is not available or negligible.

Metal level selection in New Jersey  and California at incomes 201-400% FPL

State	Bronze enrollment	Silver enrollment	Gold Enrollment
New Jersey	32%	65%	2%
California	39%	41%	20%

6. In 2019, on-exchange enrollment in California was down 0.5% from 2018 and 2.7% from 2017. New Jersey was down 7.1% from 2018 and 13.5% from 2017. 

On-exchange enrollment change, CA and NJ, 2017-2019

State	2017 total	2018 total	2019 total	Change, 2018-19	Change, 2017-19
CA	1,556,676	1,521,524	1,513,883	-0.5%	-  2.7%
NJ	295,067	274,782	255,246	-7.1%	-13.5%

Source:  Charles Gaba 

There are a lot of reasons that California has been able to minimize enrollment losses triggered by various Trump administration measures designed to curtail enrollment. As a state running its own exchange, and retaining the fees charged to participating insurers, California did not bear the full brunt of the Trump administration's 90% cuts to advertising and 84% cuts to enrollment assistance and was able to maintain a three-month enrollment period after the Trump administration cut the enrollment period to six weeks in the states using the federal exchange (e.g., New Jersey, which just passed a bill to establish a state-based exchange).  

California also anticipated Trump's cutoff of direct reimbursement of insurers for Cost Sharing Reduction expenses in 2017 and instructed insurers to add 12.4% to their 2018 silver plan premiums, guaranteeing at least some silver loading effect and reducing uncertainty for insurers. The state also actively encouraged insurers to offer discounted off-exchange silver plans, free of the silver load -- as New Jersey did in 2019, probably boosting off-exchange enrollment. 

In short, as part of its general commitment to maximize marketplace performance, California took positive steps to generate silver loading discounts, and those steps have contributed to its relative success. Further regulatory action -- in any or all states -- could shape a market in which the de facto benchmark for enrollees with incomes over 200% FPL is gold-level, 80 AV. 

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Note:  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.

* The PUF breaks out enrollment at different CSR levels for HealthCare.gov states, including NJ, allowing a precise AV calculation. That breakout is not available for CA, a state-based marketplace, but silver enrollment is broken out by income. Of the 5% of silver enrollment ascribed to "other income" in CA, I have attributed 3% to subsidized enrollees with incomes under 138% FPL (legal noncitizens time-barred from Medicaid) on the basis of California's March 2018 active member profile, available here (the 2019 numbers are not out yet). The CA data also indicates that about 0.6% of enrollees in the 139-200% FPL income range, or 4,000 enrollees in all metal levels, are unsubsidized. Perhaps 2,000 of those ascribed to AV 94% or 87%, then are actually only obtaining 70% AV, which would shave a few decimal points off aggregate silver AV