Tuesday, July 23, 2019

New enrollment drop in California: Probably the mandate repeal

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Covered California, the state's ACA exchange, recently released its March Active Member Profile, the year's first detailed breakout of enrollment data for all enrollees (repeated quarterly). It follows a prior breakout for new enrollees. The Active Member numbers show some market stability -- they're broadly similar to last year's. They may also support CoveredCA's previous explanation of a drop in new enrollment.

On January 30, CoveredCA put out an analysis  as of the end of open enrollment, emphasizing that while enrollment was virtually flat overall compared to 2018 (down 0.5%), new enrollments had tumbled 23.7%. CoveredCA attributed this worrisome drop (offset by a 7.5% increase in re-enrollments) to repeal of the individual mandate penalty, noting that the new enrollment drop was "relatively evenly spread across demographics." California has since enacted measures intended to reverse the damage, instituting a state individual mandate and state-funded premium subsidies to supplement the federal subsidies.

I wondered whether part of the drop in new enrollment may have been caused by an overall 8.7% average weighted increase in premiums in 2019 and/or by changes in the discounts in gold and bronze plans generated by silver loading (see note at bottom for an explanation). The answer appears to be no -- it was the mandate repeal. Ready for a null-result report?

What led me down the garden path was a change in new enrollees' metal level choices. Note the decline in gold and bronze selection since 2018:

New Enrollment, 2018

New Enrollment, 2019

Source, CoveredCA Plan Selection Profile, 2018 and 2019

Historically, new enrollees in California have a lower rate of silver plan selection than re-enrollees. Oddly, this year, increased bronze and gold selection among re-enrollees offset the decline in those metals among new enrollees, so that overall metal level selection varied very little year-over-year. Compare the far-right columns.

Total Enrollment, March 2018

Total Enrollment, March 2019

 Source: CoveredCA Active Member Profile, March 2018 and March 2019

It appears that a significant number of re-enrollees switched out of silver into gold or bronze. I have no hypothesis to account for the inversion -- more silver for new enrollees, less for returnees. The income breakout for the two years are nearly as closely aligned as metal level selection.

I tried to align premium changes from 2018 to 2019 in the cheapest bronze, silver and gold plans in the largest rating areas with changes in enrollment, both total and new. As far as I can tell, they don't align. Neither overall premium changes for cheapest plans nor increases or decreases in silver loading effects (discounts in gold and bronze plans) seem to correlate with enrollment performance.

The chart below tracks premium changes and enrollment changes (among new enrollees and all enrollees) in the ten California counties with highest enrollment. These counties account for 73% of total enrollment. Since giant Los Angeles County is split into two rating areas (Regions 15 and 16), I have reported their results separately. In the boxes listing the cheapest premiums at each metal level, the 2018 premium is to the left of the dash and the 2019 premium to the right.

The premiums listed are for a 40 year-old with an income of $30,000, which qualifies for the lowest level of Cost Sharing Reduction, raising the actuarial value of a silver slightly to 73% (versus 60% for bronze and 80% for gold). At this income level, the benchmark (second cheapest) silver plan costs $207/month nationwide. Premiums are net of subsidy, which reduces the benchmark to that level.

Changes in Cheapest Bronze, Silver, Gold Plan Premiums and in Enrollment, 2018-2019
Premiums for a 40 year-old with income of $30,000
Ten California Counties with Highest Enrollment

Sources: Kaiser Family Foundation; Covered California for LA Regions 15-16, Covered California for enrollment data

The LA split is instructive: prices in LA-15 and LA-16 moved in opposite directions, but new enrollment is all but identical in the two areas. Total enrollment did drop two percentage points more in LA-15, where cheapest-plan premiums rose at all metal levels, than in LA-16, but that pattern does not carry through the ten counties.

The total enrollment figures are from March, reflecting effectuated enrollment, which is always lower than total plan selections recorded at the end of Open Enrollment. Note, though, that the year-over-year drop as of March (2.3%) is larger than the drop reported at the end of OE (0.5%), showing greater first-month attrition this year than in 2018. New enrollment figures are as of the end of OE.

In every ACA market, multiple factors affect enrollment. In California, however, plan designs are standardized and marketing/outreach is sustained statewide. I am somewhat surprised that premium changes don't line up with enrollment changes. Maybe I overestimated the impact of the cheapest plans. In fact, Blue Shield of California and Kaiser Permanente account for 65% of enrollment state-wide, and they are rarely the cheapest plans in a rating area. [Update, 7/24: I was wrong about this. Between them, Blue Shield and Kaiser have the cheapest silver plan in 11 of 19 rating areas, and the cheapest bronze plan in 9 rating areas. It's true that they're not the cheapest in silver or bronze in Regions 15 through 19, with the exception of silver in R-17 (Blue Shield). Together, those 4 regions account for 54% of enrollment. But Blue Shield and Kaiser dominate in many regions with mid-size enrollment. See the 2019 product price list, available here.] 

Postscript: California should be positioned for a strong enrollment performance in 2020 -- with premiums increasing less than 1% on average; new supplemental state subsidies extending premium support up to 600% FPL, zeroing premiums for legally present noncitizens time-barred from Medicaid (i.e., with incomes from 0-138% FPL), and modestly boosting premiums at 200-400% FPL; and  a new state individual mandate -- which the state can adequately publicized, since as a state-based marketplace, Covered California is not subject to Trump administration sabotage of the advertising/outreach budget in the 39 states using the federal exchange. An important lesson from New Jersey is that a state can't be ashamed to publicize a state-based mandate -- and it's politically astute to pair the mandate with enhanced subsidies, since ACA subsidies are inadequate for many. It will be interesting to see whether new enrollment recovers in 2020.
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, inflated silver premiums create discounts for subsidized buyers in bronze and gold plans. Click here for a series of posts recording and exploring silver loading effects.

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