Tuesday, September 10, 2019

When silver loading discounts trump strong CSR (the nonexpansion state "advantage," take 5)

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This post picks up where the last one left off, further examining potential partial explanations for why ACA marketplace enrollment declines on HealthCare.gov in 2019 were much sharper in states that have expanded Medicaid than in states that have refused the expansion. I raised a question in that post, bolded in the excerpt below.

Enrollment changes by income, HealthCare.gov states
2019 enrollment as a percentage of 2018, as of the end of OE in each year

State group
Total enrollment
100-150% FPL
150-200% FPL
100-200%  FPL
200-400% FPL
* Excluding Virginia and Maine   Source: CMS state-level public use files 

The enrollment performance gaps at 100-200% FPL and 200-400% FPL are comparable. I would be tempted to suggest that the gap at 100-150% FPL is due to the concentration of low income enrollees in the nonexpansion states (those at 100-138% FPL, who pay less for top-level CSR silver plans than do those at 138-150% FPL), and that the gap at 200-400% FPL is due to stronger silver loading in the non-expansion states. But the large performance gap at 150-200% FPL kind of belies that -- unless, perhaps, silver loading at that income level is pulling more prospective enrollees into free or ultra-cheap bronze plans in the nonexpansion states. In the silver loading era, silver plan selection at 150-200% FPL has dropped from 83% in 2017 (pre silver loading) to 76% in 2019 in HealthCare.gov states. The lure is bronze coverage that is often free at that income level, while benchmark (second cheapest) silver costs about $130/month at 200% FPL. I guess I need to test whether bronze selection in this income band has risen faster in nonexpansion states.

At 150-200% FPL, the value of Cost Sharing Reduction (CSR), a free benefit, still usually outstrips the value of discounts in bronze and gold plans.  But not always. While CSR raises the actuarial value of a silver plan to 87% -- better than most employer plans -- that still leaves low income people with a deductible averaging about $800.  The premium for the benchmark (second cheapest) silver plan is $59/month at an income of 150% FPL (a little over $18,000/year for an individual) and $133/month at 200% FPL  (income slightly over $24,000). Bronze plans, on the other hand, have deductibles averaging about $6,000 but are effectively free at these income levels in much of the country -- i.e., in over 2,000 counties nationwide, according to the Kaiser Family Foundation.  And gold plans, with average deductibles of about $1,600, are cheaper than silver in some states and counties (also thanks to silver loading).  So there is a real choice to made in many cases -- and the stronger the silver loading effect, the stronger the pull away from silver even at the 87% AV CSR level.

That pull does appear to be stronger in nonexpansion states on HealthCare.gov, based on metal level selection. In expansion states, silver selection at 150-200% FPL downticked from 79% to 78%. In nonexpansion states it dropped further, from 78% to 75%. In the nonexpansion states, a drop of 49,884 in silver enrollment in 2019 was largely offset by an increase of 19,154 in bronze and 9,711 in gold enrollment -- an apparent silver loading effect.

That effect is visible in enrollment change at this income level broken out by metal level selection:

Enrollment change by metal level at 150-200% FPL, 2018-2019
Expansion vs. Nonexpansion states, HealthCare.gov

State group
Total 150-200% FPL
Change 150%-200% FPL 2018-19
Total bronze 150-200 % FPL
Change bronze 2018- 2019
Total silver 150-200 % FPL
Change silver 2018- 2019
Total gold 150-200 % FPL
Change gold 2018- 2019
* Excluding Virginia and Maine

The performance gap in bronze enrollment between expansion and nonexpansion states at this income level is more than double the gap in silver enrollment. As for the spike in gold plan selection in nonexpansion states, more than half of it is concentrated in Nebraska, where gold enrollment was up elevenfold to 3373, and Oklahoma where gold was up nearly ninefold to 2533.  In Nebraska in 2019, the cheapest gold plan was cheaper than the cheapest silver plan throughout the state -- and free at this income in the southeastern part of the state, which includes Omaha. Cheapest gold was also available for less than half the price of cheapest silver throughout Oklahoma.

The next income bracket up, 200-250% FPL, is a particularly sensitive one for switching out of silver, since CSR at this income level is all but negligible, raising actuarial value from the baseline 70% for silver to just 73% -- still well below that of gold (80%). Next up, then: comparing metal level selection for expansion vs. nonexpansion states at 200-250% FPL.

Caveat: 2019 was the second year of silver loading. In some states and counties, silver loading was intensified in 2019; in others, it was reversed (e.g., in the Pennsylvania counties surrounding Philadelphia). As CBO forecast, however, the full cumulative effect of silver loading will probably take about five years to develop fully. The silver loading advantage in nonexpansion states may have both retained discounts that reduced enrollment losses and increased silver loading discounts on net in 2019.

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.

For enrollees whose incomes are too high to qualify for CSR, a silver plan has an actuarial value of about 70%. Prior to Trump's CSR reimbursement cutoff, silver plans were priced as if they were 70% AV. But CSR raises the AV of a silver plan to 94% for enrollees with incomes up to 150% of the Federal Poverty Level, and to 87% for those with incomes in the 150-200% FPL range. The more low income enrollees a state has, the higher silver's "real" AV, and the more expensive it should be.

Silver loading and 2019 ACA enrollment: A compendium
Why 2019 ACA enrollment drops were concentrated in Medicaid expansion states on HealthCare.gov, Take 3
Two key factors in state-by-state ACA enrollment performance

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