Friday, October 25, 2019

Oscar throws a wild card into the 2020 ACA marketplace

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Re the premise of my prior post -- that discounts in bronze and gold plans will be weaker in the 2020 ACA marketplace:  I've stumbled on a wild card, and it's pretty wild. Let's start where we did yesterday:
CMS has published ACA marketplace premiums for 2020.  The top-line news is that premiums have dropped 3-4%.  The key point for subsidized enrollees (69% of the ACA-compliant market) is that silver loading has gone into reverse -- and consequently there will be fewer discounted plans available. That's because benchmark silver plan premiums -- the second-cheapest silver plan in each market, which determines subsidy size -- have dropped more sharply (-4%)  than average premiums for the cheapest plan at each metal level (-3%).
Okay, so discounts stemming from silver loading* may be reduced on average, and in particular, discounts in cheapest silver may be the most impaired. Now for the wild card: Oscar is offering a $0 deductible bronze plan in Florida and Texas (and maybe elsewhere, but those two states account for a quarter of all ACA marketplace enrollment). In Miami, for a 40 year-old at an income of $17,300 -- about 140% FPL -- it's zero premium too; at $24,900 income (just below 200% FPL) it's $79/month.

Here's how HealthSherpa frames this plan vs. cheapest silver available at $17,300 income (zip code 33013, Hialeah):

The high-CSR silver plan is the better option for anyone who taps any significant medical care. The Oscar plan has a $1000 copay for the ER, and $3000 per day for inpatient hospital up to the $8,150 maximum. In fact, for $51/month at this income/age, an Ambetter silver plan offers a $0 deductible and an out-of-pocket max of $1,400.  Still, a fair number of healthy young enrollees may go for the $600-odd saved up front in premiums.

ACA marketplace enrollees with incomes below 200% FPL -- that's a majority of on-exchange enrollees, at least in states -- have largely stuck with silver plans in the silver loading era. Bronze and gold discounts are more enticing to those with incomes up at the upper end of subsidy eligibility (201-400% FPL), as they are not eligible for the strong Cost Sharing Reduction that comes only with silver plans (CSR fades to near-nothing at 201% FPL and phases out entirely at 251% FPL). In 2019, 83% of enrollees in states with incomes in the 100-200% FPL range chose silver plans. At incomes up to 150% FPL, the cutoff for the highest level of CSR, 88% chose silver in 2019.

In the most populous states, Oscar may change that. The main deterrent to choosing bronze for low income enrollees is the difference in deductibles: $0 to $1000 for silver at incomes below 200% FPL, vs. an average of nearly $7000 for bronze. Oscar is wiping that dramatic contrast out (or displacing it to hospital care) in some large markets with high concentrations of low income enrollees.

In Florida, 1.3 million out of a total of 1.8 million enrollees in 2019 had incomes under 200% FPL. 83% of them chose silver plans. How much will that change in 2020?

In states in which large numbers of low income enrollees switch to bronze, the power of silver loading to generate further discounts will be reduced, as those eligible for the most valuable CSR will forgo the benefit, leaving less excess actuarial value to price into silver plans. In Florida in 2019, the aggregate AV of silver plans was a staggering 91.5% -- platinum-plus. It wasn't priced that way. Silver loading generally has been underpowered; it will become more so if significant numbers of low income enrollees jump to bronze.


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.

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