Friday, January 31, 2020

Eye of the hurricane? The ACA marketplace in 2020

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While open enrollment in the ACA marketplace has 1-7 days to run in a handful of state-based exchanges (SBEs), and other SBEs haven't reported their data, the overall picture is clear: enrollment in 2020 was essentially flat. Enrollment in the 38 states using was down 1.4%, while enrollment in the 13 SBEs will be up 2.6%, leaving total enrollment down 0.3%, according to Charles Gaba's projection.

The big picture is perhaps relatively simple. Premiums were down slightly on average; insurers did not register major impact from the zeroing out of the individual mandate in 2019; the market in aggregate was stable.  But the ACA marketplace is really 50 marketplaces -- or thousands, if you count each rating area -- and a lot of change is bubbling under the surface, from Medicaid expansions in red states to new state-based subsidies in blue states.  Nationally, too, the initial tally sparks several questions:

1. Whither silver loading*? A report published by CMS on Oct. 22 indicated that the discounts in bronze and gold plans generated by the pricing of Cost Sharing Reduction (CSR) subsidies into silver plans only, begun in 2018, had diminished in 2020.  While premiums were down overall,  average benchmark premiums, which determine subsidy size, were down slightly more than average lowest cost plans (LCPs) at each metal level. CMS calculated that the percentage of subsidy-eligible enrollees who could get a plan for less than $75/month was down from 73% in 2019 to 69% in 2020. David Anderson calculated that the percentage of subsidy-eligible enrollees who could get a gold plan that cost less than the benchmark dropped from 26% in 2019 to 20% in 2020.

On the other hand, the Kaiser Family Foundation calculated that thanks to changes in the ACA subsidy formula, subsidized enrollees at almost every age and income level would pay slightly less on average for the LCP at each metal level. I noted further that in the ten counties with highest enrollment nationwide, changes in LCPs were all over the lot. Perhaps the changes in silver loading effects in 2020 netted out as pretty much a wash.

2. Whither retention? In the nation as a whole, notwithstanding enrollment decreases as of the end of Open Enrollment in every year from 2017 forward, effectuated enrollment was higher in December 2018 than in December 2016, and higher in February 2019 than in February 2017.** It may be that silver loading has improved retention by enrolling many people in free bronze plans and cheap gold plans; it may also be that a shorter enrollment period weeds out people likeliest to drop coverage before making a first payment.

In states, new enrollment dropped sharply from 2017 (3.0 million) to 2019 (2.1 million), while re-enrollment went the other way (6.2 million in 2017, 6.3 million in 2019). Perhaps re-enrollees are likelier to pay their first premium, and remain enrolled for more of the year. Those trends reversed slightly in 2020: new enrollment upticked, re-enrollment downticked. Perhaps, then, the three-year trend in improved retention has also run its course?

3. Whither off-exchange enrollment? While subsidized enrollment is slightly higher at present than in 2016, unsubsidized enrollment was devastated by the huge premium hikes of 2017 (a market correction as early-year losses came into focus) and 2018 (a licensed overreaction to political turmoil). In those two years, average benchmark premiums rose 61%, and unsubsidized enrollment in ACA-compliant plans plummeted from 6.4 million in 2016 to 3.9 million in 2018. Premiums were flat in 2019, however, and down 3-4% in 2020.  Has unsubsidized enrollment (most of which occurs off-exchange) rebounded at all, or at least stopped its slide? We don't know yet.

At a time when we also don't know whether democracy itself will survive the next election, it's futile to try to forecast where the ACA marketplace is headed. The ACA could be nullified by the courts, repealed after a Republican sweep in 2020, hacked to pieces administratively by a second-term Trump administration even with a Democratic House, overhauled or reformed by a Democratic administration and Congress, or left to muddle through, with federal assists to state innovations, under a Democratic president and a Republican Senate (and/or House, I suppose).  Under total political gridlock, enrollment and risk pools could be radically changed by the administration's rule allowing employers to fund marketplace subsidies through ACA -- or by a recession, which would ramp up demand (the marketplace has never experienced a recession).

Left to its own devices, though, in a continued slow-growth economy, the marketplace probably wouldn't change much. Perhaps that's the unlikeliest outcome of all.

* Silver loading refers to concentrating the cost of CSR subsidies (directly reimbursed to insurers by the federal government as stipulated by the ACA until Trump stopped payment in October 2017) in the premiums of silver plans, since CSR is available only with silver plans. 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.

** Feb. 2019 enrollment was also higher than Feb. 2016 enrollment, but Open Enrollment in 2016 did not end until Jan. 31, and enrollments after Jan. 15 were not effectuated until March. Enrollment peaked at 10.8 million in 2016, vs. 10.6 million in 2019.

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