Wednesday, January 08, 2020

Is "free" a magic word in the ACA marketplace?

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Healthcare scholars David M. Anderson and Coleman Drake have published a study that analyzes the impact of free bronze plans, which became available to millions of prospective ACA marketplace plans in 2018, on enrollment.

Ubiquitous free bronze is one result of "silver loading," 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. As a result of silver loading, $0-premium bronze plans available to millions.

Perhaps the most striking finding in Anderson and Drake's paper is the sheer ubiquity of free bronze plans, particularly for enrollees over age 45 (since premiums rise with age, and the benchmark plan costs subsidized enrollees a fixed percentage of income regardless of age, older enrollees have larger subsidies to cover plans that cost less than the benchmark). The authors divined the availability of free bronze by matching enrollment data, which CMS breaks out by county, income, age and metal level in the 38 states that use, with pricing data, which CMS also provides. 

Free bronze, they found,was available in 2019 to almost every marketplace enrollee with an income below 150% of the Federal Poverty Level (FPL) -- that is, to about 3 million enrollees in states, more than a third of all enrollees. It was available to most enrollees at 150-200% FPL, and to a large majority of enrollees over age 45 in the 200-250% FPL income bracket.

Anderson and Drake's analysis of the impact of free bronze on enrollment found the most striking effect in the 150-200% FPL income bracket, which accounted for 1.8 million enrollees in states in 2019. The authors estimate that enrollment would have been reduced by  201,790 in states in 2019 if free bronze plans had not been available.

These findings are somewhat counterintuitive, in that

  • Among subsidized enrollees, enrollment has dropped sharply at incomes below 200% FPL since 2017, while it's risen at the highest subsidy-eligible income levels (300-400% FPL).

        Enrollment by Income  2017-2019 - Subsidy-eligible Income Levels 
  • Year
    Total enrollment
    100-150% FPL
    150-200% FPL
    200-250% FPL
    250-300%  FPL
    300- 400%  FPL

    Change 2017-2019

  • Enrollees with incomes under 200% FPL have mostly eschewed free bronze and stuck to silver plans, probably because at incomes below that level the value of Cost Sharing Reduction (CSR), available only with silver plans, outstrips the value of the discount in bronze plans generated by silver loading.

    Silver Plan Selection at 100-200% FPL states
Total enrolled
Silver enrolled
Percent silver

At incomes up to 150% FPL, where the CSR benefit is strongest and a benchmark silver plan is cheapest, silver plan selection has barely budged, downticking from 89% in 2017 to 88% in 2019. At 150-200% FPL, where the CSR benefit is somewhat weaker and a benchmark plan can cost as much as $130 a month, silver selection has dropped more substantially, from 83% in 2017 to 76% in 2019. In marked contrast, in the 200-250% FPL income bracket, where CSR is negligible, silver plan takeup dropped really sharply, from 68% in 2017 to 46% in 2019.

More broadly, at incomes over 200% FPL, silver selection has plummeted -- most sharply at 300-400% FPL, where enrollment has increased 11% since 2017. It therefore appears that silver loading, broadly, has had its chief impact at the higher end of the subsidy-eligible income scale. As noted above, enrollment performance in 2019 as compared to 2017 rises with every income bracket above 200% FPL.

Enrollment at 300-400% FPL 2017-2019 - Subsidy-eligible Income Levels States

Total bronze
% bronze
Total silver
% silver
Total gold
% gold

Anderson and Drake, however, focus not on all silver loading effects, but specifically on the impact of an available free bronze plan. Their results indicate that the relatively modest drop in silver selection at 150-200% FPL deserves a second look, and is not the whole story.

For one thing, the increase in bronze selection at 150-200% FPL, from 17% of all plans selected in the income bracket in 2017 to 24% in 2019, resulted in an absolute increase in bronze plan enrollment of 25%, while silver plan enrollment was dropping 20%.  Bronze enrollment increased by 73,000 while silver enrollment dropped by 399,000. Had bronze enrollment decreased at the same rate as silver, enrollment in this income bracket would have been about 131,000 lower than the actual tally.

Of course, many of those who selected bronze plans in 2019 would probably have enrolled in silver plans had silver loading not made zero-premium bronze plans available. This suggests that if Anderson and Drake's analysis is correct, the availability of free bronze plans boosted enrollment in silver plans as well as in bronze. That is, if the zero price tag for bronze were not on the board, so to speak, many of those who selected silver plans would not have enrolled.  Perhaps half of those induced to enroll by the presence of a zero-premium plan chose zero-premium bronze, and half paid up for silver.

I've never studied marketing, but the results bring to mind omnipresent "prices as low as" pitches. Does starting the premium scale at zero significantly increase takeup at, say, $55-130 per month for silver plans enhanced with strong CSR?

Forget free bronze plans: Millions of uninsured are eligible for CSR silver
CSR takeup bends slightly under silver load at incomes up to 200% FPL

1 comment:

  1. This does not address the question of whether a free Bronze plan is really worth the proverbial hill of beans.

    A $5000 or $6000 deductible still means relentless medical debt. A bronze plan means that the hospital will get paid in part on a $50,000 claim. That is small comfort to a patient at 150 per cent of poverty, who may have to declare bankruptcy even with insurance after a hospital stay.