New Jersey's new state-based ACA marketplace subsidies *rise* with income

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The "preview plans and prices" tool on New Jersey's spanking new state-based ACA exchange, GetCoveredNJ,  is live for 2021. The tool works well -- you can punch in ages and income and get results in short order. The results come with a surprise.

The new state-based supplemental premium subsidies (tacked onto federal subsidies for enrollees with incomes up to 400% of the Federal Poverty Level) average $578 per person per year ($48/month), as Governor Murphy announced this week. The key word here is "average." The new subsidies are not flat. In direct contrast to federal subsidies, they rise with income. 

For a single individual with an annual income of $19,000, a hair below 150% FPL, the state supplement is $20/month. At an income of $25,000 (just below 200% FPL), that rises to $30/month.  At $38,000 (just under 300% FPL), it's $95/month. That's the maximum, available at a solo income up to $51,040 (400% FPL).

That may seem counterintuitive, as enrollment losses in New Jersey's individual market, which have been steep, are especially concentrated at lower incomes, as illustrated below. 

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Enrollment by Income  2017-2020 
New Jersey on-exchange, as of the end of Open Enrollment Period 

Year	Total enrollment	100-150% FPL	150-200% FPL	200-250% FPL	250-300% FPL	300-400% FPL	Other  FPL
2017	295,067	45,158	77,316	49,422	30,975	37,236	54,960
2018	274,782	40,920	68,907	45,751	25,093	37.991	52.803
2019	255,246	37,683	62,459	41,884	26,623	35,877	50,750
2020	246,426	33,545	59,833	40,945	25,093	34,472	50,538
Change 2017-20	-16%	-26%	-23%	-17%	-19%	-7%	-8%

At incomes below 200% FPL, where strong Cost Sharing Reduction subsidies are available with silver plans, enrollment, enrollment is down 24% since 2017. At 200-400% FPL, it's down 15%. "Other FPL" includes those who didn't report income (presumably because they know they're ineligible for subsidies), and those who report incomes below 100% FPL and above 400% FPL. About 85% of enrollees in this category are above 400% FPL.*

Be that as it may, the allocation is informed by an actuarial study commissioned by the state Dept. of Banking and Insurance. 

Before we delve into the logic behind the subsidy structure, the numbers above require some context. Enrollment losses in the Trump era, in New Jersey as in many states, are not quite as steep as they appear above. As the Trump administration reduced the Open Enrollment Period and gutted advertising and enrollment assistance, attrition went down, as those who did enroll were likelier to be acutely aware of their need for insurance. On-exchange enrollment in the second quarter of 2020 was down 11% from Q2 2017 in New Jersey, compared to -16% as of the end of OE. Off-exchange, where all enrollment is unsubsidized, enrollment in the second quarter of 2020, 93,205 was down 6% from Q2 2017.** Total individual market enrollment was down 9% from Q2 2017 to Q2 2020.

All that said, New Jersey's 11% on-exchange enrollment loss since 2017 is in marked contrast to the performance of the 13 states (including D.C.) that run their own exchanges, as New Jersey is doing for the first time in 2021. Collectively, enrollment as of the end of Open Enrollment Season in state-based exchanges has increased slightly (less than 1%) since 2017. The end-of-OE loss since 2017 in states that use the federal exchange (as New Jersey has done) is 9% (here, too, the loss as measured in effectuated enrollment is smaller, thanks to reduced attrition). Jersey lags that average too. Why?

One likely factor is that the New Jersey market has not benefitted much from "silver loading" -- the windfall that has bolstered many state markets since Trump cut off direct federal funding for the Cost Sharing Reduction (CSR) subsidies that insurers are required to provide to low income 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.

In most states, silver loading has made zero-premium bronze plans widely available at incomes below 200% FPL, and in some regions at incmes considerably higher than that  for older enrollees (as premiums increase with age, premium spreads between the benchmark and cheaper plans also increase). In many states, too, gold plan premiums are lower, or at least not much higher, than silver plan premiums. The result has been an exodus out of silver plans at incomes over 200% FPL. Below that threshold, the value of CSR still outstrips the value of gold/bronze discounts. Still, at 150-200% FPL, silver plan selection dropped ten percentage points, from 83% to 73% from 2017 to 2020. 

In New Jersey, zero-premium bronze plans (or premiums below $1) have not been as widely available as in most states -- and gold is priced almost entirely out of reach, selected by just 1.6% of enrollees in 2020, compared to 8.3% nationally.  Nationally, bronze and gold discounts boosted enrollment by about 5% from 2017 to 2019, according to Aviva Aron-Dine's estimate. In New Jersey, though, the effect was weak. Compare metal level selection and enrollment in NJ and California.

Why is effectively free bronze relatively rare in Jersey? As David Anderson has pointed out, in 2020, the unsubsidized premium for a bronze plan in most of the state was just $70 less per month than the benchmark silver plan, whereas nationally, the average spread was $150. Anderson attributes the narrow spread to relatively low cost-sharing in New Jersey's standardized bronze plans: bronze deductibles in 2020 could not exceed $3,450.  With Coleman Drake, Anderson has published a study indicating that widely available free bronze in other states has strongly boosted enrollment, and not just in bronze plans. A price scale that begins at $0 probably stimulates enrollment in more expensive plans as well.

For 2021, deductibles in NJ's cheapest bronze plans have risen to $6,000 -- but the spread lowest-cost bronze and the benchmark has not widened dramatically; it's now $85/month for 40 year-old. The new state-based premiums, however, have brought the availability of effectively free bronze plans  (that is, premium below $1; there are no zero-premium plans in NJ)  into line with national averages. 

For a 25 year-old in most of the state, the lowest-cost bronze premium is below $1 at an income of $22,000/year. A 40 year-old can get below-$1/month bronze at $24,000/year income. For a 60 year-old, sub-$1/month bronze is available at an annual income of $35,000.

The comparatively small state-based subsidies at incomes below 200% FPL are enough to make effectively free bronze coverage available to almost everyone below that income threshold. That may be the rationale for the reverse sliding scale. 

On the downside, the smaller subsidies at low incomes leave substantial premiums in place at incomes below 200% FPL for silver plans, which carry a strong CSR benefit up to that income threshold.

For a 40 year-old with an income of $25,000 (just under 200% FPL), the lowest cost silver plan in most of the state will cost $86/month. The deductible is $800; the out-of-pocket maximum is $2,600. The lowest cost bronze plan is $17/month, with a deductible of $6,000 and an OOP max of $7,000. Last year, cheapest silver would have cost about $125/month. 

A strategy seeking to maximize enrollment at incomes below 200% FPL would aim to make CSR-enhanced silver still cheaper. The current strategy may well have its strongest effect at incomes in the 200-400% FPL, though hopefully it will be stimulative at lower incomes too. On the downside, effectively free bronze may lure more low income enrollees out of silver plans, in which CSR makes actual healthcare affordable.

Word is just in from CMS that marketplace premiums have dropped this year, and they've dropped most dramatically for gold plans. Lowest-cost gold is down an average of 6%, versus a 1% average drop for silver and bronze plans. Since 2017, gold enrolment has doubled, from 4% to 8% of all enrollment. On an actuarial basis, however, the effect of silver loading on gold premiums has been weak.*** CSR raises the average actuarial value of a silver plan to a level above gold AV, but gold remains more expensive than silver in most markets. That may change in many markets this year. But not in New Jersey. The premium for the lowest-cost gold plan available on-exchange is $637/month -- $249 above lowest-cost silver.

Arguably, New Jersey could get as much benefit by inducing insurers to maximize silver loading effects as they'll get out of supplemental subsidies. But the subsidies should boost enrollment.

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Related:

Weak silver loading and state-based subsidies in New Jersey's ACA marketplace
New Jersey poised to add state-based subsidies to ACA marketplace

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* In 2016, 4% of New Jersey enrollees who reported income had income below 100% FPL, suggesting about 7,600 enrollees below that level in 2020. 2016 is the last year that HHS broke out enrollment below 100% FPL. 

** Off-exchange enrollment, which plunged 14% in 2018 as premiums soared by more than 20%, recovered about half that loss in 2019, when the state implemented a reinsurance program and premiums dropped an average 9% below 2018 levels. 

*** Analysts who forecast silver loading effects while direct CSR reimbursement was under challenge, beginning with the Urban Institute's Linda Blumberg and Matt Buettgens in January 2016 and including the Congressional Budget Office in August 2017, expected that gold plans priced below silver would become the norm. That has not been the case.