In Health Affairs: The Biden administration should complete the silver loading revolution

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The Covid relief legislation making its way through Congress would vastly increase premium subsidies in the ACA marketplace for two years but would not touch out-of-pocket costs. Premium subsidies would still be set against a silver benchmark -- that is, designed to make the second-cheapest silver plan "affordable." At incomes over 250% FPL, silver plans have deductibles averaging $4816.

In Health Affairs, David Anderson and I have a post positing that the Biden administration can complement the subsidy boosts by requiring insurers to price gold plans below silver plans. That is, by requiring full "silver loading."

Silver loading is a premium pricing practice that began in 2018 in response to Trump's abrupt cutoff in October 2017 of direct reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they must provide to lower income enrollees who select silver plans. State regulators responded by permitting insurers to price CSR into silver plans only, 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.  

Thanks to CSR, which most silver-plan enrollees receive, silver plans have a higher actuarial value on average than do gold plans. With CSR priced into silver plans, gold plans should be cheaper, and analysts who forecast the outcome of ending separate CSR reimbursement expected as much. But, as we point out:

silver loading has stopped halfway....discounts generated by silver loading have been partial and haphazard. They're available in one zip code and not the next; they appear one year and disappear the next. Gold plans priced below the silver benchmark are available in some but not most markets.

The Biden administration can change that, we argue, by  requiring insurers to price plans at each metal level in strict proportion to their actuarial value. That's not quite as simple as it sounds, but it's not terribly complicated either. Doing so would guarantee that every prospective marketplace enrollee would have access to a plan with an actuarial value of 80% (gold) or higher (high-CSR silver, available at incomes up to 200% FPL).

Mandating full silver loading could be done in concert with another regulatory action I've written about - - changing the actuarial value formula so that the estimate of the "average enrollee's costs" is not skewed by the astronomical costs incurred by patients with the highest risk scores. That would reduce out-of-pocket spending at each metal level. 

The Health Affairs post includes a hat-tip to actuaries Greg Fann and Daniel Cruz, who have been advocating for mandatory maximal silver loading for at least a couple of years. It makes the most concentrated case we can manage, which is convenient for me, as I've often wanted to link to it or quote it as it's hung fire for the last couple of months.

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