The dark side of free bronze plans: Erosion of CSR silver enrollment accelerates

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While the 2021 Open Enrollment Report for the ACA marketplace released by CMS yesterday shows an overall increase in enrollment over 2020, the attendant Public Use Files show acceleration in a troubling trend: decreased selection of silver plans by enrollees with incomes below 200% of the Federal Poverty Level. Selecting bronze below that income threshold, as almost all who don't select silver plans do, means forgoing the strong Cost Sharing Reduction (CSR) that attaches to silver plans only. 

Silver Plan Selection at 100-200% FPL
HealthCare.gov states

Year	Total enrolled	Silver enrolled	Percent silver
2017	5,258,797	4,574,172	87.0%
2018	4,865,014	4,152,230	85.4%
2019	4,712,094	3,944,471	83.7%
2020	4,725,360	3,864,275	81.8%
2021	4,933,622	3,830,086	77.6%

Source (all enrollment tables): CMS State-level Public Use Files. See note below.

For enrollees below the 200% FPL income threshold, silver plans are enhanced by strong Cost Sharing Reduction subsidies that sharply reduce out-of-pocket costs. CSR raises the actuarial value of a silver plan (the percentage of the average enrollee's medical costs allegedly* paid by the plan) to 94% for enrollees with incomes up to 150% FPL and to 87% for those with incomes in the (150-200% FPL) range.  Bronze plans have an actuarial value of approximately 60%. Here's how that difference translates into deductibles in the 36 states using the federal exchange, HealthCare.gov, according to the OE Report:

The annual out-of-pocket maximum nationwide for a silver plan in 2021 averages about $1200 at incomes up to 150% FPL and about $2500 at incomes from 150-200% FPL, according to the Kaiser Family Foundation. I don't have an average OOP max for bronze plans, but it's almost surely north of $8,000 (as is silver without CSR).  

The wide availability of free bronze plans since 2018, thanks to the silver loading** that began that year after Trump cut off direct reimbursement to insurers for CSR costs in October 2017, has eaten into silver selection at low incomes. More than half of enrollees with incomes up to 200% FPL are likely eligible for free bronze plans (see KFF estimates by income and county here). During Open Enrollment for 2021, benchmark silver plan premiums were $29/month for those with incomes up to 138% FPL, $64/month at 150% FPL, and about $135/month at 200% FPL.  (The benchmark plan, against which subsidies are set, is the second cheapest silver plan. In some markets, the cheapest silver plan is significantly cheaper.)

The decline in silver selection and increase in bronze selection among those eligible for strong CSR is most acute at the upper end of the income bracket, 150-200% FPL, where benchmark silver plans cost between 4.1% and 6.5% of income.

Enrollment by metal level at 150-200% FPL
HealthCare.gov states

Year	% bronze	% silver	% gold
2017	14.5%	83.2%	1-2%
2018	18.2%	78.4%	2.5%
2019	20.6%	76.3%	2.9%
2020	23.9%	72.9%	2.9%
2021	30.0%	66.8%	3.0%

 

Before this year, silver selection held relatively steady at 100-150% FPL, just downticking from 89% in 2017 to 87% in 2020. But this year, silver takeup at this lowest income/highest CSR level slid to 83%.

Perhaps the pandemic was a factor in the shift toward bronze, throwing cash-strapped people into the marketplace.  In states that have refused to enact the ACA Medicaid expansion, enrollment increased 10% in 2021, while it was flat in expansion states. In nonexpansion states, supplemental emergency unemployment insurance may have pushed a number of people over the 100% FPL threshold, qualifying them for premium subsidies.  Perhaps even relatively small premiums are a deterrent in those circumstances. But this is just speculation.

The American Rescue Plan Act, enacted on March 11, 2021, has now made benchmark silver coverage free at incomes up to 150% FPL through 2022, and available at 0-2% of income at 150-200% FPL. That should halt the slide in silver selection at low incomes. In fact, enrollment assisters will probably be encouraging current low income enrollees in bronze plans to switch to silver right now, as the extended emergency Special Enrollment Period in effect through August allows.  While some who switch metal levels might lose money spent toward their deductibles at out-of-pocket maximums, those thresholds are so much lower in high-CSR silver plans, the switch will usually be worth it.

At incomes above 200% FPL, the flight from silver plans makes perfect sense, as CSR is weak-to-nonexistent above that threshold and silver loading has created steep discounts in bronze and sometimes in gold plans. Silver loading has stopped halfway, however: these discounts are neither as large nor as consistently available as they should be, particularly in gold plans. At 200-400% FPL, gold selection declined slightly in 2021, while bronze continued to surge.

Enrollment by metal level at 201-400% FPL
HealthCare.gov States

Year	Total bronze	% bronze	Total silver	% silver	Total gold	% gold	Total
2017	969,190	34%	1,706,780	60%	173,881	6%	2,851,601
2018	1,299,845	45%	1,251,385	43%	337,995	12%	2,891,851
2019	1,428,582	50%	986,957	35%	427,824	15%	2,863,824
2020	1,518,120	55%	795,248	29%	404,302	15%	2,737,184
2021	1,550,459	62%	584,721	23%	342,105	14%	2,496,779

Unless and until Democrats supplement improved premium subsidies with increases in actuarial value at every income level, silver loading will remain relevant, and Biden's CMS should take regulatory action to maximize it. If the current premium subsidy structure is made permanent, bronze plan selection at low incomes should go into reverse. 

Related: ACA marketplace 2020: CSR takeup continues to erode

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* Actuarial value allegedly reflects the percentage of the average enrollee's annual medical costs that will be paid by the insurer. At present, the small minority of enrollees who rack up tens or hundreds of thousands of dollars in medical costs skew the averages, as Bill Gates walking into a bar skews the average income of those present. Thus a plan that by AV formula covers 70% of "the average enrollee's costs" may have a $5,000 deductible and require 40% coinsurance for most services. For 99% of enrollees, that plan doesn't come close to covering "70% of costs."  One way to reduce out-of-pocket costs at all incomes in the ACA marketplace without legislation would be to change the AV formula to omit the highest-risk enrollees, who skew the average. 

** 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 CSR. 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. Those discounts in turn have been driving upper-income enrollees out of silver plans, so that a large majority of silver plan enrollees obtain plans with actuarial values of 94% or 87%. On average, silver plan AV exceeds gold AV (80%). Reduced silver selection at incomes below 200% FPL erodes that effect, however. 

Note on tabulations: Silver selection as a percentage of total enrollment at 100-200% FPL is not a perfect measure of CSR takeup, as a small percentage of enrollees in this income group are not eligible for subsidies (e.g., because of an affordable offer of insurance from an employer). CMS also breaks out enrollment in silver plans at CSR with 94% AV and 87% AV, and those totals are nearly identical to silver enrollment at 100-200% FPL (3,830,066 enrolled in silver; 3,828,086 enrolled in CSR 94/87). But legally present noncitizens with incomes under 100% FPL who are time-barred from Medicaid enrollment are eligible for ACA subsidies. In California, subsidy-eligible enrollees below the Medicaid eligibility threshold (138% FPL) account for about 2.4% of total silver enrollment.  One further clue: at 150-200% FPL, 98% of silver plan enrollees obtain CSR87 (1,027,009 with CSR out of 1,047,106 with silver).  If 98% of silver plan enrollees at 100-150% FPL likewise obtain CSR, then approximately 71,530 CSR94 enrollees in HealthCare.gov states have incomes below 100% FPL.

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