Thursday, May 06, 2021

ARPA should reduce underinsurance in the ACA marketplace

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  • While free bronze plans have been widely available to low income marketplace enrollees since 2018, the American Rescue Plan makes free or very low-cost silver plans with much lower out-of-pocket costs widely available.

  • Bronze plan enrollment at low incomes spiked during Open Enrollment for 2021

  • The American Rescue Plan may already be reversing the drift toward bronze at low incomes

The Urban Institute estimates that if the American Rescue Plan Act's increases to subsidies in the ACA marketplace are made permanent, enrollment will increase by 5.1 million, and the uninsured population will be reduced by 4.2 million. The enhanced subsidies are funded only through 2022 at present.

Urban foresees most of this enrollment increase -- about three quarters of it -- occurring at incomes over 200% of the Federal Poverty Level.  But ARPA should also reduce underinsurance, primarily at incomes below 200% FPL.

While ARPA does not reduce out-of-pocket costs at any metal level, it does make silver plans, which come with strong Cost Sharing Reduction (CSR) subsidies at incomes up to 200% FPL, much more affordable to low income enrollees. 

The benchmark (second cheapest) plan is now free at incomes up to 150% FPL. To that threshold, CSR raises the actuarial value of a silver plan to 94%. That translates to an average deductible of $177 and average out-of-pocket maximum of $1,189, according to KFF

At 150-200% FPL, the benchmark  now costs 0-2% of income. That tops out at $43/month for an individual at 200% FPL ($25,520/year). In this income bracket, CSR takes the actuarial value to 87%. The average deductible is $800 and the average out-of-pocket max is $2,528. 

Bronze plans, in contrast, have an average deductible of $6,921 and out-of-pocket maxes usually over $8,000. But bronze plan selection at incomes below 200% FPL has been creeping up ever since 2018, after Trump triggered silver loading* by cutting off direct funding for CSR in October 2017. That made free bronze coverage widely available at low (and sometimes not-so-low) incomes. Just prior to ARPA's enactment this March, 4 million uninsured Americans were eligible for free bronze plans, according to KFF's estimate.  As I noted recently, silver plan selection in HealthCare.gov states at incomes under 200% FPL dropped from 87.0% in 2017 to 81.8% in 2020 to 77.6% in 2021.

In Open Enrollment for 2021, enrollment at low incomes surged in the 14 states that have not yet enacted the ACA Medicaid expansion. The supplemental unemployment insurance provided by the CARES Act, probably played a role, as it pushed some people over the 100% FPL threshold for subsidy eligibility in the marketplace. At the same time, the shift to bronze plans among low income enrollees accelerated in those twelve states and nationwide, as illustrated below. Compare metal level selection at low incomes in 2020 and 2021:

Takeup of Silver Plans with Cost Sharing Reduction in Nonexpansion States: 2020

    Source: CMS public use files

Takeup of Silver Plans with Cost Sharing Reduction in Nonexpansion States: 2021

Source: CMS public use files

A few things to note here:

1. Enrollment at under 200% FPL in fourteen nonexpansion states accounts for more than two thirds of enrollment in those states and almost half of enrollment in all 36 states using HealthCare.gov. 

2. Silver plan selection has crashed at 150-200% FPL, dropping 5 percentage points from 2020 to 2021 and 16 percentage points nationally since 2017. That trend should go into reverse now. Pre-ARPA, a benchmark silver plan cost about $135 per month for an individual at 200% FPL ($25,520/year); it now costs $43. The cheapest silver plan in a given rating area may offer a further discount on CSR.

3. The Trump administration cut federal funding for enrollment assistance in states using HealthCare.gov (as 36 currently do) from a peak of $63 million in 2016 to $10 million in 2018 and thereafter. The Biden administration has allocated $80 million for 2022.* While the nonprofit "navigators" funded by such assistance are not supposed to make specific plan recommendations, their mandate is to make features and choices clear to their clients. Their input should help to reverse the shift out of high-CSR silver in their mostly low income clientele.

4. As I write today, CMS has effectively announced that the envisioned shift back to silver plans is already happening. During the emergency Special Enrollment Period (effectively a second Open Enrollment) that began on February 15 and will run through August, CMS reports that along with 940,000 new enrollees, 

The ARP also helped to lower out of pocket spending costs for new consumers. The median deductible for new consumers during the SEP fell by nearly 90 percent, from $450 prior to April 1 to $50 as consumers used their increased tax credits from the ARP to choose plans with lower out-of-pocket costs.

There seems to be some error here -- unless virtually all new enrollees are reporting incomes below 150% FPL, which seems unlikely. The average deductible in plans obtained in HealthCare.gov in OE 2021 was $2,825. Still, it seems clear that more enrollees are choosing silver plans, and most of them probably are at incomes below 200% FPL.  [Update, 3:00: thinking further about the CMS deductible claim: $50 is the median deductible, not the average. That's possible, and it indicates that new enrollees' income (or estimated income) skews very low. In its end-of-OE report, CMS quoted the average deductible for CSR94 silver (silver at incomes up to 150% FPL) as just $69 in HealthCare.gov states. Florida and Texas have zero-deductible silver plans that extend up to 200% FPL at least, and those two states together account for 444,000 of the new SEP enrollments -- nearly half the total. In fact, in both states there are zero-premium bronze plans. So I suppose half of new enrollees may indeed have deductibles at or below $50.

Update, 5/7/21: Via a marketplace public use file specific to deductibles, the median deductible for CSR94 plans in HealthCare.gov states (silver plans for enrollees with incomes up to 150% FPL) in 2021 is $0, and the median for CSR87 (150-200% FPL) is $450. In Open Enrollment for 2021, 34% of enrollees in HealthCare.gov states obtain CSR94. while 41% of enrollees had incomes below 150% FPL (the vast majority of them in nonexpansion states, where marketplace subsidy eligibility begins at 100% FPL).  46% of enrollees had either CSR94 or CSR87, while 60% had incomes below 200% FPL. The $50 median deductible in the SEP appears to indicate higher CSR takeup under ARPA than in the pre-ARPA Open Enrollment period. 

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Silver loading is a 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.

** In HealthCare.gov states, funds for the "navigator" enrollment assistance program are drawn from user fees charged to insurers selling plans the exchange. The fifteen states that run their own exchanges collect their own user fees and so maintain their own enrollment assistance budgets. KFF estimates that underspending of the user fee funds by the Trump administration has left the Biden administration with some $1.2 billion in user fee carryover.

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