Thursday, August 19, 2021

What's the effect of a gold benchmark in the ACA marketplace? Three states tell a tale. And a platinum benchmark is coming.

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Bloomberg's Sara Hansard reports that six states have now taken action to require insurers in their ACA marketplaces to price plans in strict proportion to their actuarial value -- that is, to increase the effects of silver loading. (Actuarial value (AV) refers to the percentage of the average enrollees costs the plan is designed to cover, in percentages fixed by metal level.)

Maryland, Pennsylvania and Virginia required strict silver loading in 2021 (and some or all in years prior). New Mexico and Colorado have new regulations going into effect in 2022. Texas has passed a law requiring the state insurance commissioner to take the value of Cost Sharing Reduction (added to silver plans only) into account during rate review.

Silver loading as mandated in Maryland, Pennsylvania and Virginia makes gold plans at least marginally cheaper than silver plans, increasing value for enrollees with incomes above 200% of the Federal Poverty Level ($25,520 for an individual in 2021). Below that income threshold, Cost Sharing Reduction (CSR) raises the actuarial value of silver plans to a roughly platinum level.

Silver loading began in 2018, after Trump, in October 2017, abruptly cut off the direct reimbursement of insurers for CSR required by the ACA statute. Almost all state regulators responded by allowing or encouraging insurers to price the value of CSR directly into silver plans. Because ACA 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), increased silver premiums create discounts for subsidized buyers in bronze and gold plans. 

Since the vast majority of silver plan enrollees have incomes below 200% FPL, below which level silver plans have AV roughly equivalent to platinum, the pricing of CSR into silver plans should have made gold plans consistently cheaper than silver plans. That did not happen -- silver loading effectively stopped halfway, offering partial discounts in bronze and gold plans.  In 2021, the average unsubsidized lowest-cost gold premium was $482 per month, vs. $436 for lowest-cost silver. Bronze plan discounts are also smaller than strict AV-based pricing would dictate.

Partial though it was, silver loading did trigger an exodus out of silver plans at incomes above 200% FPL. Because gold plans are still usually more expensive than the benchmark (second-cheapest) silver plan, however, the bulk of the movement has been into bronze plans. Silver loading began in 2018 and reached peak intensity nationally in 2019.

Enrollment by metal level at 201-400% FPL in States


Total bronze

% bronze

Total silver

% silver

Total gold

% gold


























Source: CMS  state-level public use files.

Why do silver plans remain relatively underpriced?  More than half of marketplace enrollees have incomes below 200% FPL and so qualify for strong CSR, and insurers compete to offer the cheapest silver plans, which still dominate enrollment below the 200% FPL threshold (rightly so, since CSR below that income level makes silver plans effectively platinum, trumping the discounts created by silver loading).  

Additionally, CMS's risk adjustment formula, used to compensate insurers whose plans attract higher-risk enrollees than the norm and penalize those with lower-risk enrollees, favors silver plans, according to Stan Dorn of Families USA and other experts. The formula arguably assumes that CSR will induce more use of medical services than it does, as the reduced out-of-pocket costs are still high for low income enrollees. 

According to actuary Daniel Cruz -- an early and consistent advocate for strict silver loading -- state regulators generally allow insurers to consider factors other than actuarial value in pricing their plans at different metal levels -- and this violates the ACA statute (and implicitly, Cruz argues, CMS guidance as well). He and his colleague Greg Fann have been urging state regulators and legislatures to mandate strict silver loading -- as has Dorn.

There are basically two levels at which regulators can require more intense silver loading. First, more conservatively, they can require insurers to price silver at the average actuarial value obtained by silver plan enrollees at different income levels. Because of CSR, silver plans are offered at four AVs: 94% (at incomes up to 150% FPL), 87% ( at 150-200% FPL), 73% (at 200-250% FPL), and 70% (at over 250% FPL). Because most silver plan enrollees have incomes below 200% FPL, the average AV for all silver plans sold is usually above 80%, the statutory AV for gold plans.

Alternatively, regulators can mandate what should be a self-fulfilling prophecy: assume that all silver plan enrollees have incomes below 200% FPL, and so price silver at an essentially platinum level (90% AV). This makes sense, since if silver is priced properly even by the more conservative "average" standard, it should be more expensive than gold, and gold plans consequently should "dominate" silver plans (offer higher AV for less money) at incomes over 200% FPL. Of the six states that have taken steps to intensify silver loading, only New Mexico is requiring this strict standard, effective for 2022 (and sending Stan Dorn into transports). In 2022, New Mexico will have an effectively platinum benchmark, as silver will be priced as if all enrollees obtain AV of either 94% or 87%.

Three states -- Maryland, Pennsylvania, and Virginia -- have already issued guidance requiring the milder form of AV-proportionate pricing.  In all of them, the cheapest gold plans are modestly cheaper -- or essentially the same cost -- as the cheapest silver plans. 

Sometimes the differences are subtle. In Philadelphia, the cheapest silver plan (without CSR, i.e., at incomes over 250% FPL) has a lower deductible than the cheapest gold plan -- but a higher annual out-of-pocket maximum. A gold plan that costs just $1/month more than cheapest silver has a lower deductible and out-of-pocket max than the silver plan. The dominant insurer, however -- Independence Blue Cross -- does not offer a cheap gold plan -- but offers the cheapest silver. I am not sure how they get away with that, as their cheapest gold plan -- priced $85/month above the cheapest gold available to a 40 year-old -- apparently has the same provider network as their cheapest silver plan.

That said, the premium pricing requirements in these three states have increased the value of offerings for enrollees with incomes above the 200% FPL threshold. In these three states, gold plan selection is about 2.5 times higher than in all states that have expanded Medicaid. (In states that have refused the ACA Medicaid expansion, silver selection is much higher because about 40% of enrollees have incomes below 150% FPL and so get the highest level of CSR.)

Metal level selection in states requiring strict silver loading
Compared with all states that have expanded Medicaid


Total enrolled






     39,774 |  24%  

     54,744 |  33%

  65,815  | 40%



     91,738 |  27%  

   154,911 |  46%

  88,981  | 26%



   106,105 |  41%

   104,054 |  40%

  48,183  | 18%



   237,617 |  31%

   313,790 |  41%

202,979  | 27%

Expansion states


2,431,872 |  38%

3,157,734 |  49%

708,192  | 11%

Source: CMS state-level public use files, 2021.

To put these figures in perspective, it's important to keep in mind that more than 80% of enrollees with incomes below 200% FPL select silver plans (a percentage that should rise still higher now that the American Rescue Plan has vastly increased premium subsidies, rendering benchmark silver plans free at incomes up to 150% FPL and costing 2% of income at 200% FPL). In the three states spotlighted above, 40% of enrollees had incomes below 200% FPL. Probably 40% of enrollees with incomes above that threshold selected gold plans. (Unfortunately, CMS does not break out metal level selection by income in states that run their own exchanges, as Maryland and Pennsylvania do.)

The coming experiment in New Mexico is exciting. In past years, monopoly insurers or dominant insurers in some markets have created extreme silver loading discounts, sometimes rendering gold plans or even silver plans free at relatively high income levels. New Mexico may soon be the first state with truly proportionate pricing, however. One question is whether instituting an essentially platinum benchmark, in New Mexico and eventually elsewhere, will create a market for platinum. At present, thanks to past ACA pricing, platinum plans are not available in New Mexico, or in most states.

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