Thursday, October 14, 2021

bewellnm launches with *really* cheap gold plans; some confusion at low incomes likely

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New Mexico's newly minted state-based ACA exchange, bewellnm, has launched plan preview shopping for 2022.

What's noteworthy: uniquely, the New Mexico Office of the Superintendent of Insurance has instructed insurers selling in the state individual market to price silver plans on the assumption that no one who does not qualify for strong Cost Sharing Reduction (CSR)-- that is, no one with an income above 200% of the Federal Poverty Level -- will buy silver.  In other words, silver plans must be priced more or less as if they're platinum* -- since they are in fact platinum-equivalent at incomes below 200% FPL.  Platinum plans (which are almost nonexistent) have an actuarial value (AV) of approximately 90%. CSR brings silver plan AV to 94% for enrollees with income up to 150% FPL, and 87% for those in the 150-200% FPL income range.

This is meant to be a self-fulfilling prophecy: if gold plans (approximately 80% AV) are priced below silver plans, no one who doesn't get the high CSR value should buy silver. Silver plans for enrollees who don't qualify for CSR (income above 250% FPL) have an AV of 70%; those who qualify for negligible CSR (income 200-250% FPL) get an AV of 73%.   Why buy silver if it offers a lower AV than gold -- -but costs more?

In Albuquerque in 2022 (zip code 87107), gold is priced well below silver, as planned. For a 40 year-old ineligible for subsidies (income $100,000**), the lowest-cost gold plan costs $288 per month; the lowest-cost silver plan is $320 per month. Six gold plans, with deductibles ranging from $750 to $2300, are cheaper than the cheapest silver plan, which has a deductible of $5450.  The second cheapest (benchmark) silver plan, at $337/month, has a deductible of $4250. Who would buy silver in these circumstances?

For a single enrollee with an income of $32,000 (just out of CSR eligibility range), the lowest cost bronze plan costs $7 per month; lowest cost gold, $61/month; and LC silver, $91. 

Potential trouble in the mid-CSR range

There is a danger of unintended consequences among enrollees with incomes in the 150-200% FPL range, where the second-strongest level of CSR is available. At an income of $24,000 (a bit below 200% FPL), in the same Albuquerque zip code, a 40 year-old will pay $16/month for lowest-cost silver plan (deductible $1200), $33/month for the benchmark silver plan (deductible $500), and $0 for the four cheapest gold plans available -- one of which has a deductible of $750. Some will go for gold. *** 

That may look sensible to many, but it obscures a major advantage of high-CSR silver: a much lower annual out-of-pocket (OOP) maximum.  For the two cheapest silver plans, the OOP maxes are $2200 and $2500, respectively. In the four zero-premium gold plans, the OOP max ranges from $4500 (unusually low for gold plans nationally) to $8700 (the highest allowable). 

Inexplicably, the NM exchange, bewellnm, obscures the OOP max: it's two clicks away from the initial display, and not even marked as such (you have to first click on "plan details," and then click again on "plan details," the top item appearing in a list of specific plan features).  The norm for ACA exchanges is to show the OOP max with the premium and deductible in the top-line summary, seen in the list of available plans.

The new exchange further obscures the issue in its plan recommendation tool. Most such tools default to a silver plan recommendation for enrollees with incomes up to 200% FPL, because CSR is a major free added benefit, available only with silver plans. Bewellnm instead asks what's more important to you: "low monthly payments," "costs...easier to predict," or "costs...somewhere in between." Pick "low monthly payments," and the tool defaults to gold. 

The tool does show estimated total costs for each plan, and at an income of $24,000 (individual) they're roughly similar for the cheapest gold and silver plans. It also shows "estimated costs in a bad year" -- and those estimates are much lower in silver plans, thanks to the much lower OOP max. But that's easy to miss -- and not associated with the contrasting OOP maxes, which are all but invisible.

It's possible that a prospective enrollee who qualifies for strong CSR will rationally go for gold rather than silver to obtain a desired plan network or other feature. For example, for our 40 year-old with an income of $24,000 in Albuquerque, a gold Blue Cross plan with a deductible of $750 is available for zero premium, while the lowest-cost Blue Cross silver plan costs $47 per month (as noted above, other silver plans are considerably cheaper). That said, the OOP maxes should be prominently visible, inducing the shopper to take them into account with premium and deductible.

The New Mexico pricing structure will provide affordable gold plans to enrollees with incomes above 200% FPL -- mitigating the ACA marketplace's very high out-of-pocket costs for enrollees above that threshold. Messaging flaws on the exchange, however, may expose a significant number of lower income enrollees to dangerously high OOP maxes. 


*Technically, insurers in New Mexico's individual market are required to price silver plans at 1.44 times what they would charge for a silver plan with an AV of 70% (i.e., silver with no CSR). The market pricing guidance for 2022 instructs,  "To account for CSR payments not being reimbursed, a CSR Defunding Adjustment of 1.44 should be applied to on-exchange silver plans to reflect a mix of enrollment in CSR 87 and CSR 94 variants."  The "defunding" refers to Trump's October 2017 cutoff of direct reimbursement of insurers for the value of CSR. Before 2018, CSR was not priced into premiums because the federal government paid insurers directly for the extra value CSR provides to silver plans. The pricing in of CSR in silver plans only (not subject to strict guidance in most states) is commonly known as "silver loading." Among six states that mandate or will mandate strict silver loading, New Mexico is unique in mandating silver pricing that assumes no silver purchase at incomes above 200% FPL. 

** In 2022, the benchmark (second cheapest) silver plan costs no more than 8.5% of income for anyone who's otherwise eligible for subsidies (i.e., a citizen or legally present noncitizen who lacks access to other "affordable" insurance). For a single 40 year-old with an income of $100,000 in Albuquerque, benchmark silver costs less than 8.5% of income; hence, no subsidy.

***In 2022, silver plans are free at incomes up to 150% FPL, so the problem is not so acute below that threshold.

Photo by Ian Beckley from Pexels

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