Tuesday, October 19, 2021

New Mexico models a platinum benchmark for the ACA marketplace

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I'd like to delve a bit deeper into the metal level pricing in New Mexico's 2022 marketplace (discussed in the previous post), since it's a potential model for the whole country. Plans available for 2022 can now be previewed on New Mexico's new state-based exchange, bewellnm.

For 2022, the state's insurance department instructed insurers to price silver plans as if they have platinum value. That's because, for enrollees with incomes up to 200% FPL, silver plans do have platinum value, thanks to the Cost Sharing Reduction (CSR) subsidies available to low income enrollees, which attach to silver plans only. Most silver plan enrollees in New Mexico have incomes below 200% FPL, and the pricing instructions are meant to be a self-fulfilling prophecy: if gold plans cost less than silver, then no one with an income over 200% FPL will buy silver plans. Since premium subsidies are set to a silver benchmark, gold will be available below benchmark, i.e. below the level deemed affordable by ACA criteria.

The pricing instructions have worked as designed. For a single 40 year-old with an income of $34,000 in Albuquerque ( a bit over 250% FPL, i.e. above eligibility for CSR), the cheapest bronze plan has a premium of $32/month, the cheapest gold plan is $86/month, the cheapest silver is $116/month, and the benchmark silver plan (second cheapest, against which the subsidy is set) is $133/month. Silver is thus out of the question, and there's a viable choice between bronze and gold (a bronze HSA, with its statutory lower out-of-pocket maximum of $7000, is available for $35/month). 

For a 60 year-old, unsubsidized premiums are about twice those available at age 40, which means the subsidy rises to cover the added cost to the benchmark silver plan, increasing discounts in plans priced below the benchmark. At age 40, the subsidy in Albuquerque at an income of $34,000 is $204; at age 60, it's $558. For plans that cost less than the benchmark, the discounts deepen with age. For a 60 year-old, the cheapest bronze plans are available for $1/month, the cheapest gold plan comes in at $37, and the cheapest silver at $103. The benchmark silver plan costs $137/month.

What I didn't really delve into in the last post is the potential that gold plans might offer a viable cheaper option to some enrollees who are eligible for strong CSR, i.e., those with incomes in the 150-200% FPL range (at incomes up to 150% FPL, the benchmark silver plan with the highest level of CSR is currently available for free in all markets). Back in 2014, I wondered whether CSR ought to attach (at a lower level of coverage) to bronze plans, because silver plan premiums struck many prospective enrollees with income near 200% FPL as quite expensive. In Open Enrollment for 2021, before the American Rescue Plan Act (ARPA) strongly increased marketplace subsidies, an enrollee with an income of 200% FPL (a bit over $25,000/year for a single person) paid about $135/month for benchmark silver.  While bronze plans were generally much cheaper, the gulf in value between high-CSR silver (87% actuarial value) and bronze (60% AV) was so wide, and out-of-pocket expenses for bronze are so steep, that bronze was not really a viable option for most in this income range -- though enrollees in this income bracket were increasingly choosing bronze.

Alert readers (as Dave Barry used to say) may note that benchmark premiums in the example above (now obtained at an income of 264% FPL) are within a couple of dollars of what they used to be at 200% FPL.  Pre-ARPA, gold would have been a truly compelling option for many enrollees in the 150-200% FPL income bracket -- look again at the price spreads outlined above. 

Even at ARPA-enhanced subsidy levels, gold still may make sense for some. As actuary Greg Fann pointed out to me, if pricing is truly proportionate to AV, then gold, priced for 80% AV, should have a slight advantage in the 150-200% FPL bracket over silver, where silver is priced at approximately 90% AV but designed to offer 87% AV (though wiggle room allowed insurers around the statutory AV can negate this difference).

Under the ARPA pricing scheme (in effect through 2022, and likely but not sure to be made permanent in the pending reconciliation bill), low benchmark silver prices below 200% FPL erase some but not all of the gold pricing advantage. In Albuquerque, the cheapest silver plan for a 40 year-old at an income of $25,000 (a tad below 200% FPL), costs $17/month, while benchmark silver is $37/month. Three gold plans are available for zero premium, and two more for single-digit premiums.

At this income level, the chief advantage of a CSR-enhanced silver plan over gold is the annual maximum out-of-pocket cost (MOOP), which by statute can't exceed $2900 at this income level. In Albuquerque, the two cheapest silver plans at this income level have MOOPs of $2200 and $2500, respectively.  Gold plans, in contrast, can carry a MOOP as high as $8700, and often do. By buying low-cost gold plans, enrollees may save, say $200-500 on premiums, but they expose themselves to up to $5500 in out-of-pocket costs if they incur significant expenses -- say, a single hospital admission.

The calculus is somewhat complicated -- in Albuquerque and in fact throughout New Mexico -- by a Blue Cross gold plan with an unusually high deductible ($2000) but an unusually low (for gold) MOOP, $4500.  That plan costs under $3/month for a 40 year-old at $25,000 income in Albuquerque. Other variables, such as provider networks or drug coverage, may be dispositive for many. 

Albuquerque, New Mexico's largest city, is in the state's highest-enrollment county, Bernalillo. Premium spreads between silver and gold are substantially similar in Santa Fe and Las Cruces, cities in the two counties (Santa Fe and Doña Ana) with the next highest enrollment. The pricing structure is also similar in McKinley County, which is near the state median in enrollment, although there the lowest-cost silver plan at age 40/income $25k is just $6/month.

Steep discounts in gold and bronze plans were stimulated beginning in 2018, after Trump cut off direct reimbursement of insurers for the value of CSR in October 2017. In years prior to 2018, silver plans were priced as if the AV were always 70% (the baseline without CSRJ), since CSR was reimbursed separately. Since then, "silver loading" -- pricing the value of CSR into silver plans -- has been significant but haphazard, with insurers granted substantial latitude in most states. As of 2021, three states -- Maryland, Pennsylvania and Virginia -- had required insurers by one means or another to price in CSR according to formula -- leading to gold being priced roughly on a par with silver in most regions of those states. New Mexico is the first state to require insurers to price silver as if it's available only at the two strongest levels of CSR (94% and 87% AV), rather than effectively averaging out AV for all their silver plan enrollees (e.g., enrollees obtaining AVs of 94%, 87%, 73% or 70%). 

Technically, New Mexico instructed insurers to price silver plans at 1.44 times what they would charge for silver at 70% AV - compared to a CSR pricing factor of about 1.2 (varying slightly each year) in Pennsylvania.  CMS could follow New Mexico's lead and mandate a 1.44 ratio nationally, effectively establishing a platinum benchmark and so making gold a discount metal level. That would entail fixing the current risk adjustment formula, which currently favors silver plans and thus motivates insurer to underprice silver, as they do in most states. I made that case with David Anderson in Health Affairs. This year, New Mexico offers a test case.

Other states have had extreme, sometimes almost ridiculous, discounts in gold (and sometimes lowest-cost silver) plans in some years. But those discounts are haphazard, and have in many cases been at the sole discretion of a monopoly insurer. New Mexico is the first state to impose a platinum pricing ratio on silver plans and obtain relatively uniform, proportionate gold discounts at this level from multiple insurers across the state. Bernalillo, Santa Fe and Doña Ana counties -- the state's 3 largest by enrollment, accounting for about 60% of state enrollment -- all have six insurers; so does McKinley County, with just 420 enrollees. 

P.S. bewellnm has a potentially useful cost estimate tool, but so far its estimate of your "Total Cost in a Bad Year" includes the unsubsidized premium, regardless of your premium subsidy. Be kind; it's a soft launch; they'll get it right...

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