Premiums down, out-of-pocket costs up up up: The post-ARPA case for maximal silver loading

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I have repeatedly made the case that CMS should follow the lead of several states and mandate strict silver loading* in the ACA marketplace-- that is, require insurers to consistently price gold plans below silver plans, since the average actuarial value of silver plans is higher than the mandated AV for gold plans (80% -- i.e., the plan is designed to cover 80% of the average enrollee's costs). 

In recent posts, I have spotlighted New Mexico's maximized mandatory silver loading: in 2022, the state required insurers to price silver plans as platinum-equivalent, since silver plans are platinum-equivalent for enrollees with incomes below 200% FPL ($25,7600 for an individual in 2022).  The regulation is designed to be a self-fulfilling prophecy: if gold plans are priced well below silver, no one with an income over 200% FPL should buy silver plans.  In 2022, gold plans are in fact priced well below silver plans throughout New Mexico.

Since silver loading began in 2018, the main case for maximizing it has simply been that the ACA marketplace has always been under-subsidized, and a state or CMS can alleviate high enrollee costs without help from Congress. That case may appear less urgent after the American Rescue Plan Act (ARPA), enacted this past March, sharply increased premium subsidies. The draft Build Back Better bill would extend those subsidy boosts through 2025.

But the case for strict silver loading remains strong. While ARPA reduced premiums, it did not reduce out-of-pocket costs, and these have risen relentlessly at each metal level, driven by medical inflation, which is always higher in the commercial market.  Strict silver loading is a way to roll back that rise for enrollees with incomes above 200% FPL; it's a kind of back-door CSR for enrollees above that income level. (Moreover, the BBB bill is not a done deal, 2025 is not the end of time, and strict silver loading would mitigate a far-from-unlikely expiration of the subsidy boost.)

Back in the fall of 2013, I was shocked to read that average bronze plans deductibles in the new marketplace (effective Jan. 1, 2014)  would exceed $5,000.  In 2022, if history is any guide, silver plan deductibles will likely exceed that threshold. Average gold plan deductibles in 2022 may approach the silver plan average for 2014.

The chart below shows the rise in deductibles since the ACA's marketplace's launch in 2014, according to KFF. Averages are for plans with no separate deductible for prescription drugs (as is the case for more than 80% of enrollees). 

Average Deductibles at major metal levels, ACA marketplace, 2014-2021

Year	Bronze	Silver	Gold
2014	$5,113	$2,425	$1,101
2018	$6,002	$4,034	$1,194
2021	$6,921	$4,816	$1,641

    Source: Kaiser Family Foundation

Caveat: deductibles are an imprecise stand-in for overall out-of-pocket costs, and plan design practices have shifted over time. I believe that silver and gold plans offer more services not subject to the deductible than they did in the marketplace's early years. Conversely, Oscar and other insurers have introduced zero-deductible bronze plans in recent years. Marketplace plans in fact offer a bewildering maze of copays, coinsurance, tiers, and services subject/not subject to the deductible. 

But while imperfect, average deductibles offer a reasonable snapshot of the rise in out-of-pocket costs in marketplace plans. Another proxy is the annual highest allowable out-of-pocket maximum, which is reached by many marketplace plans, including silver and gold ones. In 2014, the highest allowable MOOP was $6,350. In 2022, it's $8,700.

The pattern of rising deductibles shows some variation in silver plans enhanced by the three levels of CSR (the lower the income, the stronger the CSR). The differing pattern here bolsters the case for mandating strict silver loading.

Average deductibles for CSR-enhanced silver plans, ACA marketplace, 2014-2021

Year	CSR 94% AV	CSR 87% AV	CSR 73% AV
2014	$183	$582	$1,949
2018	$234	$817	$2,973
2021	$177	$800	$3,385

Source: Kaiser Family Foundation

While deductibles have risen sharply and steadily at the weakest level of CSR, the trend has been rolled back slightly at the mid-level (87% AV), and fully reversed at the highest level (94% AV). This is no accident: it illustrates that competition is most intense for the lowest income enrollees. More than half of on-exchange enrollees in ACA-compliant plans have incomes below 200% FPL, and over 80% of them choose silver plans. Low income enrollees are highly price-sensitive, so insurers that offer lowest-cost silver plans tend to dominate the market. 

Moreover, utilization by high-CSR enrollees has proved to be lower than the creators of the ACA risk adjustment formula, which compensates insurers whose enrollees are higher-risk than average and penalizes those with below-average risk scores, forecast. (That's likely because the comparatively low out-of-pocket costs feel prohibitively high at these income levels.)  The risk adjustment formula thus favors silver plans, and insurers, left to their own devices, have underpriced them since the silver loading era began in 2018. While various analysts forecast that pricing CSR directly into silver plans would lead to gold plans being priced consistently below silver, that has happened only occasionally and haphazardly in states that do not mandate it.

In August 2017, anticipating Trump's cutoff of direct federal reimbursement of insurers for the cost of CSR, CBO estimated that silver loading (pricing CSR into silver plans only) would add $194 billion to federal premium subsidies over 10 years. That's close to CBO's recent estimate of the 10-year cost of making the ARPA subsidy boosts permanent ($209 billion). Anticipated silver loading costs have probably not panned out so far, as silver loading practice has been weaker than anticipated.  But the potential to boost the practice -- and its cost, i.e., its value to enrollees -- remains a powerful policy lever for CMS -- or, failing action on that front, for individual states.

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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. 

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