Thursday, December 16, 2021

Swinging benchmarks, meaningful difference, market stability and market chaos

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My last post focused on the steep premium hikes that can hit ACA marketplace enrollees if they passively let themselves be auto-reenrolled in their current plan for the year following. In brief: if the benchmark (second cheapest silver) premium shrinks (say, because a new discount insurer enters the market), so does the subsidy. If the enrollee's current plan premium in turn increases, it's a double whammy. 

The major increase in ACA marketplace subsidies enacted when the American Rescue Plan Act (ARPA) passed in March 2021 does not alter this dynamic. If the benchmark silver plan is available to you for free -- as it is now for some two million enrollees -- and your silver plan premium exceeds the benchmark by $139 per month, you'll pay... $139 per month. Louise Norris shows an even more extreme example of a one-year premium increase for a subsidized enrollee.

In fact, large benchmark swings may be more common this year than in years past. Insurer participation in the ACA marketplace has surged this year, probably prompted by the ARPA subsidy boosts, which followed several years of price stability and profitability. CMS reports that the average enrollee has between 6 and 7 insurers to choose from in 2022, compared to between 4 and 5 in 2021 -- an increase of 44% if you take the midpoint (6.5 vs. 4.5).  Among the insurers expanding their footprint in 2022 are discounters Bright, Centene, Friday, and Molina. The average benchmark premium dropped 3% nationally, according to the Kaiser Family Foundation.

A parallel problem, adding to the confusion inherent in marketplace structure for those who do check out their options, is an overabundance of plan choice. In 2022, the number of plans available to the average marketplace enrollee soared from 61 to 108 -- a 77% increase. In Dallas, 164 plans are available on-exchange. In Miami, 263.

This choice chaos was deliberately exacerbated by the Trump administration. In advance of Open Enrollment for 2019, CMS under Seema Verma's leadership eliminated a requirement that plans offered by a given insurer be "meaningfully different" from one another. That is, a reasonable consumer should be able to identify one more material differences in cost sharing, provider networks, covered benefits, or plan type (CFR § 156.298 (b)). The Biden administration has not yet restored or amended this requirement (as David Anderson points out to me, there was not time to do so for 2022). 

Consequently, insurers flood the zone with offerings like those pictured below. These quotes are for a single 40 year-old with an income of $25,000 (just low enough to qualify for strong Cost Sharing Reduction attached to silver plans). I've used the "insurer" filter to place one carrier's offerings together, and I've sampled silver plans only. Quotes are via HealthSherpa, which makes it easier to drive between zip codes than the plan shopper.

Dallas (zip code 75051)

Miami (zip code 33127) get the idea. I'll spare you the next 10 Florida Blue silver plans. Go try to sort the meaningful differences.

On the plus side, it's fair to hypothesize that market competition is holding premiums down. Following the huge premium increases of 2017 and 2018 (the former understood as a one-time market correction, the latter largely a results of legislative and regulatory assault from Republicans in 2017), premiums have been all but flat since 2019, and insurer participation has grown in every year since 2019. That price stability presumably held down the cost of the ARPA subsidy increases, which made coverage more affordable for almost all participants. But restoring meaning to the "meaningful difference" requirement would also help enrollees.  

As an alternative to parsing "meaning" like literary critics, health insurance scholar David Anderson has proposed simply requiring that an insurer's plans in a given metal tier differ in premium by at least 3%.  Difference defined by price would encourage insurers to exploit the allowable variation in actuarial value at each metal level (expanded by the Trump administration) to offer plans of genuinely different value at each metal level.  Per the offerings posted above, I'm not sure 3% would make an, um, meaningful difference. But differentiating by price might be the way to go.

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