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.

The broker's tale: Louise Norris on skewed incentives in the ACA marketplace

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As noted in last week's post, the ACA exchanges rely heavily on health insurance brokers and agents to help people sort their options and enroll in ACA-compliant individual market plans. Almost half of enrollments on the federal exchange, HealthCare.gov, which currently serves 33 states, are enrolled by brokers and agents. The same is true for Covered California, the largest state-based exchange -- which, unlike HealthCare.gov,* has maintained a consistent commitment to making the marketplace work as designed since its launch in fall 2013.

The reliance on brokers was inevitable, given the complexity of marketplace offerings (check out the 221 plans on sale in Miami, the nation's largest ACA marketplace, in 2022) and the pre-existing pool of expertise, commercially funded, that brokers constituted prior to ACA launch.  And while brokers have played a vital role,** the ACA failed to align their incentives in such a way as to ensure that their participation would be an unmixed blessing. Among the problems:

• Not all insurers that participate in the ACA exchanges pay commissions to brokers. Commissions have fluctuated quite a bit over the seven years of the marketplace's existence, as well as by state, region, and individual insurer.
  
  
• The lightly regulated market for so-called Short Term Limited Duration plans fostered by the Trump administration (which rendered them neither short-term nor of limited duration, if there's a difference) pays much higher commissions than the ACA-compliant market, but serves few enrollees' best interests. STLD plans are medically underwritten, riddled with exclusions and coverage gaps, prone to balance billing, and pay as little as half of premium revenue to cover enrollees' medical claims. ACA-compliant plans are required to maintain a minimum "medical loss ratio" (MLR) of 80% -- that is, pay out at least 80% of premium revenue in claims.

How do ethical brokers deal with these conditions, and how could incentives be better aligned? To address those questions I queried Louise Norris, co-owner with her husband Jay Norris of a health insurance brokerage serving individual market customers in Colorado.

States seeking to reduce their uninsured populations must beware a Catch-22

By David M. Anderson, Charles Gaba, Louise Norris and Andrew Sprung

Note: this post is the third joint effort by David, Charles, Louise and me. Others here and here.

State policymakers have been prolific and creative in putting forward measures to strengthen their ACA marketplaces. Measures enacted since 2017 or in progress now include reinsurance programs, which reduced base premiums by an average of 20% in their first year in the first seven states to implement such programs; new or renewed state-based exchanges, which capture insurance user fees that can be used for advertising and outreach; state premium subsidies to supplement federal subsidies; and state-based individual mandates, which can provide funding for all of the above.

Policymakers must recognize, however, that these choices entail tradeoffs — and not just in budgetary constraints. Specifically, built into ACA marketplace architecture is a pricing dynamic that bedevils state attempts to improve ACA marketplace performance: reductions in premiums for unsubsidized enrollees tend to raise premiums for subsidized enrollees. Because premium subsidies are designed so that enrollees pay a fixed percentage of income for the benchmark (second cheapest silver) plan, premium increases also increase subsidies — and tend to increase the difference, or "spread," between the benchmark plan and cheaper plans.

Hey blue states: How about offering a public option off-exchange only?

Louise Norris, clearest of expositors, has some mildly ambiguous wording here that set off a lightbulb:

Colorado enacted legislation in 2019 that directed the state to explore ways to create a public option health insurance program that could offer a lower-cost alternative for people who buy their own health insurance.

Eureka: Why doesn't a state offer a public option off-exchange only? That would solve the dilemma caused by the ACA's underfunded subsidies: measures that reduce ACA marketplace premiums for unsubsidized  buyers tend to raise them for subsidized buyers.  (Colorado is not moving toward this option.) N.B. in most states, ACA-compliant plans are offered off-exchange as well as on-exchange. This public option would be ACA compliant.

I almost got snared in the short-term health insurance market

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Sarah Gantz, a Philadelphia Inquirer reporter, has done some great work spotlighting people who were snared by sales pitches for short-term health plans that left them with huge bills when they got seriously ill or injured. Her latest concerns a woman who got stuck with a $36,000 bill when her fixed indemnity plan covered only a small fraction of the tab for surgery after she broke her wrist and back (!) -- (the latter doesn't seem to have caused lasting damage):

Martin thought she’d bought a comprehensive health insurance plan through the government-regulated Affordable Care Act marketplace, healthcare.gov. But she really visited a website cunningly crafted to look like an ACA portal, which put her in contact by phone with a salesman. He sold her plan that turned out to offer only minimal coverage, and when Martin needed help, his number was disconnected.

The larger point is that since the Trump administration changed the rules to enable so called short-term, limited duration (STLD) plans to extend plan terms to up to a year, and touted them as a cheap alternative to ACA-compliant plans, deceptive marketing for such plans has exploded. Robocalls, websites meant to snare people seeking HealthCare.gov (with help from Google ads), and hard-sell-quick-sell phone techniques are well chronicled by Gantz.

Louise Norris, a broker of individual market insurance who puts her clients' interests first (and has compiled a virtual encyclopedia on the subject at healthinsurance.org), acknowledges that there is a role for STLD plans, and that not all of them are terrible. But the market is honeycombed with coverage traps.  In fact, Louise helped me, and someone I was helping, avoid perhaps the subtlest of snares in the STLD market.

Late Days of Empire Edition: Health Wonk Review

We're addled on many fronts here in Trumpville, and this week's Health Wonk Review reflects that. We have snapshots of a country that continues to trail its peers in population health measures; an opioid vendor looking to short-circuit potential tobacco industry-level liability; an individual market for health insurance offering unaffordable plans to many of the unsubsidized, and freakish bargains to some of the subsidized; and, for a little futuristic relief, a human resources tech vendor that may chain healthcare data to a block, where it shall remain unaltered forever and ever.

At Workers' Comp Insider, Tom Lynch  looks at what the U.S. gets for spending 41% more on health care than our wealthy nation peers in the OECD and 81% more than the entire 35-nation OECD average. Spoiler: not much. We're "sort of like a big-market baseball team spending gazillions more for players than any other team, only to finish out of the running."

At Managed Care Matters, Joe Paduda notes that Purdue Pharma is trying to strike a deal to resolve all state claims relating to opioids. He warns:

States vary in their responses to CSR uncertainty

By David Anderson, Charles Gaba, Louise Norris, Andrew Sprung

Note: this post is a joint effort with colleagues who have closely tracked the CSR chaos induced by Trump and Republicans in Congress. Dave Anderson is a former health insurance analyst, now a healthcare scholar at Duke, and a blogger at Balloon Juice; Charles Gaba is the fabled chronicler and analyst of ACA enrollment, marketplace pricing, and healthcare policy; Louise Norris is co-owner with her husband Jay of a health insurance brokerage for individual market customers, and a top source of marketplace information and analysis at her own blog (link in byline) as well as at healthinsurance.org and elsewhere.

Note 2 Today, the Maryland and California exchanges opened their plan preview tools for 2018, with premiums listed. California has implemented its planned CSR surcharge, adding 12.4% to the premium of silver on-exchange plans only. In some regions, the cheapest gold plan is cheaper than the cheapest silver.

Update, 10/14: David Anderson has mapped out the choices states have made to cope with CSR uncertainty (and now, CSR cutoff) here, and Charles Gaba is charting them here.

The open enrollment period for the 2018 ACA Marketplace that begins on November 1, 2017 is likely to confront enrollees with more challenges than any open enrollment since the troubled launch of the ACA Marketplace in October 2013. The time period is shorter, the outreach will be far less robust, and the pricing of plans will behave in ways that people do not expect.  Much of the pricing variance will be a result of choices that states and insurers have made in response to the uncertainty over whether the federal government will continue to reimburse insurers for the Cost Sharing Reduction (CSR) subsidies that insurers are legally obligated to provide to qualified exchange enrollees.  

Alternative Facts, Alternative Realities Edition of Health Wonk Review

In a divided country and interconnected world, it often feels as if reality is fracturing before our eyes. When a spokesperson for the President asserts the administration's right to promulgate "alternative facts," it's a major challenge to convince a critical mass of people that verifiable facts are in fact verified. On the plus side, as ever more of the previously voiceless find or create a forum, we have the chance to see how differently a given law or trend may affect different people -- not alternative facts, but variant effects.  This week's Health Wonk blog reflects that variety, as well as battles over fact and interpretation.

First up is Harold Pollack in healthinsurance.org, tilting against alternative facts of the pure variety -- a.k.a. lies. In You can only lie about policy in Washington D.C., Pollack takes on four of Paul Ryan's assertions about the AHCA (delivered in short space) that the Congressional Budget Office (CBO) analysis of the bill directly contradict.  Most of them boil down to claims that the AHCA will make insurance and healthcare more affordable to more people, but Ryan also avers for the umpteenth time that the ACA marketplace is collapsing under its own weight.

At InsureBlog, conversely, Patrick Paule takes on CBO the old fashioned way -- with a factual critique rather than a go-team cry of fake news. Paule asserts "four reasons the CBO score is flawed."noting that CBO  1) pits AHCA individual market enrollment against CBO's 2016 baseline for the ACA, which overestimated enrollment by 4 million; 2) assumes that under current law, more states would embrace the ACA Medicaid expansion; 3) assumes (thanks to the MacArthur Amendment, allowing states to waive ACA coverage rules) that some health plan enrollees won't have comprehensive coverage, but does not define what coverage must be provided to make the cut; and 4) does not delve into the implications of its forecast that millions will voluntarily drop insurance in the absence of a mandate to obtain it.

Single payer by inches?

File this under Half-baked Ideas and What's a Blog For?....

Dave Anderson, Louise Norris and I were noodling about stability funds, reinsurance, high risk pools, and the probably minuscule chance that Republicans would demand something acceptable in exchange for coughing up some federal "stability" money for states without repealing the ACA when a thought emerged...

What if the federal government undertook to foot the bill for all truly catastrophic claims -- say, those over $200,000 a year -- for all insurers, paying Medicare rates for care?

For hospitals and doctors, that would mean status quo ante payments for patients already on Medicare; a severe haircut for patients covered by commercial insurance; but a corresponding bump-up for patients on Medicaid. The rate (Medicare plus or minus a bit) could be calibrated to net out even, or a bit less than even in exchange for giving providers the certainty of getting major claims paid.

The tradeoff would be reduced rates for commercial insurance in exchange for a universal tax increase -- say, added to the Medicare payroll tax. In FY 2015, the 2.9% Medicare tax yielded $234 billion, so perhaps every additional 1% would yield another $80 billion, adjusted for growth and inflation.  If the reinsurance brought down commercial rates, that should translate into lower premiums and out-of-pocket costs for employees and/or higher wages.