Weak silver loading and state-based subsidies in New Jersey's ACA marketplace

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weighing the value of low-AV bronze

New Jersey, as noted here last week, is poised to tack supplemental state subsidies onto federal premium subsidies for enrollees in the state's ACA marketplace in 2021. The revenue comes from a state Health Insurance Assessment that replaces the repealed federal tax of the same type, paid for the last time in 2020. 

Word is that the state subsidies will be available to all enrollees with incomes below 400% of the Federal Poverty Level (while the state's reinsurance program, also to be partly funded by the HIA, continues to reduce premiums for unsubsidized enrollees). It looks like the new state subsidies will be in the range of $40-60 per month for a single enrollee.

David Anderson points out that New Jersey might achieve much the same results -- spending federal rather than state dollars -- if it took steps to increase premium spreads between the benchmark (second cheapest silver) plan against which federal subsidies are set and plans cheaper than the benchmark -- i.e., bronze plans and the cheapest silver plan. These spreads are narrower than national averages in the New Jersey health insurance marketplace -- mainly, as Anderson has noted more than once, because the state requires bronze plans to offer higher actuarial values than federal rules allow (AV refers to the percentage of the average enrollee's costs the plan is designed to cover, using required formulas).

Testimony in support of a Health Insurance Assessment in New Jersey

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The New Jersey Senate and Assembly are holding hearings this afternoon on a bill, S2676/A4389, that would replace the national ACA tax on health insurers repealed by Congress late last year with a state tax that would raise some $300 million per year. The bill dedicates the funds to improving health insurance affordability, focusing mainly on low-income New Jerseyans.

The bulk of the money will likely be used to add state subsidies to federal subsidies for health plans sold in the ACA marketplace -- possibly as early as 2021 --  with a portion going to fund the existing reinsurance program that reduces individual market premiums for those who earn too much to qualify for subsidies.

BlueWaveNJ, of which I am a member, submitted the testimony below on behalf of the bill.

Juice it, Jersey: What silver loading anemia looks like

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I have noted before that New Jersey's implementation of an individual mandate and a reinsurance program in its ACA marketplace in 2019 illustrates the tradeoffs involved in reducing premiums in the ACA marketplace. In brief: unsubsidized premiums down, subsidized premiums up.

I have also noted that in New Jersey, silver loading is underpowered -- that is, it has produced weaker-than-average discounts in bronze plans and no discounts in gold plans, which accounted for an anemic 2% of enrollment in 2019.

Last week, David Anderson and Coleman Drake published a study indicating that the widespread availability of free bronze plans, a major byproduct of silver loading*, has had a particularly strong impact on enrollment.  The authors noted that this effect is conspicuously lacking in Jersey, and suggested a reason:

New Jersey restricts cost-sharing variation within metal levels. In 2019 New Jersey bronze plans were required to have an actuarial value of 64 percent—higher than the 58.5 percent minimum allowed by federal law. This regulation limited the financial exposure of existing enrollees by preventing them from selecting plans with higher cost sharing. However, it also limited the premium spread between the benchmark silver plan and bronze plans, which reduced the availability of zero-dollar premium plans in the state and thereby reduced enrollment. A trade-off thus exists between reducing enrollees’ financial exposure by increasing minimum actuarial value levels and increasing insurance coverage via the zero-price effect.

Mining the silver lode (or not): A tale of two blue states

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I have argued in recent posts that

1. State insurance regulators should take the advice of actuaries Greg Fann and Daniel Cruz and force the silver loading spring -- that is, pretty much mandate that insurers price on-exchange gold plans below or at least only slightly above on-exchange silver plans. Fann and Cruz recommend that regulators require insurers to price silver plans more or less as if their actuarial value is 87% or higher, as it is for enrollees with incomes up to 200% FPL. If they do so, no one at incomes above 200% FPL will buy silver, so the AV estimate will become a self-fulfilling prophecy. (See note at bottom for a brief explanation of silver loading, which began in 2018.)


2. New Jersey enrollment has suffered since 2017 from a lack of discounts in bronze and gold plans that silver loading has produced in many other states. 

States that have refused to expand Medicaid have a built-in silver loading advantage. Since eligibility for marketplace subsidies in nonexpansion states begins at 100% FPL rather than the 139% FPL threshold in expansion states,  the nonexpansion states have a high concentration of silver plan enrollees who obtain the highest level of CSR, which raises the actuarial value of a silver plan 94%.  Still, some expansion states have enjoyed pronounced silver loading effects, while others have seen almost none.

Below, I contrast the experience of two expansion states, New Jersey and California. All enrollment figures are derived from the 2019 state-level Public Use Files published by CMS, unless otherwise noted.  I am going to indulge in a bit of shorthand in this post and neglect to provide definitions and back story, excepting the note on silver loading at bottom.

What state laws ratifying ACA marketplace rules can and can't accomplish

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On May 31, New Jersey legislators introduced, with Governor Murphy's support, a raft of bills* that  codify in state law the ACA's coverage rules in the individual and small group health insurance markets, including protections for people with pre-existing conditions

Separate bills maintain a ban on medical underwriting or exclusion of pre-existing conditions (S626), mandate coverage of the ACA's Essential Health Benefits (S562) and a set of preventive services (S3803), and limit age rating -- the degree to which the oldest enrollees can be charged more than the youngest adult enrollees -- to the ACA's 3-to-1 ratio (S3810).**

Many other states with Democratic governors and legislatures have passed or have in progress similar laws that duplicate the ACA's federal standards. Such laws are redundant by definition; they are designed as protection against future further Republican action to undermine the ACA.

I can imagine these laws serving a useful function under two circumstances:

New Jersey's disappointing 2019 ACA enrollment: Some perspective

Policymakers in New Jersey were disappointed by enrollment in the state's ACA marketplace in 2019, which came in 7.1% behind 2018 enrollment. In the 39 states using HealthCare.gov, the federal exchange, enrollment was down 3.8%, and in the 12 states (plus DC) that have their own exchanges, it's likely to come in flat (enrollment is not over in several of them).

The state had acted swiftly in the first half of 2018 to pass a state-based individual mandate and get a reinsurance program enacted by legislation  and approved/funded by CMS. As a result, premiums were down an average of 9% in 2019, and 22% below where they would have been had no action been taken.

But base premiums affect only unsubsidized buyers, and in 2019 premiums in New Jersey were actually higher than in 2018 for most subsidized enrollees, as benchmark silver plan premiums, which determine subsidies dropped further than the average for all plans. For a 40 year-old with an income of $30k, the cheapest bronze plan cost 12-22% more in 2019 than in 2018 (varying by region) -- that is, $13-$25 more per month. Cheapest silver was also up slightly in most of the state.  There's some hope that off-exchange enrollment will show some improvement, as that's where the benefit from lower premiums comes home. We'll know when the state publishes first-quarter off-exchange enrollment in the spring.

In New Jersey's 2019 ACA marketplace, fruits of reinsurance, individual mandate, and silver loading

New Jersey's Dept. of Banking and Insurance has posted individual market health plan prices for 2019. Thanks to the state's new reinsurance program, state-based individual mandate, and silver loading (actively encouraged by DOBI), unsubsidized enrollees will see price drops from 2018. According to DOBI, premiums are down 9% on average, and 22% below where they would be if not for the reinsurance program and the state individual mandate enacted this year. For the subsidized, it looks pretty much like status quo ante -- although network changes and plan design changes could alter that picture.

As was the case last year, AmeriHealth has sewn up all the lowest price points. AmeriHealth and Oscar are offering discounted silver plans off-exchange -- presumably because of silver loading (Cost Sharing Reduction, available only with silver plans and only on-exchange, is not priced into off-exchange silver).  Horizon is not offering any off-exchange discounts, but it has dropped prices about 7% from last year. A few salient year-to-year comparisons below. Quoted premiums are for a 46 year-old -- where they're a clean 1.5 times the base rate posted by DOBI.

• The cheapest silver plan for a 46 year-old was $468 per month in 2018. This year, cheapest silver is $359, offered off-exchange only. They're both AmeriHealth, but they're not the same plan. The off-ex 2019 cheapest is a "Select Silver EPO", a new designation for AmeriHealth, and it's an HSA plan, which means that all services except mandatory free preventive care are subject to the deductible. The cheapest non-HSA silver is an AmeriHealth HMO ("Local Value"), for $381 per month. That plan may have a better network than the "Advantage" network, which in some areas at least is quite limited.

New Jersey balance billing protection law is strong on scheduled procedures

Earlier this week I raised a question whether New Jersey's new law protecting insured patients from balance billing requires patients in scheduled procedures to confirm in advance that not only the physician performing the procedure and the facility where it's performed are in network, but that all participating providers, such as anesthesiologists and radiologists, are also in-network. The question was triggered by language like this (Section 5b):

A health care professional who is a physician shall provide the covered person, to the extent the information is available, with the name, practice name, mailing address, and telephone number of any health care provider scheduled to perform anesthesiology, laboratory, pathology, radiology, or assistant surgeon services in connection with care to be provided in the physician’s office for the covered person or coordinated or referred by the physician for the covered person at the time of referral to, or coordination of, services with that provider. The physician shall provide instructions as to how to determine the health benefits plans in which the health care provider participates and recommend that the covered person should contact the covered person’s carrier for further consultation on costs associated with these services.

Other bill language, I noted, seems to indicate that the patient is not responsible for ascertaining that all personnel are in network. 

Maura Collinsgru, health care program director at New Jersey Citizen Action and a prime mover of the NJ for Health Care Coalition, tells me that the onus is not on the patient to make all those determinations:

Good News in New Jersey: CMS approves state reinsurance waiver

Some good ACA news out of New Jersey: CMS has approved the state's reinsurance waiver proposal, designed to reduce premiums by 15% in 2019.

The bill mandating pursuit of this waiver was paired with a bill establishing a state individual mandate, which according to the state Dept. of Banking and Insurance reduced requested rate increases by about 7%.  Taken together, the mandate and reinsurance program will push 2019 premiums more than 20% below where they would have been absent these two programs and down an average of about 9% from this year. That in the wake of average increases of 22% for 2018.

It's worth tallying the various ways New Jersey has girded its individual market against Republican sabotage.  The state

Six ways New Jersey is fighting off Obamacare sabotage

Since Trump's inauguration, the ACA marketplace has undergone multiple waves of sabotage from the administration and the Republican Congress. Leaving aside some short-term hits, such as the cutoff of advertising at the end of Open Enrollment for 2017, these are the structural elements:

• Radical reduction in federal funding for enrollment assistance and advertising
• Cutoff of direct federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are obligated to provide to low income enrollees (now priced into premiums)
• Effective repeal of  the individual mandate, which requires those for whom coverage is deemed affordable to obtain it or pay a penalty (Republican Congress zeroed out the penalty)
• Regulatory promotion of a parallel market in medically underwritten short-term plans and association health plans -- measures designed to worsen the risk pool in the ACA-compliant market.

The ACA was designed to promote state innovation and autonomy, within fairly firm boundaries. While those boundaries have been breached on multiple fronts, states still have leeway to stay within them or actively reconstitute them. Meanwhile, thanks to the failure of Republicans' repeal legislation, federal funding for the core programs remains in place -- and has even been inefficiently enhanced, via the CSR funding cutoff, since reimbursing CSR is more cost-effective for the federal government than paying premium subsidies inflated by CSR.

It strikes me that New Jersey is unique in the degree to which it has acted to fend off the sabotage. Going into 2019 enrollment, the state has:

New Jersey's individual market needs some off-exchange discounts in 2019

Trump's cutoff of federal reimbursement to insurers for Cost Sharing Reduction (CSR) subsidies last fall turbo-charged premium hikes in the individual market in 2018.  Those hikes hit unsubsidized enrollees directly. Yet states that allowed insurers to load the cost of CSR onto on-exchange silver plans only, allowing cheaper silver plans to be sold off-exchange, provided a measure of effective relief to the unsubsidized.

In Philadelphia, an unsubsidized 50 year-old could get the cheapest off-exchange silver plan for $153 per month less ($498/month) than the cheapest on-exchange silver plan (for more closely comparable plans, the spread was $94).  In Baltimore, the cheapest silver plan offered on-exchange for a 50 year-old was $88/month more than the same plan off-exchange ($610 vs. $522).

Not so in New Jersey, where individual market premiums rose a weighted average of 22% in 2018, and still more steeply on market hegemon Horizon Blue Cross's most popular silver plans.* New Jersey did allow "silver loading" -- that is, concentrating the cost of CSR in silver plans only, since CSR is only available in silver plans. But none of the three insurers participating in the state's ACA marketplace offered cheaper silver plans off-exchange, as insurers did in many other states.

In fact, none of the three (Horizon, AmeriHealth, Oscar) sold off-exchange plans that differed in any way from their on-exchange offerings.**

In New Jersey, ACA reinsurance or....?

Here in Jersey, progressives are urging Governor Murphy to sign two bills designed to fend off Republican sabotage of the ACA. The first would establish a state individual mandate to replace the effectively repealed federal mandate. The second would seek federal funding for a reinsurance program for the individual market for health insurance, designed to reduce premiums by 10-20%.

If the two bills are enacted and the ensuing waiver application seeking federal funding for reinsurance is approved, the two measures should reduce premiums by 20-30%, compared to where they'd be if no action is taken. For more detail, see this writeup.

Governor Murphy is likely to sign the mandate bill, but there are indications that he may seek changes to the reinsurance bill. The problem is cost.

Rough projections are that revenue from the mandate would cover a third to half of the reinsurance program's costs, while the federal government picks up half or a bit more than half. The state could be on the hook for an additional $30-40 million per year. New Jersey is in dire financial shape;  Murphy has a lot of spending priorities, and a looming fight on his hand to raise new revenue.

State Senator Joseph Vitale is confident that if the program proves to need more funding by FY 2021, when the first bill to insurers comes due, a revenue source can be developed -- probably via an assessment on insurers. Murphy might seek to get that in writing, in the bill -- as it was in an early version.  He would do so by issuing a conditional veto, after which the legislature would have to vote on an amended bill by June 7.

I found myself mulling this evening: If the bid to stand up a reinsurance program fails, how else might the mandate revenue, projected at about $90-100 million per year, be deployed to boost healthcare access in the state? One answer might be simply to return the mandate revenue to those hurt most directly by rising premiums: enrollees in the individual market who don't qualify for federal subsidies (subsidized enrollees pay a fixed percentage of income for a benchmark plan and so are not directly affected by premium hikes). These are mostly people above the income eligibility threshold, 400% of the Federal Poverty Level (FPL). They also include people who are ineligible for subsidies because of an offer of insurance from an employer.

"New Jersey is poised to fight off ACA sabotage. Is Gov. Murphy on board?"

As Ive noted before, while the New Jersey legislature has passed bills establishing a state individual mandate and a reinsurance program, Gov. Murphy has not committed to signing them. I have an op-ed up on NJ Spotlight arguing that the need is urgent.:

The Congressional Budget Office forecast that mandate repeal in itself would generate premium increases of 10 percent per year throughout the next decade. An analysis of the impact on states commissioned by Covered California the state's ACA marketplace, put New Jersey in the highest risk category, where premiums are forecast to rise as much as 90 percent over three years if action is not taken to strengthen the markets. Early insurer rate requests filed in Virginia and Maryland are showing sky-high increases. Maryland's insurance commissioner is warning of a death spiral and placing hope on the state's reinsurance waiver proposal.

If there's any sticking point, it's probably related to cost. Here is an outtake with someone more detail than I had space for:

How Phil Murphy can counteract ACA sabotage in New Jersey

I've suggested before that states can protect their individual markets for health insurance by passing their own individual mandates -- and using the revenue to further shore up their individual markets. In NJ Spotlight, I make the case specifically for New Jersey.

Revenue from the mandate

could be dedicated to strengthening the state’s individual health insurance market. One possibility would be direct financial help for people who don’t qualify for ACA premium subsidies — a group hit particularly hard by the premium hikes of the past two years. Another option is to spend the money on enrollment assistance and outreach, which the federal government radically cut in 2017. A third option is to dedicate the funds to a state-based reinsurance program.

Mandate revenue would not fully fund a reinsurance program, and New Jersey is in terrible fiscal shape.

But the state can also seek federal reinsurance funding via an ACA “innovation waiver”, as HHS specifically suggested last spring. Funding may be granted as a “pass-through” of savings derived from lower premiums — since lower premiums mean lower subsidies, which are paid by the federal government.

The rest, once more, is here.

Can blue states protect their health insurance markets from Trump's executive order?

Can a state that wants to preserve ACA consumer protections protect itself from the executive order Trump signed today, which opens paths to segmenting the risk pools in the individual and small group markets? Consider the case of New Jersey, which had guaranteed issue (and, with no individual mandate, sky-high premiums) pre-ACA.

The Trump EO instructs Treasury, DOL and HHS to expand availability of short-term insurance, allowing it "to cover longer periods and be renewed by the consumer."  That's understood to mean allowing coverage for up to a year -- and so, via renewal, indefinitely, though subject to medical underwriting at renewal as well as at first purchase.  Short-term plans are not subject to ACA coverage rules.

At present, plan duration is limited to three months. Since  that rule only went into effect this April, extending the term to up to a year is not a radical shift from the ACA status quo.  But combined with weak enforcement of the individual mandate, and more exemptions from the mandate stemming from rising premiums, temporary plans available continuously are likely to weaken the ACA risk pool.

Temporary plans are subject to state regulation, however, and health law scholar Nicholas Bagley expects that to continue:

13/ The states should still retain authority to regulate short-term plans -- and to require them to adhere to ACA rules.

— Nicholas Bagley (@nicholas_bagley) October 12, 2017