With a two-step regulatory change*, Pennsylvania has transformed its ACA marketplace. The measure is probably the most impactful single step a state has taken to improve its marketplace. And the move won't cost the state a cent. It simply picks up money the Trump administration left on the table when it cut off direct federal reimbursement of insurers for the Cost Sharing Reduction (CSR) subsidies they must provide to low income marketplace enrollees who select silver plans.
The new Insurance Department regulation (Revision 1b here) requires individual market insurers filing rate submissions to make this change:
CSR Defunding Adjustment of 1.20 – all individual silver exchange plans.
In other words, price silver plans proportionately to their real actuarial value (as estimated by the Department) with CSR priced in -- at 1.2 times the value of silver without CSR.
That change dates back to 2020. For 2021, the Dept. of Insurance added a requirement that insurers must base their estimates of "induced demand" at each metal level on the scale HHS uses for its risk adjustment program, also incorporating the CSR adjustment. "Induced demand" is a measure of how much each increase in coverage generosity is likely to stimulate more use of medical services. Left to their own devices, insurers have tended to overestimate the "induced demand" imputed to gold plans, leading to their overpricing relative to silver.
The change standardizes, and therefore in almost all cases increases, silver loading -- pricing of CSR into the premiums of silver plans only, since CSR is available only with silver plans (see note below). The result: statewide, the cheapest gold plan costs less than the benchmark silver plan against which premium subsidies are set, and bronze plan discounts have increased as well.
