A Midas touch on New Mexico's ACA exchange, revisited

Subscribe (free) to xpostfactoid

Kudos to health insurance analyst and advocate Stan Dorn and actuary Greg Fann for selling the New Mexico Office of the Superintendent of Insurance on strict silver loading in advance of Open Enrollment for 2022.   

In brief, the Superintendent required marketplace insurers to price silver plans on a par with platinum, since silver plans, thanks to Cost Sharing Reduction (CSR) subsidies, do have platinum-equivalent actuarial value for enrollees with incomes up to 200% FPL. The directive is meant to be a self-fulfilling prophecy: if gold plans are cheaper than silver plans -- and in New Mexico in 2022, gold plans were 10% cheaper on average -- no one with income over 200% FPL should buy silver plans, which have a lower AV than gold plans. In that case, the average AV for silver plan enrollees will indeed be platinum equivalent. 

New Mexico didn't quite get there, but came close. In Health Affairs this week, Stan Dorn analyzed the results, spotlighting a massive decrease in enrollment in bronze plans, which have deductibles averaging more than $7,000:

Dorn argues forcefully that New Mexico's pricing directive should be adopted nationally, explaining in detail the flaws in CMS's risk adjustment formula for marketplace plans that favors silver plans, incentivizing insurers to underprice them, and urging a fix.

All that said, while metal level selection at incomes above 200% FPL in New Mexico is an unbridled triumph, there's a caveat to the drop in bronze plan enrollment at incomes below 200% FPL (the middle row above).  Bronze plan takeup at low incomes would have dropped significantly in any case -- and did drop nationally -- because the Open Enrollment Period for 2022 was the first (and possibly the only) OEP in which the premium subsidy enhancements provided by the American Rescue Plan were in effect. Those subsidy boosts made benchmark silver coverage free at incomes up to 150% FPL and available for 0-2% of income for enrollees in the 150-200% FPL range. In HealthCare.gov states, bronze plan selection dropped by 2 percentage points in the 100-150% FPL income range and by 8 percentage points at 150-200% FPL from OEP 2021 to OEP 2022. 

The bronze selection decrease at low incomes in New Mexico was much sharper. But far too many enrollees at income below 200% FPL switched into gold plans rather than silver, which have far lower out-of-pocket costs than gold plans at incomes below 200% FPL.  This is no knock on New Mexico pricing practices, but rather on presentation flaws on the newly minted state exchange, BeWellNM.  The New Mexico exchange does not emphasize the availability of CSR at low incomes. The display, uniquely among ACA exchanges, buries the annual out-of-pocket maximum for each plan (you have to go two clicks in from the top-line display for each plan to find the OOP max) -- and OOP max is where the silver advantage is sharpest, topping out at $2,900 for high-CSR silver compared to $8,700 for gold. 

Worst, the site has a malfunctioning total cost estimation tool, which apparently uses the unsubsidized premium to estimate "costs in a bad year," completely obscuring silver plans OOP max advantage.  (I described these flaws and their effects, with screenshots, in this post.)

The result: silver plan selection at incomes below 200% FPL was just 62% in New Mexico in 2022, compared to 81.5% nationally and 80% in the thirteen state-based exchanges that enroll people with incomes under 200% FPL and provide metal level choices broken out by income. (Those totals are based on my calculations from CMS's Public Use Files and omit the 1.6% of enrollees with income below 100% FPL). 

The 5% bronze selection in New Mexico at incomes below 200% FPL is a sterling accomplishment. But most of the 33% of enrollees in that income bracket who selected gold plans should be in silver. For some, getting a cheaper gold plan from a desired insurer might be worth the extra out-of-pocket exposure, which might be in the $5,000-6,000 range (as discussed here). But most would be better off in silver.

ACA metal level structure is confusing, as bronze, gold and platinum actuarial value is fixed at all incomes whereas as silver plans come with no less than four different AVs, depending on income.  The fact that silver plans can be worth more than gold -- as they are for slightly more than half of marketplace enrollees -- is deeply counterintuitive. Display matters. For enrollees with income under 200% FPL, silver plans should be displayed at the top of results. OOP maxes should always be clearly visible, and defined via mouseover. The availability of CSR and its impact should be heavily signposted. 

Gold plans should be consistently cheaper than silver plans nationally, as Dorn argues (and as David Anderson and I have also done). If metal levels are priced as in New Mexico, plans with an AV of at least 80% (gold) should be available at a premium at or below the benchmark against which subsidies are set. To maximize the value available, however, decision support on most exchanges also needs to be improved.

Update from Stan Dorn (click through for essential gif):

Stan Dorn

@standorn

·

2h

Replying to

@xpostfactoid

...In yet another brilliant, creative NM policy innovation, they are labeling all high-AV products as “turquoise,” a favorite NM color that will easily signal the highest value options for each consumer

Subscribe (free) to xpostfactoid

What's the effect of a gold benchmark in the ACA marketplace? Three states tell a tale. And a platinum benchmark is coming.

Subscribe to xpostfactoid

Bloomberg's Sara Hansard reports that six states have now taken action to require insurers in their ACA marketplaces to price plans in strict proportion to their actuarial value -- that is, to increase the effects of silver loading. (Actuarial value (AV) refers to the percentage of the average enrollees costs the plan is designed to cover, in percentages fixed by metal level.)

Maryland, Pennsylvania and Virginia required strict silver loading in 2021 (and some or all in years prior). New Mexico and Colorado have new regulations going into effect in 2022. Texas has passed a law requiring the state insurance commissioner to take the value of Cost Sharing Reduction (added to silver plans only) into account during rate review.

Silver loading as mandated in Maryland, Pennsylvania and Virginia makes gold plans at least marginally cheaper than silver plans, increasing value for enrollees with incomes above 200% of the Federal Poverty Level ($25,520 for an individual in 2021). Below that income threshold, Cost Sharing Reduction (CSR) raises the actuarial value of silver plans to a roughly platinum level.

Maximizing the ACA Innovation Waiver: Biosimilar silver loading, anyone?

Subscribe to xpostfactoid

Ask, and it shall be given

The advocates for more affordable health insurance at Families USA are asking the Biden administration to loosen up the Catch-22 that confronts states seeking to take advantage of the ACA's section 1332 innovation waivers.

1332 waivers enable states to propose alterations to virtually every feature of the ACA marketplace in pursuit of more affordable and effective coverage. The alternative scheme must cover at least as many people at least as comprehensively as the existing marketplace, and must do so without increasing the federal deficit. 

As currently interpreted, the deficit-neutral requirement presents a Catch-22: if the state's alternative scheme ends up costing more because more people sign up, the state is responsible for the excess costs, even if the coverage costs less (or no more) per person than the exiting ACA marketplace. 

ACA Hunger Games, Part II

Subscribe to xpostfactoid 

I'd like to revisit the "hunger games" scenario for legislation to improve the ACA posited in the last post. In brief: assume that Democrats, forced to accommodate their most conservative members to get all 51 of their Senate votes on board for any legislation passed through reconciliation, pare back the broad expansion of premium subsidies for ACA marketplace coverage they've proposed elsewhere -- e.g., in candidate Biden's health care plan and in the House-passed Affordable Care Enhancement Act of 2020 (ACEA). If forced to scale back, should they:

a. Concentrate on the currently unsubsidized, for whom coverage is often truly unaffordable, capping premiums for a benchmark plan as a percentage of income (e.g., 8.5% as in the ACEA, but probably higher)?

b. Concentrate on lower incomes, where takeup among the subsidy-eligible has been poor? (See the last post for the ACEA subsidy scale and how it compares to current law.)

c. Spread whatever enhanced subsidy money they can muster across all income groups?

If Democrats get skimpy with ACA enhancement, who should get half a loaf?

Subscribe to xpostfactoid 

With a 50-50 Senate under Democratic control, how far will the Democrats go in rendering health insurance more affordable for those who currently find it unaffordable?

The Affordable Care Enhancement Act passed by the Democratic House last June would reduce the percentage of income paid for a benchmark silver plan in the ACA marketplace at every income level -- and remove the income cap on subsidy eligibility, currently 400% of the Federal Poverty Level ($51,040 for an individual, $104,800 for a family of four). Premiums for a benchmark silver plan would range from $0 (at incomes up to 150% FPL) to 8.5% of income. Here's the scale established by the bill:

How many newly uninsured? Families USA and the feds paint different pictures

Click here to subscribe to xpostfactoid

Families USA released a report this week estimating that 5.4 million adults newly unemployed by the pandemic as of May are also becoming uninsured.

The estimate is based on data and analyses concerning  1) the number of people who have lost jobs (BLS), 2) the likely percentage of newly unemployed who have lost access to health insurance, and 3) the percentage of newly unemployed in the ACA era (2014-2018) who have found other insurance, including Medicaid and marketplace (Urban Institute).

The analysis boils down to a fairly simple equation: about a quarter of those who lose jobs do not find their way to job-based insurance through a family member, Medicaid, marketplace coverage or COBRA. Much higher percentages of the newly unemployed are estimated to become uninsured in states that have refused the ACA Medicaid expansion (42.5%) than in expansion states (22.6%).

5.4 million uninsured adults equates to about a 2.6 percentage point increase in the uninsured rates for Americans aged 18-64.  Based on the most recent National Health Interview Survey (Jan-June 2019), that would suggest an uninsured rate of about 16.3% for ages 18-64. As I've noted recently, more immediate survey data seems to indicate less severe increases in the uninsured population. A Commonwealth Fund survey of about 2300 adults conducted May 13 through June 2 seemed to indicate that a bit less than 2% of the population had recently become uninsured.

More strikingly, the experimental new Household Pulse Survey updated weekly by the CDC -- a joint project of the Census Bureau and National Center for Health Statistics -- shows comparatively little movement since its launch in the week of April 23, when it recorded a national uninsured rate of 12.6%  for ages 18-64 -- more than a percentage point lower than the 2019 NHIS estimate. The weekly updates have been quite volatile but on the whole have ticked upward, reaching 13.5% in the week of June 25 (there'll be another update tomorrow).  Estimates for individual states, shown below, average three percentage points higher in Pulse than in the FUSA study, and vary widely.

Turning Washington's public option to gold

Subscribe to xpostfactoid via box at top right (requires only an email address; you'll get 2-3 emails per week on average)

Washington state legislators made ACA history last month by passing the first state-based "public option," to be sold in the state ACA marketplace. An unkind reaction reaction, partly prompted by the main actors' own assessments, would be that the creators labored mightily to produce a mouse.

In an early version, the bill to create the public option stipulated that the program would pay healthcare providers at Medicare rates. As the bill neared passage, the payment rate jumped to 150% Medicare -- and then, at passage, to 160%. David Frockt, the bill's sponsor in the state Senate, claimed that providers would not participate at lower rates, particularly in rural areas, where the state has had a hard time attracting insurers into the exchange.* Frockt later told Sarah Kliff that the bill would not have passed without the rate bump.

State officials estimate that the plan will reduce individual market premiums by a modest 5-10%. That's a boon to unsubsidized enrollees -- with no guarantee of any pricing benefit to subsidized enrollees, who pay a fixed percentage of income for the benchmark (second cheapest) silver plan in their area. In fact, lower base premiums sometimes reduce affordable options for subsidized enrollees as lower premiums tend to reduce price spreads between the benchmark, which determines subsidy size, and cheaper plans.

Perhaps the public option's chief benefit is the guarantee that at least one insurer, paying not-exorbitant rates to providers, will operate in rural areas ( though the bill also empowers the state exchange to pay higher rates in areas where they can't attract sufficient providers). That's not nothing, but it's not exactly a game changer [though per update at bottom, 14 of 39 counties in 2019 had just one insurer, and some have no bronze plans]. The state exchange also will design the plans with an eye to reducing deductibles and offer some services not subject to the deductible, presumably favoring those that meet a stated goal of encouraging "choice based on value." A plan designed with the intent to maximize benefit to enrollees is good -- but there's just so many ways to slice the actuarial value  mandated for each metal level by the ACA. And the state will not administer the plans -- it will engage private insurers to do so.

Some regulatory alchemy is needed

There is a way, however, that the plan's administrators (which include the state exchange, the insurance commissioner, and the state Health Care Authority), could  increase the value of the public option to enrollees at the upper income levels of  subsidy eligibility. They could require  that gold plans be priced more cheaply than silver plans. They should be, because Washington's silver plan enrollees, taken together, obtain a slightly higher actuarial value than do gold plan enrollees -- and that value difference will expand if the plans are priced appropriately. (Actuarial value is the percentage of the average enrollee's costs a plan is designed to cover, computed according to a federally mandated formula.)

Silver loading is just getting started

Subscribe to xpostfactoid via box at top right (requires only an email address; you'll get 2-3 emails per week on average)

A bit more than a year ago, I calculated that silver loading, a disruption that Trump accidentally injected into the ACA marketplace just in time for 2018 Open Enrollment, had boosted enrollment by several hundred thousand, perhaps in the 350,000-700,000 range.

Silver loading was prompted by Trump's cutoff in October 2017 of direct reimbursement to marketplace insurers for the Cost Sharing Reduction (CSR) subsidies that reduce out-of-pocket costs for low income enrollees who select silver-level plans. State regulators responded by allowing or encouraging insurers to price CSR into the premiums of silver plans only.* Since premium subsidies, designed so that the enrollee pays a fixed percentage of income, are set to a silver plan benchmark , inflated silver premiums create discounts for subsidized buyers in bronze and gold plans.

These discounts are often dramatic. As Stan Dorn notes in Health Affairs this week, "By 2019, 15 states had average gold premiums lower than average benchmark silver premiums, and in 15 other states gold premiums exceeded benchmark silver by less than 10 percent."  In 2018, zero-premium  coverage (usually but not always in bronze plans) was available to more than half of marketplace participants, thanks to silver loading.

How many might be loathe to trade employer-sponsored insurance for expanded Medicare?

In my last post, I stressed that a significant and politically powerful subset of the 156-odd million Americans who get health insurance through employers have coverage way better than the norm. Those with the most generous employer-sponsored coverage (ESI) might be averse to transitioning to a public plan with significant cost sharing -- say, to a plan with coverage comparable to a typical Medicare Advantage plan.

Out-of-pocket costs for enrollees in ESI have risen rapidly in recent years; premiums have risen more slowly, but steadily. Nonetheless, a lot of people have coverage a good deal more generous than the norms reported in the Kaiser Family Foundation's 2018 Employer Health Benefits Survey -- e.g., deductibles well below the $1,573 average for single coverage, and premiums well below the $99 per month average for single and $462/month average for family coverage.

The figures below**, taken from the Kaiser survey, highlight benefits enjoyed by insured employees with the most generous coverage.

• For 12% of covered workers, the employer pays 100% of the premium for single coverage. Another 8% of workers in single coverage pay less than $500 per year. Just 3% of covered workers pay nothing for family coverage; another 4%, pay under $1500 annually.