Free silver plans at incomes above 150% FPL

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The American Rescue Plan enacted last month radically though temporarily boosted premiums in the ACA marketplace. The premium paid by enrollees for the benchmark (second cheapest) silver plan is now set at $0 for enrollees with household incomes up to 150% of the Federal Poverty Level, and at 0-2% of income for enrollees with incomes in the 150-200% FPL range. That tops out at $43 per month for a single person with an income of $25,520.

Bronze plans are now available at zero premium to almost any enrollee with an income below 200% FPL (and to a fair number at higher incomes).  But bronze plan deductibles average $6,921.  At incomes up to 200% FPL, silver plans come with strong Cost Sharing Reduction (CSR), which brings deductibles down to an average of $177 for enrollees with incomes up to 150% FPL and $800 in the 150-200% FPL range. The contrast is similarly dramatic in annual out-of-pocket maximums, which usually top $8,000 in bronze plans. CSR brings them down to an average of $1189 at incomes up to 150% FPL and $2529 at 150-200% FPL. 

Prior to the subsidy boost, increasing numbers of enrollees with incomes below 200% FPL were selecting bronze plans, especially in the 150-200% FPL range, where benchmark silver topped out at $135/month for an individual (see The darker side of free bronze). The newly enhanced subsidies should reverse that trend. Still, even modest premiums are often experienced as steep at low incomes, and zero-premium plans remove administrative friction that deters some enrollees (arranging and executing on monthly premium payment can be surprisingly difficult). 

The dark side of free bronze plans: Erosion of CSR silver enrollment accelerates

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While the 2021 Open Enrollment Report for the ACA marketplace released by CMS yesterday shows an overall increase in enrollment over 2020, the attendant Public Use Files show acceleration in a troubling trend: decreased selection of silver plans by enrollees with incomes below 200% of the Federal Poverty Level. Selecting bronze below that income threshold, as almost all who don't select silver plans do, means forgoing the strong Cost Sharing Reduction (CSR) that attaches to silver plans only. 

Silver Plan Selection at 100-200% FPL
HealthCare.gov states

Year	Total enrolled	Silver enrolled	Percent silver
2017	5,258,797	4,574,172	87.0%
2018	4,865,014	4,152,230	85.4%
2019	4,712,094	3,944,471	83.7%
2020	4,725,360	3,864,275	81.8%
2021	4,933,622	3,830,086	77.6%

Source (all enrollment tables): CMS State-level Public Use Files. See note below.

For enrollees below the 200% FPL income threshold, silver plans are enhanced by strong Cost Sharing Reduction subsidies that sharply reduce out-of-pocket costs. CSR raises the actuarial value of a silver plan (the percentage of the average enrollee's medical costs allegedly* paid by the plan) to 94% for enrollees with incomes up to 150% FPL and to 87% for those with incomes in the (150-200% FPL) range.  Bronze plans have an actuarial value of approximately 60%. Here's how that difference translates into deductibles in the 36 states using the federal exchange, HealthCare.gov, according to the OE Report:

Forget free bronze plans: millions of uninsured are eligible for CSR silver

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The Kaiser Family Foundation is out with an analysis estimating that 4.7 million uninsured Americans are eligible for free bronze plans in the ACA marketplace. That's a bit less than half of the uninsured who are eligible for marketplace subsidies, according to a 2017 Kaiser estimate.

These estimates have emerged as a Kaiser tradition in the Trump era , which in ACA terms is the silver loading era. "Silver loading" is the byproduct of Trump's October 2017 cutoff of direct federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are required to provide to low income marketplace enrollees who select silver plans. Faced with the cutoff at the brink of open enrollment for 2018, most state insurance departments allowed or encouraged insurers to price CSR into silver premiums only. Since premium subsidies, designed so that the enrollee pays a fixed percentage of income, are set to a silver plan benchmark (the second cheapest silver plan), inflated silver premiums create discounts for subsidized buyers in bronze and gold plans. One result is $0-premium bronze plans available to millions.

Arguably, "free bronze" is useful chiefly as a marker of the extent of bronze plan discounts, which are more popular at the upper income end of ACA subsidy eligibility, 200-400% of the Federal Poverty Level (FPL) than at the lower end, 100-200% FPL, which still accounts for the majority of on-exchange enrollees. At upper income levels, bronze plans are likelier to be cheap than free.

In 2019, 89% of enrollees with incomes in the 100-150% FPL range in the 39 states using HealthCare.gov  selected silver plans. At 300-400% FPL, just 24% selected silver, vs. 58% for bronze and 17% for gold. Cheap bronze is more of a lure than free bronze. At low incomes, the value of CSR outstrips the value of bronze discounts generated by silver loading.

In ACA marketplace, more discount counties -- but which counties count?

Taking the country as a whole, are ACA marketplace offerings more or less attractive to prospective enrollees, subsidized and unsubsidized, in 2019 than in 2018?

The question takes on urgency as a lag in on-exchange enrollment persists into week 4 of Open Enrollment for 2019. In the 39 states using HealthCare.gov, enrollment is down 11% compared to this time last year. If plan offerings are roughly equal in value to last year's, depressed enrollment could easily be accounted for by repeal of the individual mandate penalty, establishment of a parallel lightly regulated, medically underwritten "short-term plan" market, and further drastic cuts to federal spending on enrollment assistance and advertising. Still, in 2018 the windfall bargains generated by silver loading (see note at bottom) partly offset the prior round of Trump administration sabotage, and the question lingers whether something similar may happen this year.

Some top-line facts may suggest that marketplaces are offering better value to more people in 2019 than in 2018. Unsubsidized premiums are down slightly on average. More states are silver loading, creating discounts in bronze and gold plans and/or encouraging insurers to offer off-exchange silver plans with no CSR load. The number of counties where a gold plan is available for less than the benchmark silver plan has increased from 595 in 2018 to 1136 in 2019. And the Kaiser Family Foundation reports that free bronze plans are available to subsidized enrollees at every subsidy-eligible income level in more counties in 2019 than in 2018.

There are counties and counties, however. One county may have 10 million people; another, 95. The Kaiser report includes a map that color-codes counties where free bronze is available to a 40 year-old with an income of $30,000 for the first time in 2019  A mouseover reveals that most of those counties are rural.

The marketplace isn't all roses for the subsidized, either

Sam Baker has an insightful take on the bifurcation of the individual market between the subsidized and the unsubsidized, exacerbated by Trump. I want to offer a caveat, though.

Of the fallout from Trump's cutoff of Cost Sharing Reduction (CSR) reimbursement -- premium spikes for the unsubsidized, bronze and gold bargains for some subsidized -- Baker writes:

All of this has compressed the ACA's benefits. The law was initially designed to move a lot of people into the same system, in which even the people who didn't get a subsidy would benefit from a competitive marketplace to shop for coverage.

Instead, we're ending up in a place where the poorest consumers can get even cheaper coverage than the ACA intended, especially if they choose less comprehensive care, while wealthier consumers increasingly don't have much incentive to get covered at all. Those trends will only grow more pronounced if Republicans successfully repeal the individual mandate in their tax bill, leaving the law with only its carrot, and no stick.

There's nothing inaccurate here. But in general discourse if not here, the perceived bonanza for the subsidized stemming from inflated subsidies may be somewhat overstated.

A Medigap for the Marketplace?

It's well known by now that Trump's cutoff of federal funding for Cost Sharing Reduction (CSR) subsidies in the ACA marketplace has had the paradoxical effect of making free bronze plans widely available to subsidy-eligible marketplace enrollees.

The blessing is something of a mixed one for many buyers with incomes up to 200% of the Federal Poverty Level (FPL), however. Silver plans up to the 200% FPL level come with strong CSR that reduces average deductibles to under $300 (for enrollees up to 150% FPL) or under $1000 (for those in the 151-200% FPL range). That's in contrast to bronze plan deductibles that average over $6,000.  Other out-of-pocket cost differences are commensurate. More than half of current marketplace enrollees have incomes under 200% FPL, and most can probably now find free bronze plans.

CSR was designed to make actual healthcare affordable to low income enrollees -- who, again, constitute more than half of all marketplace enrollees (and more than half of the uninsured; as of 2013, 55% of the uninsured had incomes under 200% FPL). $6,000 deductibles are not generally appropriate for low income people (or arguably, for almost anyone).

On the other hand, a benchmark silver plan for a solo buyer with an income of $24,000 just under 200% FPL costs $126 per month -- versus $0, in many cases now, for bronze.

Since CSR costs the enrollee nothing, CSR-enhanced silver plans used to be worth considerably more in absolute terms than bronze, providing more actuarial value for the buck. That's not necessarily true any more. And a fair number of bronze plans do not subject services such as doctor visits and generic drugs to the deductible. The yearly out-of-pocket maximum for a bronze plan, on the other hand, is $7,350 for an individual -- versus $2,450 for a CSR-enhanced silver plan for enrollees with incomes up to 200% FPL. The out-of-pocket maximum represents an enormous amount of risk for a low income person.

There is an existing market resource, however, that could give some enrollees in free or very cheap bronze plans significant relief from high out-of-pocket costs. That's so-called gap insurance, which offers first-dollar coverage for a range of expenses up to a limit of, say, $5,000 or $10,000. It's not available everywhere, coverage for preexisting conditions is excluded, and coverage is not comprehensive -- it's for named perils such as accidents and critical illness, as commenter Bob Herz cautions below [I have updated here to make those limitations clearer].  But for a healthy enrollee, plans of this sort may provide coverage up to the bronze out-of-pocket maximum and beyond. [Update, 11/23: Comment by Bob Hertz below is on point -- the policy featured below is for named perils only, e.g., accident, heart attack/stroke/"invasive"cancer, plus limited hospital indemnity.]

Replacing the individual mandate with auto-enrollment, part II

A week ago, I suggested that the wide availability of free bronze plans in 2018 for subsidy-eligible potential ACA marketplace enrollees opens a window for replacing the individual mandate with auto-enrollment of the uninsured, a measure that's popped up in various Republican bills and conservative repeal-and-replace proposals.

That was tongue-in-cheek, since the House and Senate tax cut bills make it obvious that Republicans are not interested in using current federally budgeted dollars to insure more people. They'd rather give the subsidy money to the wealthy via tax cuts.

That said, a fact brought to my attention by Politico's Dan Diamond does boost the case for auto-enrollment. 80% of the 6.7 million households that paid the mandate penalty in 2016 (for tax year 2015) had incomes below $50,000 -- that is, near the subsidy eligibility threshold for a single person, $48,240. Many of those households with incomes over $50,000 are also doubtless subsidy eligible. (On the other hand, a good number of those with incomes in subsidy range may have been disqualified for subsidies by an offer of insurance from an employer. Kaiser estimates that 3.7 million are rendered subsidy-ineligible for this reason.)

IRS tables show that payers of the mandate penalty in tax year 2015 were pretty heavily concentrated at income levels where free bronze plans are common this year:

Hey, Republicans: Auto-enrollment is within reach

Put it in Chapter 1 of the Annals of Unintended (though not un-forecast) Consequences: Trump's cutoff of federal funds to reimburse health insurers for Cost Sharing Reduction (CSR) subsidies has made free bronze plans widely available to subsidized buyers in the ACA marketplace*.

So available, in fact, that the Kaiser Family Foundation has calculated that more than half of the 10.7 million people who are uninsured and eligible for marketplace coverage can find free bronze plans in the ACA marketplace, and 70% can access bronze plans for less than the cost of paying the penalty for going without coverage.

That paradoxical effect of cutting off funding for a subsidy suggests a political deal -- a second paradoxical effect.  Recall that ever since Democrats included the individual mandate in the various bills that became the ACA, Republicans have cast the mandate as a mortal threat to freedom -- and seek to this day to repeal (and maybe replace) it.

As a substitute for the mandate, several Republican bills and plan outlines included auto-enrollment of the uninsured in a catastrophic plan that would cost the enrollee nothing, since its premium would equal whatever subsidy the enrollee was eligible for.

For Whom the Bronze Bell Tolls in the ACA Marketplace

My last post looked at the likely impact of the availability of free or very cheap bronze plans for ACA marketplace customers who are eligible for strong Cost Sharing Reduction (CSR), available only with silver plans, in the five largest markets in the country.

In this post, we'll look at current CSR takeup in the five counties in question and consider how it's likely to change. Here are the counties, with their 2017 initial marketplace enrollment totals:

Miami-Dade, FL              387,848
Los Angeles, CA             380,520
Broward, FL                    240,984
Harris, TX (Houston)      240,064
Cook, IL (Chicago)         144,418

While bronze plans generally have deductibles above $6,000, CSR-enhanced silver plans, for enrollees with incomes up to twice the Federal Poverty Level, generally have deductibles in the $0-1,000 range. Silver plan premiums can be hard for CSR-eligible buyers to afford, though. The wider the spread between cheapest bronze and cheapest silver premiums, the more people will choose bronze.