Is enrollment surge on GetCoveredNJ driven by off-exchange migration? Maybe not.

Subscribe (free) to xpostfactoid

Liberty State Park, Jersey City, NJ

New Jersey's Department of Banking and Insurance (DOBI) reports that enrollment in health plans on GetCoveredNJ, the state's ACA exchange, was up more than 25% as of December 5 compared to the same time last year. That may be the largest one-state year-over-year surge during an Open Enrollment season in which enrollment was up about 9% nationally as of Dec. 8. 

New Jersey has a large off-exchange individual market, which in 2020 accounted for 30% of enrollment in ACA-compliant plans (94,885 out of 316,580 total enrollments as of Q1 2020). The surge in on-exchange enrollment may provide a hint as to the extent of migration from off-exchange to on-exchange driven by the American Rescue Plan Act's removal of the income cap on subsidy eligibility. Since April of this year, premiums for the benchmark (second cheapest) silver plan have been capped at 8.5% of income, regardless of how high the income is. New Jersey, moreover, layers its own supplemental subsidy on top of the federal APTC. At high incomes, NJ kicks in $100/month per person, up to an income of 600% FPL. This subsidy, like the federal one, is only available on-exchange.

Subscribe (free) to xpostfactoid

Estimate: Between 42 million and 50 million people have enrolled in ACA-compliant plans since 2014

Subscribe to xpostfactoid 

While only about 5% of the nonelderly U.S. population is insured through the ACA-compliant individual market for health insurance, a far larger percentage of us are likely to access the market at some point in our lives (if it survives). At healthinsurance.org, I've estimated that between 42 million and 50 million people have accessed the ACA marketplace since its launch in January 1, 2014.

I've referred readers of that post here for more explanation of the basis of that estimate. CMS does not provide a simple count, yearly or cumulatively, of unique enrollees at all times and venues: during the annual Open Enrollment, via Special Enrollment Period year-round, and off- as well as on-exchange. So here is what I have pieced together:

1. New enrollment on-exchange during Open Enrollment

In its reports and Public Use Files tallying annual marketplace enrollment, CMS breaks out the number of new enrollees (as opposed to renewals). Each year, after reporting on total signups during the Open Enrollment period, CMS later reports on effectuated enrollment  -- that is, the number of enrollees who have paid their premiums. Effectuated enrollment at its peak each year has averaged about 89% of initial signups.  In the right column below, I have estimated effectuated new enrollment in each year and in total.

Total New ACA marketplace enrollment, 2014-2020

    Source: CMS Public Use Files (see note at bottom for adjustments)

From 2014 through this year, approximately 27.7 million people have purchased plans during the annual Open Enrollment period and paid their first premiums, effectuating coverage ("approximate" because I'm applying the overall effectuated percentage to the new enrollees specifically).  Some "new" enrollees may have dropped out and returned.

The year after: Does reinsurance boost marketplace enrollment?

Subscribe to xpostfactoid via box at top right --->

I have written on various occasions about a Catch-22 that bedevils state governments trying to improve affordability and boost enrollment in their ACA marketplaces: 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  plan, premium increases also increase subsidies — and tend to increase the  "spread" between the benchmark plan and cheaper plans, creating discounts. Premium reductions reduce those spreads and discounts.

States face this Catch-22 when considering reinsurance programs, for which federal funding is available. By reimbursing insurers for costs incurred by their most expensive enrollees, reinsurance reduces premiums by predictable amounts, averaging 20% in the first year of implementation as of 2019, according to Avalere Health. That helps unsubsidized enrollees but sometimes hurts the subsidized.

By 2018, states faced intense pressure to help the unsubsidized. A federal reinsurance program helped control premiums nationally in the marketplace's first three years of operation, 2014-2016. When the program sunset in 2017, premiums skyrocketed, as they did in 2018 (other factors included insurers' initial underpricing in a new market, which was manifest by 2017, and political turmoil in advance of the 2018 enrollment season). From 2016 to 2018, average benchmark premiums increased by an average of 61%.  By 2019, unsubsidized enrollment in ACA-compliant plans was down about 50% from 2016.

Let's take a look at how enrollment fared in ten of the twelve states that have stood up reinsurance programs (as CMS has encouraged states to do) since 2018 (Rhode Island has not yet reported 2020 totals, and Maine's 2019 enrollment was affected by late implementation of the ACA Medicaid expansion).

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.

Surprise! New Jersey ACA marketplace outperforms the national market

When CMS reported enrollment totals in the ACA marketplace at the end of Open Enrollment last December, the news for New Jersey was disappointing.

Despite (or per below, partly because of) a 9% average reduction in premiums last year, fruit of a new reinsurance program and a state-enacted individual mandate, on-exchange enrollment dropped 7.1% -- a performance that lagged the national marketplace (down 2.7%) and the 39 states that rely on the federal HealthCare.gov platform (down 3.8%) -- though right at the median for HealthCare.gov states that have expanded Medicaid (and so get less juice from silver loading)*.

When the state released off-exchange numbers in June, the results provided a measure of consolation. Off-exchange enrollment was up 3%, shrinking the total individual market enrollment loss to 4% from Q1 2018 to Q1 2019.

The main cause of the contrary results is not hard to find. Three quarters of on-exchange enrollment in New Jersey is subsidized.  In David Anderson's pithy formulation, "Reinsurance, all else being equal, helps the unsubsidized and hurts the subsidized." That's true of any measure or market force that reduces average premiums. When the benchmark (second cheapest silver) plan premium goes down, subsidies are reduced accordingly, and price spreads between the benchmark and cheaper plans tend to shrink, reducing discounts.

New Jersey off-exchange enrollment rose in 2019: Did cheap off-exchange silver help?

Good news for New Jersey's individual market for health insurance: while on-exchange enrollment, announced late last December, was down a disappointing 7%, those losses were partly offset (as some observers had hoped) by off-exchange enrollment gains announced today:


Why was enrollment down on-exchange, and up off-ex?  In brief: the state's swift action in 2018 to stand up a reinsurance program and pass a state individual mandate resulted in an average premium decrease of 9%, That drop did not help the large majority of on-exchange enrollees who obtained premium subsidies. As I explained last January:

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

The drop did help unsubsidized enrollees, however. And as DOBI notes today, the unsubsidized had some motive to migrate off-exchange: