Benefit cliffs in the ACA marketplace

Dave Anderson highlights an important weakness in the subsidy structure for the ACA marketplace. As income rises, the enrollee's share of the premium for a benchmark silver plan is subject to sudden and irregular bump-ups, which Anderson compares to jolts in marginal tax rates.  Take the case of a couple looking to buy a benchmark silver plan:

From $17,000 to$20,000 this couple pays an extra $2 per month for every thousand dollars more they earn a year.  Annually this is about a 2% marginal tax rate on the additional income.  And then there is a huge bump from $20,000 to $21,000.  The benchmark premium suddenly becomes $256 more expensive.  This is a 25% marginal rate...

And then the marginal rate drops again when the family increases their earnings from $21,000 to $22,000.  The marginal rate for this slice is now about 11%.  The marginal rate for couples earning under 300% FPL is in the mid-teens, and then there is a drop in the marginal rate to just under 10% for 300% to 400% FPL and then a potential massive spike as soon as someone earns over 400% FPL.

The spikes in out-of-pocket (OOP) costs this couple is exposed to as income rises are even more sudden -- and, I think, potentially damaging to family finances -- than the premium spikes. The main benefit cliff is formed by the sudden fadeaway of Cost Sharing Reduction (CSR) subsidies at 201% FPL, where the actuarial value of a silver plan drops from 87% to 73%.  CSR disappears entirely at 251% FPL, and the coverage offered by a benchmark silver plan with no CSR, which has an AV of 70%, is clearly underinsurance for those without significant financial resources.

"Not losing, choosing"? - Avik Roy turns up the gaslight on the BCRA

Two weeks ago, I took on the argument of various BCRA proponents that most of the 22 million people forecast by CBO to lose insurance coverage should the bill become law would be "choosing, not losing." That write-off of legions of uninsured was founded on CBO's assertion that most of the first-year coverage loss of 15 million would occur "primarily because the penalty for not having insurance would be eliminated."  Expect to hear more of this, I forecast.

In brief, I suggested that argument depended on  1) conflating the forecast immediate effect of mandate repeal in 2018 with the ten-year effect; 2) ignoring the extent to which, in CBO's own telling, the mandate interacts with other changes in the marketplace and Medicaid; and 3) pooh-poohing the obvious and stated purpose of the mandate, which is to boost the ranks of the insured and reduce premiums by improving the risk pool -- which CBO clearly assumes it has accomplished in some measure.

Now here cometh Avik Roy, chief healthcare apologist for the Republican establishment, making the "choosing not losing" argument in detail.  Roy's addition to the argument hinges mainly on a rather breathlessly presented look at CBO's unpublished estimate of 10-year coverage losses attributable to mandate repeal under the BCRA (provided to Roy by a Congressional staffer). This estimate closely tracks CBO's published December 2016 analysis of the effects of repeal of the mandate alone, with the ACA left otherwise intact. CBO forecast that straight mandate repeal under the ACA would result in a ten-year coverage loss of 15 million, as compared to CBO's forecast that 22 million will lose coverage under the BCRA. Here's CBO's breakout of the losses under straight mandate repeal:

Getting medical care like it's 1999

In the past year or two, job growth has returned to late-1990s levels. Wage growth has not. But thanks doubtless in large part to the ACA, access to needed medical care has also taken us back to the late Bill Clinton years, more or less.

Below is a chart of one measure of healthcare access from the latest data release of the National Health Interview Survey, including responses from January-September 2015. It's a brief history of lack of access to needed medical care in the U.S.:

A little less underinsurance on HealthCare.gov this year

[1/11 update at bottom]

It looks as though takeup of Cost Sharing Reduction (CSR) subsidies by eligible buyers on HealthCare.gov is up slightly this open season, so far. CSR reduces deductibles, copays and maximum out-of-pocket costs for buyers with incomes below 250% of the Federal Poverty Level (FPL) -- but only if they select silver plans, the second-cheapest of four metal levels.

As of the end of open season for 2015 enrollment last February, 76.8% of CSR-eligible HealthCare.gov customers had selected silver plans and so accessed the benefit. For 2016 enrollees through 12/26/15, according to HHS's latest enrollment report, CSR takeup is up to 78.4% on the federal exchange.

Here's the basic calculation for CSR takeup among 2016 enrollees:

Marketplace watch: ACA year in review

As an amateur student of U.S. healthcare, I'm always conscious that I'm talking to (and reading) people who know far, far more than I do.  And I wish I knew how to locate and talk to more marketplace and Medicaid enrollees about their experiences. Perhaps that can be my resolution for 2016.

That said, by carefully reading sources I've come to trust (and studies they recommend), and burrowing into a few preoccupations (CSR, anyone?), I do think I've managed to bring a few important points to light or into focus in the past year. Chief among them may be the extent to which enrollees who should have been Medicaid-eligible propped up the private plan marketplace in states that refused the Medicaid expansion; the extent to which the uninsured were concentrated in low income bands where ACA offerings have been most effective; the various ways in which subsidy-eligible uninsured people may have got the impression they were ineligbile for aid; the extent to which news coverage and even sophisticated research misses the effects of Cost Sharing Reduction; and the extent to which exchange design affects CSR takeup.

A lot of my 'discoveries' are surely obvious to those who closely study healthcare or work at implementing the ACA. But it may not be obvious to them that the points need highlighting. Below are a few of those highlights from 2015. Thanks for reading!

Dollars to donut holes, Ambetter undercuts the competition (11/20)
     Cut-rate insurers with roots in Medicaid managed care are driving down benchmark premiums in some major markets

The counter-Upshot: Obamacare is quite as egalitarian as it seems (11/20)
     Most of America's uninsured have incomes below 250% of the Federal Poverty Level

Supporting the biggest decision for ACA marketplace shoppers (11/3)
     That would be whether to access or forgo Cost Sharing Reduction subsidies

The ACA's uncertain shield against underinsurance: A CSR compendium

Note, 2/16/18: This post, and the index of posts it introduces, originated long before the legal challenge to federal CSR reimbursement began to directly affect policy and the shape of the ACA marketplace. The focus until the 2016 election was mainly on CSR takeup and the factors that affected it. In 2017, Trump's threats to cut off CSR reimbursement, executed in October, reshaped the ACA marketplace, driving up costs for the unsubsidized while providing windfalls for many of the subsidy eligible. That is a separate story, and posts relating to those effects are listed in a new section at the top of the index.

Updated 10/9/15, 4/6/16, 4/14/17

Cost Sharing Reduction (CSR) subsidies are the ACA marketplace's best defense against underinsurance for private plan buyers. That's why I've been so interested in who accesses or fails to access CSR and why -- and why takeup varies widely from state to state.

Thanks to CSR, half of marketplace enrollees obtain coverage that covers a higher percentage of the average enrollee's costs than the average employer-provided plan. That is, about 49% of enrollees are enrolled in CSR-enhanced silver plans that raise the plan's actuarial value -- the percentage of the average user's costs covered by the insurer --  to either 94% or 87% (see The Rosetta Stone of CSR takeup*).  The average in employer sponsored insurance is about 82%, or at least it was as of 2011, according to a Kaiser analysis. Another 5% of enrollees are in gold or platinum plans, with AV 80% and 90% respectively [paragraph added 4/14/17].

Below is an index of my posts examining the factors affecting CSR takeup, along with some posts questioning whether the benefit ought to be restructured.  I've done a fair number of single-state snapshots, and they're listed separately at bottom. The top two posts focused on California highlight price sensitivity; the Connecticut, New York, Maryland, Rhode Island Washington posts show how website design can shape the choice; and the posts on southern states mostly illustrate that lower income buyers, for whom the CSR benefit is strongest and the cost of silver lowest, are likeliest to access CSR.

Overall, according to the most recent enrollment figures for 2015, 56% of marketplace private plan buyers in all states accessed CSR (Update, 4/14/17: 58% in 2017).  About 85% of them reported a household income under 201% of the Federal Poverty Level (FPL) and so received a strong version of the benefit, raising the actuarial value of their silver plans to 94% (up to 150% FPL) or 87% (151-200% FPL). Another 7% of all buyers bought gold (AV 80%) and 3% bought platinum (AV 90%) plans. 21% bought bronze plans (AV 60%) with their sky-high deductibles, usually ranging from $5,000-6,600 per person. (Update: in 2017, the breakout was 4% gold, 1% platinum, 71% silver and 23% bronze.)

Here's a sampling of my posts on the subject.

Effects of Trump's CSR cutoff (added 2/16/18, updated 4/27/18)

If Seema Verma bans silver loading, how many marketplace enrollees will suffer? (4/12/18)

Choosing a metal level in the CSR-addled Maryland marketplace (1/17/18)

For whom the bronze bell tolls in the ACA marketplace (11/16/17)

Hey, Republicans: Auto-enrollment is within reach (11/10/17)

Free bronze or CSR-boosted silver? The choice in 5 top ACA marketplaces (11/4/17)

CSR windfall: Will it have a bronze or gold cast? (10/27/17)

Bronze and gold discount plans in California, 2018 (10/20/17)

States vary in response to CSR uncertainty (with David Anderson, Charles Gaba and Louise Norris) (10/11/17)

Covered California to midde-class enrollees: There may be gold in them thar hills (10/7/17)

Go ahead, Trump, cut off CSR payments -- starting in 2018 (7/20/17)

National CSR takeup (and implications)

"Strong" CSR takeup dropped modestly on HealthCare.gov in 2018 (4/3/18)

On HealthCare.gov, CSR takeup rose steadily 2015-2017 (2/15/18)

The real cost of benchmark silver for BCRA enrollees (7/1/17)

ACA vs. AHCA: Total subsidized shares of costs at different income levels and ages (3/19/17)

The Rosetta Stone of CSR takeup (1/9/17)

ACA afflicted by a deductible cliff (12/21/16)

Cutting off CSR subsidies will hit red state enrollees especially hard (12/5/16)

Two major divides in the post-ACA individual market (4/1/16)

Supporting the biggest decision for ACA marketplace shoppers (11/3/15)

How bronze plans offer fool's gold to the Treasury (11/1/15)

Surprise! When silver plans are cheaper, more people buy them (10/24/15)

Addled by the metal level (10/5/15)

"Are marketplace plans affordable?" - on Commonwealth Fund survey (9/28/15)

The feds are taking CSR and premium subsidies away from many enrollees (9/8/15)

Five factors shaping CSR takeup on ACA exchanges (9/1/15)

A quibble with Avalere over CSR takeup (8/20/15; updated, 9/3/15)

Is Obamcare's bronze trap widening? (on healthinsurance.org (8/12/15)

Income levels and CSR takeup in states that refused Medicaid expansion (8/23/15)

Underinsurance: What's offsetting the rise in deductibles?

On the weekend, I posed a few questions raised by the Commonwealth Fund survey of underinsurance released this week. I've since heard from Commonwealth's Sara Collins, VP of health care coverage and access, the lead researcher in the study. Her answers highlight some significant unknowns about what's going on in employer-sponsored insurance.*

To recap, Commonwealth found that among those American adults under age 65 who were insured for a full twelve months, 23 percent were underinsured – that is, their deductibles and copays were high enough to cause severe financial strain. That top line is almost unchanged since 2010; the real damage on this front was done from 2005 to 2010, when employers started shifting costs en masse to employees. Among those who get insurance from an employer, the Commonwealth found an underinsurance rate of 20%, unchanged since 2012 and up from 17% in 2010.

Mysteries of underinsurance in the Commonwealth Fund survey

A Commonwealth Fund survey released this week found that among those American adults under age 65 who were insured throughout 2014, 23 percent were underinsured – that is, their deductibles and copays were high enough to cause severe financial strain. That top line is almost unchanged since 2010; the real damage on this front was done from 2005 to 2010, when employers started shifting costs en masse to employees.

I have several questions about the report, to which I'm seeking answers from the authors. If you have any insight, please let me know (email address is in profile to right).

In the questions below, please keep in mind Commonwealth's definition of underinsured: 1) total out-of-pocket costs exceed 10% of annual income, or 5% if the person's household income is under 200% of the Federal Poverty Level (FPL), or 2) the plan deductible exceeds 5% of the beneficiary's annual income.

1. While deductibles in employer-sponsored plans continue to rise, most notably among those with less than 100 employees, the underinsurance rate actually dropped among large employers from 2012 to 2014, from 16% to 14%.  In the same period, the percentage of large-firm employees whose deductible exceeded 5% of annual income rose from 6% to 8%.  What's offsetting that rise in the ranks of those whose deductibles alone classify them as underinsured? Do the free preventive services mandated by the ACA play a role? Or rather, since "the out-of-pocket cost component of the measure is only triggered if a person uses his or her plan," could reluctance to use (and pay for) any medical services be inhibiting the underinsured total?

2. More generally, , among all insured Americans under age 65, Commonwealth finds an increase of 7 million since 2010 in those whose deductibles qualify them as underinsured, but a net increase in underinsureds of only 2 million . Again, something seems to be offsetting the relentless rise in deductibles. Since 2010,

Commonwealth and Kaiser on underinsurance

This week, the Commonwealth Fund put out a new survey of underinsurance among American adults under age 65, while Kaiser released a new survey of buyers in the individual market, both on- and off-exchange. Over at healthinsurance.org, I find that Kaiser indirectly indicates that Cost Sharing Reduction subsidies are somewhat leveling the underinsurance playing field. CSR is a leaky vessel, but it's carrying maybe 6 million souls across the underinsurance chasm. Hope you'll have a look.

Between Scylla and Charybdis in a hospital bed

The Commonwealth Fund is out with a report*suggesting that the ACA has the potential to reduce the substantial ranks of the nation's underinsured -- those who currently either spend a percentage of their incomes on premiums deemed unaffordable by ACA formulas or who are exposed to out-of-pocket medical expenses high enough to deter them from getting needed care. Jonathan Cohn overviews the core conclusions here.

While affirming that ACA benefits are well-targeted at those likeliest to be underinsured, the report also highlights ways in which the ACA's Qualified Health Plans  (QHPs) may also underinsure -- chiefly via the high deductibles and out-of-pocket cost limits prevalent in bronze plans, selected thus far by 19% of QHP buyers. That much was not news to me. But then the report flagged another underinsurance hazard that brought me up short -- and brought a memory flash. My emphasis below:

Is the ACA reducing underinsurance?

About 16 percent of the U.S. population has no health insurance. Reducing that percentage by more than half is a primary purpose of the Affordable Care Act. As subsidized coverage in a reformed individual market has become available for the first time in 2014, news coverage has understandably focused mainly on how many previously uninsured people are gaining coverage.

But the ACA also rewrote the rules governing what kinds of coverage health insurance policies had to offer. The revamp was designed to address a problem nearly as pressing as reducing the ranks of the uninsured: tens of millions of Americans were also underinsured, or unreliably insured.  Coverage was subject to annual or lifetime caps and to arbitrary rescission.  Essential benefits such as hospitalization, mental healthcare, rehabilitative care and childbirth were excluded from many policies.

Many ACA provisions designed to end underinsurance have been in effect for some time  -- the ban on lifetime coverage limits has been in place since September 23, 2010, as has mandatory free coverage for a long list of preventive services, including birth control  I would like to examine the extent to which serious uninderinsurance has already been reduced.  What follows is a kind of scope-of-question outline -- a few questions, a few premises, a few observations.