States seeking to reduce their uninsured populations must beware a Catch-22

By David M. Anderson, Charles Gaba, Louise Norris and Andrew Sprung

Note: this post is the third joint effort by David, Charles, Louise and me. Others here and here.

State policymakers have been prolific and creative in putting forward measures to strengthen their ACA marketplaces. Measures enacted since 2017 or in progress now include reinsurance programs, which reduced base premiums by an average of 20% in their first year in the first seven states to implement such programs; new or renewed state-based exchanges, which capture insurance user fees that can be used for advertising and outreach; state premium subsidies to supplement federal subsidies; and state-based individual mandates, which can provide funding for all of the above.

Policymakers must recognize, however, that these choices entail tradeoffs — and not just in budgetary constraints. Specifically, built into ACA marketplace architecture is a pricing dynamic that bedevils state attempts to improve ACA marketplace performance: 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 (second cheapest silver) plan, premium increases also increase subsidies — and tend to increase the difference, or "spread," between the benchmark plan and cheaper plans.

The year after: Does reinsurance boost marketplace enrollment?

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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).

Everything changes: Demographics inside and outside the ACA marketplace

Every year at this time I bind sheaves of four blog posts for two submissions to the National Institute of Health Care Management's Digital Health Care Media Awards. Here I'd like to post an outtake: a series of posts probing some under-the-radar facts about the the ACA marketplace and its prospective enrollees.  That is:

• The ACA marketplace and Medicaid expansion have never been tested by recession but stand ready as an economic shock absorber.
• U.S. income gains since 2014 have affected marketplace participation.
• Yearly apparent declines in on-exchange enrollment since 2016 are largely illusory.
• Nonetheless, persistent low takeup bespeaks inadequate subsidies.
• A recent increase in the uninsured population is concentrated at higher incomes.

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Eye of the hurricane? The ACA marketplace in 2020

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While open enrollment in the ACA marketplace has 1-7 days to run in a handful of state-based exchanges (SBEs), and other SBEs haven't reported their data, the overall picture is clear: enrollment in 2020 was essentially flat. Enrollment in the 38 states using HealthCare.gov was down 1.4%, while enrollment in the 13 SBEs will be up 2.6%, leaving total enrollment down 0.3%, according to Charles Gaba's projection.

The big picture is perhaps relatively simple. Premiums were down slightly on average; insurers did not register major impact from the zeroing out of the individual mandate in 2019; the market in aggregate was stable.  But the ACA marketplace is really 50 marketplaces -- or thousands, if you count each rating area -- and a lot of change is bubbling under the surface, from Medicaid expansions in red states to new state-based subsidies in blue states.  Nationally, too, the initial tally sparks several questions:

Frederick Isasi: Three healthcare trends, three power struggles

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At Families USA's Health Action conference last week, FUSA executive director Frederick Isasi, in a presentation for attending media, identified three healthcare trends for 2020.  It struck me that at the heart of each enumerated "trend" is a looming political battle, each of them central to the U.S.'s current existential struggle between oligarchy and renewed democracy. Let's look at each in turn.

1. Value. Describing Americans' demand for "value" in healthcare, Isasi was not speaking primarily about "value-based care," i.e. outcomes-based alternatives to fee-for-service payment. He focused rather on out-of-control prices paid to providers that are rendering care unaffordable to tens of millions. He pointed out that healthcare costs have climbed 600% in the last 40 years and nearly tripled as a percentage of GDP, rendering care unaffordable for tens of millions.  "Almost half of Americans say they have trouble affording healthcare," he said. "People are more scared of paying for getting sick than they are of getting sick."

As to the cause of runaway costs, Isasi blamed the market power of the various healthcare industries: "it's a highly subsidized sector with almost no government oversight." The struggle to hold down costs is less technocratic than political: forcing powerful industries to accept curbs on their pricing power.  Potentially enabling that struggle is a sea change in public attitudes: While coverage has eroded in recent years, Isasi noted, the ACA has wrought a sea change in Americans' expectations: "acceptance of the right to access is a new societal norm."

At Health Action 2020: Once more unto the breach, dear friends

I've had my yearly fix from Health Action 2020, Families USA's annual conference for healthcare advocates, policy people, scholars, and, most importantly I think, front-line ACA enrollment counselors.

I attended my first Health Action conference in January 2017, days after Trump was "sworn," aka perjured, into office. Republicans were promising swift ACA repeal -- "repeal and delay" was their watchword of the moment, meaning they would sunset the marketplace and Medicaid expansion swiftly and fill in the details later. The conference was composed of several hundred people devoted to preventing that. "Our action should lead to their inaction," declared incoming FUSA president Frederick Isasi. And mirabilis, that's exactly what happened.

In 2017 I felt keenly that the conference was run and attended by people who had devoted years or decades to expanding healthcare access in the U.S. -- all now faced with the prospect that their work would be unraveled. I wrote about an emanation of collective strength, institutional and individual, from the participants.  And this year I kept flashing back.

Since the impeachment process got into gear this year, I have often felt that American democracy is going down. It's terrifying to watch the entire Republican party fall in behind Trump to neuter Congress's power to hold a corrupt would-be autocrat accountable for on-the-record abuse of power.  Once again, the people on the stage and in the room reminded me that despite the grave threat to democracy posed by a party in power that's given up on democracy, the country has huge reserves for resistance: people who know how to be free; institutions that know how to wield political influence in service of the common good; courts that at least sometimes uphold the rule of law.

No mandate penalty, no problem? The jury's still out

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The Kaiser Family Foundation is peerless as a source of data and analysis of the ACA marketplace, and indeed of all U.S. healthcare markets. So it's probably foolish of me to question a simple, unequivocal and important conclusion by KFF president and CEO Drew Altman. Still...

Altman, who has a regular column conforming to Axios' radically short format, begins his latest with this declarative:

The Affordable Care Act’s insurance market has not been materially affected by the elimination of the individual mandate penalty.

Evidence: premiums are down in 2020, marketplace insurers are profitable, the risk pool has not apparently worsened, enrollment is more or less stable, and the Medicaid expansion appears to have been "largely unaffected."

That's a lot of evidence in short space. The marketplace, and the Medicaid expansion are clearly functioning without the mandate. But still, I think it's too soon to declare the effect of zeroing out the mandate negligible.  Caveats:

Juice it, Jersey: What silver loading anemia looks like

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I have noted before that New Jersey's implementation of an individual mandate and a reinsurance program in its ACA marketplace in 2019 illustrates the tradeoffs involved in reducing premiums in the ACA marketplace. In brief: unsubsidized premiums down, subsidized premiums up.

I have also noted that in New Jersey, silver loading is underpowered -- that is, it has produced weaker-than-average discounts in bronze plans and no discounts in gold plans, which accounted for an anemic 2% of enrollment in 2019.

Last week, David Anderson and Coleman Drake published a study indicating that the widespread availability of free bronze plans, a major byproduct of silver loading*, has had a particularly strong impact on enrollment.  The authors noted that this effect is conspicuously lacking in Jersey, and suggested a reason:

New Jersey restricts cost-sharing variation within metal levels. In 2019 New Jersey bronze plans were required to have an actuarial value of 64 percent—higher than the 58.5 percent minimum allowed by federal law. This regulation limited the financial exposure of existing enrollees by preventing them from selecting plans with higher cost sharing. However, it also limited the premium spread between the benchmark silver plan and bronze plans, which reduced the availability of zero-dollar premium plans in the state and thereby reduced enrollment. A trade-off thus exists between reducing enrollees’ financial exposure by increasing minimum actuarial value levels and increasing insurance coverage via the zero-price effect.

Has silver loading reduced mortality?

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In early 2017, the IRS sent letters to 3.9 million taxpayers who had paid the ACA's individual mandate penalty in 2015, encouraging the recipients to obtain health insurance and avoid the penalty.  A study of the results* published last month found that 1) those who received the letter were 1.3 percentage points likelier to enroll in coverage in the year following than penalty payers who did not receive it, and 2) that receiving the letter reduced mortality  over the next two years among 45-64 year-olds -- by about six deaths per ten thousand, a significant result.

Drilling into the data-set of millions, the authors infer that in this heart attack and cancer-prone age group, "each month of coverage (on average) reduces baseline mortality among those who enroll in coverage by approximately 2.4%." As to how insurance might have this effect among 45-64 year-olds who lacked coverage in the previous year, the authors posit:

For coverage to reduce mortality over this time horizon, it must affect conditions that: (1) can cause death quickly if left untreated or unmanaged, and (2) for which treatment or management can prevent or delay mortality. For example, individuals lacking health insurance may delay seeking care when experiencing symptoms of acute conditions (e.g., heart attack or stroke), and such delays increase the likelihood of short-term mortality (Smolderen et al., 2010; Medford-Davis et al., 2016)... Separately, obtaining coverage may reduce mortality by causing the diagnosis of certain chronic conditions for which treatment has rapid protective effects. For example, cardiovascular drugs have been observed to reduce mortality from heart disease within months of beginning treatment.

While attracting young adults into the ACA marketplace would improve the risk pool and so put downward pressure on premiums, attracting older adults saves lives. It is likely that silver loading, the pricing practice that's generated windfall discounts in bronze and gold plans in the ACA marketplace since 2018, has boosted enrollment more among older enrollees than among younger ones.

Is "free" a magic word in the ACA marketplace?

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Healthcare scholars David M. Anderson and Coleman Drake have published a study that analyzes the impact of free bronze plans, which became available to millions of prospective ACA marketplace plans in 2018, on enrollment.

Ubiquitous free bronze is one result of "silver loading," 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. As a result of silver loading, $0-premium bronze plans available to millions.

Perhaps the most striking finding in Anderson and Drake's paper is the sheer ubiquity of free bronze plans, particularly for enrollees over age 45 (since premiums rise with age, and the benchmark plan costs subsidized enrollees a fixed percentage of income regardless of age, older enrollees have larger subsidies to cover plans that cost less than the benchmark). The authors divined the availability of free bronze by matching enrollment data, which CMS breaks out by county, income, age and metal level in the 38 states that use HealthCare.gov, with pricing data, which CMS also provides. 

Free bronze, they found,was available in 2019 to almost every marketplace enrollee with an income below 150% of the Federal Poverty Level (FPL) -- that is, to about 3 million enrollees in HealthCare.gov states, more than a third of all enrollees. It was available to most enrollees at 150-200% FPL, and to a large majority of enrollees over age 45 in the 200-250% FPL income bracket.

2019: Medicare at Will, Warren in the whirlpool, silver loading Year 2....

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Below, a look back at some xpost focal points in 2019. Short version: the posts below index multiple posts on recurring themes:

Elizabeth Warren's healthcare toggle switch
Two years of rather quavery support for Medicare for All

Medicare for all who want it: Potential and pitfalls 
Scrutinizing the Medicare for America bill

Silver loading and 2019 enrollment
What impact has silver loading had so far? What can be done to increase its impact -- that is, to further boost ACA subsidies?

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Early this year, I assumed that as the Democratic presidential candidate field was winnowed, the surviving candidates would converge on a "Medicare for all who want it" model for next-gen healthcare reform.

Whither humanity? Three NYT snapshots

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*         *         *

The front page of today's print New York Times greeted Sunday breakfasters with what feels like a typical trio of world-going-to-hell headlines above the fold:

• Nearly 80 Die As Blast Strikes Somali Capital
• As It Detains parents, China Weans Children From Islam
• Trump Eroding Role Of Science In Government

As antidote, in the op-ed pages Nicholas Kristof offered up his annual reminder that by quantitative material measures the human condition continues to improve; extreme poverty, debilitating disease and child mortality are declining, literacy is growing, hundreds of thousands climb out of extreme poverty daily. 

In the same op-ed section, Ross Douthat leads with a truly arresting take on the last decade:

Assessing 2020 ACA marketplace enrollment? Don't forget Virginia's 2-year Medicaid expansion shakeout

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In assessing total ACA marketplace enrollment for 2020, it's important to keep in mind that the fallout from Medicaid expansion expansion in Virginia continued into a second year.

As I've noted before, that's generally been the case in states that have enacted belated Medicaid expansions after the ACA's core programs launched in 2014.

Marketplace enrollment drops when a state implements the Medicaid expansion (rendered voluntary to states by the Supreme Court in 2012) because the lowest-income marketplace enrollees become eligible for Medicaid -- and therefore no longer eligible for marketplace plans, at least theoretically.

In expansion states, people with incomes up to 138% of the Federal Poverty Level (FPL) are eligible for Medicaid -- and so, not for marketplace subsidies. In states that have refused the expansion (e.g., Virginia until Jan. 2019), eligibility for marketplace coverage begins at 100% FPL.

Michael Bloomberg's healthcare plan eats its own tail

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Michael Bloomberg's just-released health coverage plan would do some good if enacted. It's introduced, however, with a false premise.

Deeming "a Medicare-like public option" the "first step," the plan outline pronounces:

A public insurance option would improve consumer choice and increase competition in the private insurance market, pushing down everyone’s premiums. People of modest means who buy the public option would be eligible for the same subsidies that would apply on the health insurance exchanges.

As students of the ACA marketplace know, however, within the marketplace structure, when base (pre-subsidy) premiums shrink, the premiums paid by subsidized enrollees tend to go up. That's because the subsidies are designed so that the enrollee pays a fixed percentage of income (rising with income) for the benchmark (second cheapest silver) plan. If you buy a plan that's cheaper than the benchmark, your subsidy goes further (and these days, thanks to silver loading*, may cover the whole premium). When premiums go down, price spreads between the benchmark and cheaper plans tend to shrink, reducing discounts for the cheapest silver plan and for bronze plans. If a public option reduces premiums, as Bloomberg promises, it will increase them more often than otherwise for subsidized buyers. Ditto for reinsurance, proposed to reduce premiums another 10%.

The Cadillac Tax: An idea whose time never came

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To the surprise of no one, it looks like the ACA's long-postponed Cadillac ax, an excise tax on employer-sponsored health plans that exceed a certain cost threshold,  is slated for legislative execution, along with the medical device tax.

Against the vociferous opposition of unions and employers, Obama fought to preserve the Cadillac Tax, a linchpin of the ACA's efforts to control healthcare costs. CBO estimates that repeal will cost the treasury $200 billion over ten years.

On one level, it's sad that Congress can't make taxes with powerful opponents stick. Medical device tax repeal is a dead giveaway.  But the Cadillac Tax was based on two false premises.

Uninsurance goes (slightly) upscale, Kaiser edition

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In September, the annual Census Bureau update on health insurance coverage in the U.S. reported a 0.5% rise  in the uninsured population in 2018 -- an increase of 1.9 million uninsured. I noted at the time:

Affluent uninsured population spikes. Notwithstanding a drop of 2 million  (0.7%) in Medicaid enrollment, the sharpest increases in the uninsured were at high incomes. At 300-399% FPL, the insured rate dropped a full percentage point, from 92.9% to 91.9%, and at over 400% FPL, the rate dropped 0.8%, from 97.3% to 96.6%. Together, these two income groups account for 55% of the population. Particularly striking, the number of uninsured at incomes over 300% FPL increased 23.8% (from 6.631 million in 2017 to 8.215 million in 2018).  The spike in uninsured children at high income levels seems congruent with this drop.

These losses were concentrated in private insurance, down 1.3% percentage points at both income levels. The private insurance losses stem in part from the individual market, where unsubsidized enrollment dropped by 1.8 million in 2018, according to the Kaiser Family Foundation's estimate.  That drop is part of a longer term free-fall, from 9.1 million unsubsidized in the individual market in in the first quarter of  2016  to 4.7 million in Q1 2019, according to Kaiser.

Yesterday, the Kaiser Family Foundation released an updated analysis of the uninsured population. Kaiser finds a smaller increase in the uninsured in 2018 than did the Census, 500,000.  In contrast to the Census, Kaiser finds equal increases in the uninsured at 100-199% of the Federal Poverty Level and at over 200% FPL, with a statistically insignificant decrease at incomes below 100% FPL.  Regarding the increase at not-poor incomes, a couple of points from the analysis stand out:

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.

Ross Douthat and the "expert-fashioned architecture" of the ACA

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Credit where due: Ross Douthat is a creative thinker, capable of carving new conceptual boundaries across familiar landscapes.  Today, claiming that Democratic voters have tired of Clinton- and Obama-style technocracy, he identifies the competing approaches to policy as moral (Bernie Sanders) and transactional (Joe Biden).

On the healthcare front, citing ""widespread left-wing disappointment with what the Obama-era politics of expertise produced," Douthat asserts:

This disappointment has been strongest on health care, where Obamacare’s most popular provision was the simple socialism of the Medicaid expansion rather than the complicated, expert-fashioned architecture of the exchanges.

He's right on the merits.  The Medicaid expansion accounts for probably 75% or more of the net coverage gains achieved by the ACA.  Enrollee satisfaction is far higher in Medicaid, which covers all of enrollees' costs, than in the marketplace, where satisfaction is inversely proportionate to out-of-pocket cost exposure, and at least half of enrollees are subject to high deductibles and out-of-pocket costs.*

Should Snoopy be your editor?

There is a Peanuts comic series in which Snoopy is working on a novel, and Lucy volunteers to draw a cover for it. Snoopy makes very specific demands, and Lucy returns with the finished product:

Lucy (handing the work product up to Snoopy on dog house): I've finished the drawing for the  cover of your new novel.

Lucy (as Snoopy examines): See? It shows a bunch of pirates and Foreign Legionnaires fighting some tigers and elephants leaping through the air toward a girl who is tied to a submarine.

 Linus (addressing Lucy as she walks away staring at her drawing): Did he like your drawing?

 Lucy: It needs more tigers. 

It needs more tigers. This often comes to mind when I am on the receiving or giving end of editorial input.

GetCoveredNJ hits cable TV with its first ad

This time last year, an email correspondent who closely watches the New Jersey ACA marketplace was tearing his hair out for the lack of TV advertising by state agencies working to boost enrollment. New York was flooding the airwaves with ads; NJ was invisible.*

The then-young Murphy administration entered Open Enrollment season flying high on a newly enacted reinsurance program and state-based individual mandate that together had reduced individual market premiums 9% below 2018 levels. While the Trump administration had gutted federal spending on enrollment assistance, from $1.9 million in 2016 to $300,000, the state was kicking in $800,000 for assistance and outreach.

Yet on-exchange enrollment lagged 2018 totals, finishing 7% down, compared to a 4% average drop in 39 states using the federal exchange, HealthCare.gov. By this point (week 5), it was down 14% year-over-year (in all 9 HealthCare.gov states, a calendar discrepancy between 2017 and 2018 led to a sharp closing of the apparent gap in the final week).