Maryland: Xpostfactoid confirms: Funding CSRs *now* would hurt more than it helps


Time: D H M S

I just did a light analysis of how many people would be helped or hurt by CSR funding in 2019 in Rhode Island, and concluded that at least 28% of exchange enrollees would see their premiums increase if CSR funding was restored, while only perhaps 2-3% would see their premiums drop.

It turns out that over the weekend, my colleague Xpostfactoid did a much deeper analysis of the same situation in Maryland:

So there you have the enrollment results of full-bore on-exchange silver-loading of CSR costs in one state. In all, 49,993 on-exchange enrollees with incomes up to 400% FPL chose plans other than silver. About 48,000 of them were subsidized. That's 31.2% of all enrollees, within striking distance of Aron-Dine's upper bound of 36% for all marketplace enrollees.

I would not go so far as to say that all of them stand to be hurt by CSR re-funding, however. The "harmees," I would argue, are mainly the roughly 30,000 subsidized with incomes over 200% FPL who chose non-silver plans. That's about 20% of on-marketplace enrollees -- and about one eighth of all individual market enrollees in Maryland. Their ranks should perhaps be partly offset by some subset of the 17,410 with incomes below 200% FPL who chose bronze or gold plans. Some of them may have been lured into suboptimal choices -- gold worth less than silver, or bronze that would pay for none to little of any care they actually sought.

It's also true, however, that restoring federal CSR reimbursements would not help many individuals at this point. Arguably it would benefit none -- if all states require insurers to concentrate the cost of CSR in on-exchange silver plans (right now not all states do, and unsubsidized buyers in those states are paying some portion of the cost of CSR, from which they don't benefit). "Silver-loaded" CSR has provided a much needed backdoor subsidy to many subsidized enrollees with incomes over 200% FPL, and a perhaps-valuable lure to some low-income folks who get a bronze plan for free, or close to it. It's not an efficient way to improve ACA subsidies -- but those subsidies were in sore need of improvement. Until it's politically feasible to replace this market distortion with a more rational enhanced subsidy schedule, Democrats should resists efforts to restore the federal reimbursements.

In other words: As I've been arguing for a couple of years now, the ACA's tax credit formula needs two major improvements: The 400% FPL income cap needs to be raised or removed, and the formula itself has to be made more generous below the 400% threshold.

Silver Loading/Silver Switching has inadvertantly already taken care of the second of these, albeit via a confusing, ass-backwards kind of way. The "ACA 2.0" bill introduced by House Democrats would restore CSRs, true, but would also take care of both of the other issues the proper way. Unfortunately, the odds of that bill or anything like it becoming law before the 2019 Open Enrollment Period kicks off are pretty much zero, so in the meantime, CSRs really should NOT be restored.