Vermont officially jumping on the Silver Switcharoo Train (& restoring the Mandate as well)

Two pieces of welcome news out of the Green Mountain state via Louise Norris at

New legislation will allow Vermont insurers to load cost of CSR only onto on-exchange silver plans for 2019

For 2018 coverage, Vermont, North Dakota and the District of Columbia were the only states that didn’t allow insurers to add the cost of cost-sharing reductions (CSR) to premiums after the Trump Administration cut off federal funding for CSR. In most states, insurers were allowed to either add the cost of CSR to all silver plan premiums, to all on-exchange silver plan premiums, or, in a few cases, to all metal-level plan premiums. But in Vermont, North Dakota and DC, insurers simply had to absorb the cost of CSR, estimated at $12 million a year in Vermont.

As a reminder, for 2018:

  • 20 states went the full #SilverSwitcharoo route (the best option, since it maximizes tax credits for those eligible for them while minimizing the number of unsubsidized enrollees who get hit with the extra CSR load);
  • 16 states went with partial #SilverLoading (the second best option: Subsidized enrollees get bonus assistance, though not as much as in Switch states; more unsubsidized enrollees take the hit, but they aren't hit quite as hard);
  • 6 states went with "Broad Loading", the worst option because everyone gets hit with at least part of the CSR load except for subsidized Silver enrollees;
  • 6 states took a "Mixed" strategy...which is to say, no particular strategy whatsover. The state insurance dept. left it up to each carrier to decide how to handle the CSR issue, and ended up with a hodge podge of the other three
  • 3 states (well, 2 states + DC, anyway) didn't allow CSR costs to be loaded at all. Their carriers have to eat the loss, which makes little sense, but what're ya gonna do?

Well, Vermont has apparently decided to answer that question by officially allowing their 2 carriers to go the full #SilverSwitcharoo route next year after all:

Assuming the cost of CSR is going to be added to premiums, adding it to only on-exchange silver plan premiums is the solution that benefits the most consumers, since it allows the additional cost to be borne almost entirely by larger premium subsidies (which are tied to the cost of silver plans). If there are off-exchange silver plans available that don’t include the cost of CSR in their premiums, people who don’t get premium subsidies can purchase those plans instead of the on-exchange silver plans, and avoid having to pay the added premium to cover CSR. People who buy plans at other metal levels avoid the cost altogether, since it’s only added to silver plans, and if they get premium subsidies, those subsidies are larger due to the higher cost of silver plans in the exchange and the commensurately larger premium subsidies.

Part of the reason VT didn't allow the Silver Switcharoo path this year is because...

...until now, the plans that have been for sale outside of Vermont Health Connect have been identical to those sold within Vermont Health Connect, and thus equally priced.

...For 2019, however, Vermont has addressed the situation. Not only will insurers be able to add the cost of CSR to premiums for 2018, but Vermont has enacted legislation (Senate Bill 19, signed into law in February 2018) that codifies the process that insurers will use, allowing them to add the cost of CSR to on-exchange silver plans, and offer “reflective silver plans” outside the exchange, without the cost of CSR added to the premiums for the reflective plans. The off-exchange reflective silver plans will be similar to the on-exchange silver plans, but will have at least one variation, which will allow for differential pricing, letting the insurers add the cost of CSR only to the on-exchange versions.

The ideal solution to the CSR paradox would be for Congress to officially restructure the tax credit formula (which Silver Loading/Switching does in a crazy, ass-backwards way) and then formally appropriate CSR funding permanently....which is exactly what the "ACA 2.0" bill introduced by House Democrats a couple of weeks ago would do.

Unfortunately, the odds of that happening before January 2019 are, shall we say, slim, so until then, the next best workaround would be for all 50 states to join the 20 (now 21) already riding the Silver Switch train. The 16 Silver Load states should take the other half of the leap, and the 14 states using Mixed or Broad Load strategies should go for it as well.

Meanwhile, Vermont--one of the few states solidly blue enough to get away with doing so, I'd imagine--is also halfway towards restoring the ACA's individual mandate which Congressional Republicans repealed back in December:

Vermont House passes legislation to implement an individual mandate

In March 2018, the Vermont House of Representatives passed H.696, which would implement an individual mandate in the state of Vermont. The bill is now under consideration by the Senate Committee on Health and Welfare, but if enacted, it would take effect on January 1, 2019, seamlessly picking up where the ACA’s individual mandate leaves off (the GOP tax bill that was enacted by Congress in late 2017 will repeal the ACA’s individual mandate penalty at the end of 2018).

The initial version of the bill included specifics about how the individual mandate would work in Vermont (it would have been largely indentical to the ACA’s individual mandate, including the same penalty amounts). But an updated version of the bill leaves the details up to a working group, which would be formed if the legislation is enacted. The current legislation simply states that Vermont will have an individual mandate as of 2019, and tasks the working group with developing “recommendations regarding administration and enforcement of the individual mandate to maintain minimum essential health coverage.”

Don't get me wrong: This is welcome news. However, I hope that if it does pass, they'll make the penalty more stringent than the $695/person / 2.5% of income version that the ACA had. If you're going to have a mandate penalty-based structure, you might as well make it an effective one; the main reason the ACA penalty was only partially-effective is that it still cost far less than the premiums for many people. If the Bronze plan costs $400/month, that means people are deciding whether ot pay a $700 penalty or $4,800 for a policy. Some people just don't think of the Bronze plan as being worth the cost, so they see it as "saving" $4,100.

If you're going to treat the mandate seriously, it needs to be higher--I could see setting it to, say, 80% of however much the least-expensive Bronze plan would otherwise cost after tax credits. That would mean a choice of, say, a $3,800 penalty vs. a $4,800 Bronze plan at full price...or perhaps a $1,200 penalty vs. a $1,500 plan after tax credits are applied.