Oregon: OSPIRG urges state to reinstate mandate, reestablish exchange, go full #SilverSwitcharoo

Wed, 04/24/2019 - 9:53am

Just a few minutes ago I noted that the state of Oregon is once again strongly considering taking a second crack at establishing their own, fully state-based ACA exchange after spending the past five years piggybacking on top of HealthCare.Gov.

Well, the Oregon State Public Interest Research Group just published an extensive report in which they urge the state to do just that...along with several other key changes which I also strongly agree with:

Steps like a mandate for Oregon residents to buy health insurance and relief for exchange customers who earn too much to receive tax credits under the Affordable Care Act could help reverse premium hikes that have shot up amid attempts by the Trump administration to roll back the law, OSPIRG, the Oregon State Public Interest Group, argued in a report released Wednesday.

The report, “A Better Health Insurance Market for Oregon,” lists ambitious steps to improve the health insurance system for the roughly 120,000 Oregon customers who buy their insurance through the state individual market set up through the Obama-era Affordable Care Act.

...“We did see rate increase requests last year as high as 10 percent, where (insurers) attributed the full 10 percent increase to uncertainty around the individual mandate repeal,” said Mark Griffith, who heads OSPIRG’s health care lobbying efforts.

But other factors are pushing premiums upward for Oregon consumers and lowering participation, OSPIRG says, from the Trump administration’s elimination of federal cost-sharing reduction subsidies to insurers to the expansion of short-term health plans and their potential to pull healthier Oregonians out of the exchanges.

All of these things are points which I've written about extensively, of course. In terms of OSPIRGM's recommendations, they include:

Establishing a full state-based ACA exchange (as noted, the state is already on that),

Reinstating the individual mandate penalty at the state level, as Massachusetts, New Jersey and DC have already done (and as Vermont is supposedly doing this fall),

Improving on the existing state ACA reinsurance program (which has already reduced unsubsidized premiums somewhat over the past couple of years),

Exploring a Public Option (as I've noted, New Mexico, Washington State and Colorado are taking steps towards this as well), and...

Moving from "standard" Silver Loading to the full #SilverSwitcharoo premium pricing strategy

Last year around 20 states utilized "standard" Silver Loading while another 20 went the full Silver Switcharoo route. This year 29 states are Switching while only 16 are "standard" Silver Loading. The article does a good job of boiling down Silver Switching to the bottom line for consumers/enrollees:

The group’s report urges the state to look at ways to protect consumers above the tax credit cutoff line, exploring steps like a state mandate and a restriction on silver loading that could enable customers to buy cheaper individual plans off the exchange. About 54,000 Oregonians currently buy individual health insurance outside the exchange, according to state data.

The thing I found most amusing in the report itself is that it actually uses the phrase "Silver Switcharoo". I take a certain sense of pride and embarrassment at being the one who coined that stupid-sounding (but completely accurate) phrase back in July 2017. From the OSPIRG report:

Revise “Silver Loading” to Protect Consumers Not Eligible for Tax Credits

In response to the abrupt end of the cost sharing reduction payments in 2017 that had reimbursed insurers for meeting the requirement that they offer low deductible plans to qualified customers, many states began to encourage the practice of “silver loading.” This strategy entails insurance companies raising their rates in the silver category of plans, which are the plans that offer lower deductibles to selected consumers and also provide the benchmark for determining tax credits. Higher premiums for silver plans mean eligible consumers who buy insurance through the exchange can receive higher tax credits, regardless of which level of plan they purchase. The purpose of silver loading is to keep premiums as affordable as possible and enable participation in the individual health care market by all consumers who need to purchase care, thus maintaining a stable individual market.

With the higher subsidies, some consumers paid less for insurance in 2018 than 2017, despite a steep increase in monthly premiums for insurance plans.119 However, customers who do not qualify for tax credits must pay higher premiums, which increases the risk that healthy consumers may opt not to buy insurance at all.

Oregon currently allows its insurers to silver load. However, the state’s current approach raises premiums for the 26 percent of Oregon exchange participants who do not receive premium tax credits and for those who choose to buy insurance outside the exchange. In contrast, many states have insurers confine their silver loading premium increases to on-exchange silver plans only, while offering a modestly priced silver plan off-exchange.

This policy, colloquially known as the “silver switcheroo,” increases the premium tax credits for plans purchased on the exchange while giving customers who do not qualify for the credits the ability to shop for more affordable plans off the exchange.

Oregon could adopt the silver switcheroo, which may keep more consumers in the individual insurance market. States that have adopted a switcheroo policy have allowed insurers to make subtle changes to the cost-sharing structures of the plans. This enables the insurers to offer virtually identical plans off the exchange without technically breaking federal law.

While the federal Department of Health and Human Services (HHS) initially threatened to shut down the practice, in August 2018 the agency reversed its stance and blessed “silver loading.” HHS also recommended that states follow the “switcheroo” model and offer similar but cheaper plans off the exchange. The policy is currently accepted by the administration, but it indicated in early 2019 that it is considering banning the practice in 2021.

Silver loading and the silver switcheroo are the result of states trying to cope with federal policy changes that make it harder to maintain stable individual markets that allow as many people as possible access to health insurance. These policies are not logical by themselves nor are they a sensible way to design a health insurance market, but can be a rational response to the incentives provided under the current structure of the ACA.