Trump Admin falsely claims "credit" for 4% avg. rate drop which isn't even accurate to begin with

I've been expecting this exact press release from Trump's HHS Dept. to drop for awhile now:

Premiums for Plans are down 4 percent but remain unaffordable to non-subsidized consumers

Today, the Centers for Medicare & Medicaid Services (CMS) announced that the average premium for the second lowest cost silver plan on for a 27 year-old will drop by 4 percent for the 2020 coverage year. Additionally, 20 more issuers will participate in states that use the Federal Health Insurance Exchange platform in 2020 bringing the total to 175 issuers compared to 132 in 2018, delivering more choice and competition for consumers. As a result of the Trump Administration’s actions to stabilize the market, Americans will experience lower premiums along with greater choice for the second consecutive year.

First of all, it's important to read the wording of the first paragraph carefully: They're specifically referring to average premiums for the second lowest-cost silver plan (i.e., "benchmark Silver"). Only 6.8 million people selected any Silver plan on the ACA exchanges for 2019 according to CMS's own 2019 Marketplace Open Enrollment Period Public Use Files...and most carriers have several Silver plans available. I don't know how many of those who choose Silver plans go with the benchmark plan specifically, of course, but I can't imagine it's more than 60% of all Silver enrollees at most. Let's call it 4.1 million or so for now; I'll correct this if I get hard data on that.

Second, it refers to plans on HealthCare.Gov other words, it only includes 38 states. The other 13 (remember, DC counts as a state, and Nevada is splitting off of the federal exchange onto their own for 2020) aren't included at all. Only 5.12 million enrollees selected Silver plans this year during Open Enrollment when you subtract Nevada from the total. Assuming the same 60% chose the benchmark plan specifically, that's perhaps 3.07 million people.

Finally, this doesn't include off-exchange enrollees in any state. The total ACA-compliant individual market is around 13.5 million people, give or take, so that 4% average drop only includes between 23 - 38% of the total market, depending on how many chose the benchmark plan vs. other Silver policies.

So how much are average premiums for the entire ACA-compliant market changing (including all Silver plans, all Bronze, Gold & Platinum plans, for every state, both on and off the ACA exchanges)? They're essentially FLAT.

Technically speaking, I have them increasing slightly, by 0.1% nationally...but I only have the preliminary averages for 21 states. My suspicion is that once I plug in the final/approved average rates for the remaining states, the national average will drop ever so slightly...but overall it'll essentially be flat year over year.

Obviously this may seem like splitting hairs--ANY average reduction would still be an important change from prior years, and a 4-point difference may not sound like much...but it's still important to understand which plans and which premiums you're talking about here. Also, 4 percentage points is around $285 per year per person for unsubsidized enrollees; it's not huge, but it's not chump change either (that's over $1,100/year for a family of four). To be clear, I'm not accusing CMS of lying here, exactly--they're being careful to add the appropriate caveats in the press release itself--but the headline is definitely misleading.

It's also important to keep in mind that due to how the ACA's subsidy formula is structured (combined with Silver Loading and Silver Switching), a lower benchmark premium will actually result in higher net premiums for many subsidized enrollees (although it's still good news for those who are unsubsidized). Here's why:

  • Let's say the unsubsidized premiums for a given enrollee in 2019 is $400 for Bronze, $600 for the benchmark Silver and $700 for Gold.
  • Let's say that enrollee earns exactly $32K/year (256% FPL), meaning they only have to pay 8.54% of their income for the benchmark plan.
  • That means they qualify for ($7,200 - $2,733) = $4,467 in subsidies ($372/month).

This would leave them paying $228/month for the benchmark Silver...but they can apply that towards a Bronze plan if they wish so they'd only pay $28/month, or a Gold plan so they only pay $328/month.

What happens next year if the benchmark Silver plan drops by 4%...but the Bronze, Gold, and the OTHER Silver plans stay flat?

  • The benchmark Silver now only costs $576/month, or $6,912/year.
  • Assuming the same $32K income and no other changes, the enrollee now qualifies for $288 less in subsidies, since the difference between $6,912 and 8.54% of their income is $288 less than last year.
  • That means the benchmark Silver would cost them exactly the same ($228/month)...but if they were enrolled in a Bronze or Gold plan it would now cost them $24/month more than last year.

This is essentially Silver Loading in reverse, and it's why cherry-picking the benchmark Silver plans only can be very misleading when it comes to figuring out how much a particular enrollee will spend compared to last year.

Of course, the overall average can be misleading in other ways, but I'm not the one with a headline claiming flat-out that "Premiums for Plans are down 4 percent".

In any event, the bottom line is that the Trump Administration, which has spent nearly 3 years desperately trying to kill the Affordable Care Act, is simultaneously trying to gaslight America by claiming that they've improved it based on actions which were either taken by others or which were direct results of the way the ACA is structured in the first place.

For instance: Premiums shot up nearly 25% in 2017 and 28% in 2018. Why?

  • In 2017, it was mainly based on a) carrier experience from 2015 and b) the sunsetting of the ACA's federal reinsurance program.
  • In 2018, it was mainly based on a) carrier experience from 2016 and b) Trump cutting off CSR reimbursement payments.

The carriers were faced with massive confusion, uncertainty and a constant barrage of attacks by the Trump Administration and the GOP, along with having billions of dollars of contractually-owed reimbursement payments cut off, so they did what insurance carriers always do when faced with uncertainty: They jacked up rates to cover their asses just in case.

Well, it turned out that the both of these rate spikes turned out to be overkill. Earlier premium hikes from 2014, 2015 & 2016 had already reached near-equilibrium with actual risk pool experience; it turned out 2017 (and especially 2018) needed less of a spike than they thought. The Trump Admin had nothing to do with improving the risk pool of those already enrolled in 2017, after all.

In addition, starting in 2018 (and continuing into 2019 & 2020), about a dozen states implemented their own state-based reinsurance waiver programs...which are allowed for under Section 1332 of the ACA itself. Again: The Trump Administration had nothing to do with drafting, legislating, signing or lobbying for those waivers. I do give them some credit for approving them, but that's about it.

So why did the carriers then proceed to either dramatically lower their rates this year & for 2020 or, at worst, only increase them modestly? Well, the main reason is because the ACA pretty much required them to do so via the Medical Loss Ratio provision. Remember, under the ACA, carriers on the ACA individual market can only have a maximum 20% gross margin (before overhead/administration). If they move over that threshold (on a 3-year rolling average), they have to pay the difference back to the enrollees in the form of rebates.

As a result, for 2019 & 2020, tons of insurance carriers are scrambling to correct their pricing to account for overshooting in 2017 & 2018. Again, that's all thanks to the ACA itself, not to any actions on the part of the Trump Administration.

Really, aside from faint praise for approving the dozen or so reinsurance waivers, there's only one thing that some wonks are giving Trump "credit" for: "Allowing" Silver Loading to happen in the first place. The problem with this is that a) Trump specifically and deliberately cut off CSR reimbursements in an attempt to destroy the ACA exchange markets (this isn't my opinion...he was quite vocal about why he was doing it on Twitter); and b) he had nothing to do with Silver Loading (the strategy was developed by folks at the Urban Institute and Covered California, and quickly adopted by other state regulators & insurance carriers nationally) in an attempt to mitigate the damage caused by Trump cutting off CSR payments in the first place.

The fact that insurance carriers & regulators were able to mostly make lemonade out of Trump's lemons is hardly anything for him to cheer about.

Put another way: If I try to shoot you, but miss and the bullet ends up hitting an ATM next to you, causing it to spit out a $20 bill into your hands, do I deserve "credit" for your newfound wealth? Of course not; I was still guilty of attempted murder.