Quality Control: Beef up subsidies for better-managed plans?

Over at the Journal of Healthcare Finance, David Anderson, Sih-Ting Cai and Jean Marie Abraham have published an interesting idea which I've never thought about before:

In 2019, CMS (2020b) began publishing its Quality Rating System (QRS) for incumbent insurers who sell qualified health plans in the individual market. This information includes scores for medical care, member experience, and plan administration which are then rolled up into an overall, global quality rating (GQR). Recent research has shown notable variation by plan characteristics for behavioral health quality (Abraham, et al., 2021) and plan administration scores (Anderson, et al., 2020). CMS hopes this information is used by consumers to make enrollment decisions.

...These associations illustrate that affordable plan options for Marketplace consumers are often ‘average’ at best and sometimes far below average on the dimension of quality. Given that more than four out of five Marketplace enrollees receive APTCs, this implies that federal taxpayers are heavily subsidizing “average” plan quality.

So how might policymakers adapt the price-linked subsidy design to strengthen insurers’ incentives to invest in quality improvement and consumers’ incentives to choose higher quality plans? One place to look is Medicare Advantage, where insurers that offer four and five star plans receive enhanced federal subsidies and more relaxed marketing and sales rules. New federal legislation could provide consumers with enhanced monthly subsidies to purchase higher quality plans. This design adjustment would provide a clearer economic incentive for insurers to compete on both quality and price instead of merely competing on price.

I'm not too keen on "relaxed marketing and sales rules",  but tacking on bonus subsidies for higher-quality plans makes perfect sense to me (or, alternately, they could reduce subsidies for lower-quality plans, I suppose, depending on how you work the formula).

This is an interesting idea which, like an Age-Based Subsidy Modifier (which I've written about before and will write about again very soon) should absolutely be considered in the future...after the H.R. 369 (Kill the Cliff / Up the Subs) legislation is permanently locked in, that is...