Oregon: I'm a bit late on this, but OR decided to #SilverSwitcharoo this year!


(sigh) It's a bit silly for me to write about this now, given that the 2022 Open Enrollment Period ended a few weeks ago, but it's still relevant going forward.

As long-time readers know, I was one of a handful of healthcare wonks who coined the phrase "Silver Loading" to describe a wonky policy pricing strategy which insurance carriers started using back in late 2017 to counteract the Trump Administration's decision to terminate Cost Sharing Reduction subsidy reimbursement payments:

Let's say in 2017 a carrier projected that overall claim expenses in 2018 would increase around 5%. To keep things simple, let's say they offered just 3 plans: One Bronze, one Silver (which happends to also be the "benchmark Silver" used to determine subsidies) and one Gold, priced at an average of $450, $600 and $750/month.

This carrier had 100,000 enrollees in 2017 and had to pay out $120 million in CSR assistance. They assumed that total enrollment and their CSR costs would be around the same (and the same ratios) in 2018 Since they knew they wouldn't get reimbursed from the federal government for their CSR costs in 2018, simply raising their premiums by 5% would mean a $120 million loss. Ouch.

So, what did they start doing instead? They loaded their projected CSR losses onto the premiums instead.

Basically, they took the total amount ($120 million), divided that by 12 months ($10 million/month) and then divided that across their projected enrollment to figure out how much to tack onto each enrollee's monthly premium to make up the difference.

Now, if they simply divided that $10 million/month across all of their enrollees, regardless of the plan, they'd have to raise their premiums for every plan by around 22.6% to make up that difference, like so. This is called Broad Loading.

In 2018, a few states did it this way, but most states did something very clever instead: They Silver Loaded.

Silver loading involves concentrating the CSR costs so that they're only added to the Silver plans on the ACA market (as opposed to Bronze, Gold or Platinum). This means that instead of every plan going up by 22.6%, the Silver plans went up 32.8% while the other metal tiers only went up 5%.

The benefit of Silver Loading is that the premium subsidy program (APTC) is based on the cost of the benchmark Silver plan...but the subsidies can be applied to any plan.

In short, Silver Loading means that the unsubsidized price of Silver plans goes up substantially, but subsidized enrollees are held harmless...while subsidized enrollees who enroll in non-Silver plans often see huge savings due to the outsized financial assistance. In fact, millions of Americans have been eligible for FREE ($0 premium, anyway) Gold plans in many parts of the country as a result of Silver Loading.

As wonky as Silver Loading may seem, however, it still left one group holding the bag when it comes to paying that extra CSR reimbursement cost: Off-exchange Silver plan enrollees.

Silver Loading loads the extra CSR costs onto all Silver plans, both on and off the ACA exchanges. As noted above, this has a positive impact for subsidized Gold/Bronze enrollees and no impact either way for subsidized Silver enrollees...but if you're an unsubsidized Silver enrollee, you get hit with the full force of the extra CSR cost baked into your premium.

Now, there's a workaround for enrollees in that situation: They can simply upgrade to Gold or downgrade to Bronze to avoid the CSR hit. However, many states have taken Silver Loading one step further by utilizing a pricing strategy I decided to label "Silver Switcharoo" (much to my regret years later).

"Silver Switching" is similar to Silver Loading, except instead of spreading the CSR cost over all Silver plans, you concentrate it even further by only adding it to on-exchange Silver plans.

This has two effects: First, it maximizes the increased subsidy effect even more; second, it means that anyone who enrolls in an off-exchange Silver plan is also held harmless. This helps both subsidized and unsubsidized enrollees...as long as the unsubsidized enrollees are enrolled off-exchange.

There's a catch to this, however: Technically speaking the ACA requires the exact same policies to be priced identically whether they're enrolled in on or off-exchange. The workaround which some carriers came up with (with the blessing of many state regulators) was to offer a "mirrored" version of the plan off-exchange. These plans are generally 99% identical to the on-exchange version (aside from the lower unsubsidized premium price), but with some nominal changes which make it just different enough to be considered a different plan under ACA rules.

To be honest, I haven't thought about Silver Switching in a couple of years. For a couple of years it seemed like carriers in roughly half the states were Silver Loading while the other half were Silver Switching, but since 2020 I was under the impression that pretty much every carrier was fully Silver Switching anyway, thus making the distinction moot. The practice has become so ubiquitous that "mirrored Silver" plans are now commonly referenced in off-exchange plan explainers like this one:

Who could benefit from off-exchange plans?

Clients who fall into these three categories are most likely to find value in off-exchange plans:

  • Households that make too much to qualify for subsidies on-exchange
  • Individual coverage HRA (ICHRA) folks who are offered a Cafeteria plan and want to use those dollars along with HRA to pay for premiums
  • HRA early retiree folks who prefer non-mirrored Off-ex plans to On-ex plans
    • Key reason for this would non-mirrored plans that have removed the silver loading premium amount (i.e. plans are less expensive off-exchange)

The other reason I haven't written much about Silver Switching over the past couple of years is that thanks to the American Rescue Plan, "Silver Switching" has itself become pretty much moot for 2021 & 2022, since far more people are now eligible for ACA subsidies in the first place and there's far fewer individual market enrollees who would be better off shopping off-exchange.

However, this morning I stumbled across this blog post from the Oregon Health Department:

New in 2022: Silver Switcharoo

What is the Silver Switcheroo?

Until 2017, health insurance companies were reimbursed by the federal government for reduced out-of-pocket costs available to consumers eligible for cost-sharing reductions (CSRs) on Silver tier plans. In 2017, those reimbursements stopped, which increased the cost burden for health care services. Starting in 2019, Oregon and many other states applied a “silver load" to all Silver plans available through the Marketplace. This load increased premiums on Silver plans to cover the extra costs insurance companies have to offer CSR plans. Over the past couple of years, plan premiums for Silver plans have increased at a faster rate than other tiers, which has caused some Silver plans to have a higher premium than Gold plans. For people who purchase coverage directly through an insurance company and for people who earn too much to receive premium tax credits, the cost of Silver plans has become too high to be considered affordable.

This is where the Silver Switcharoo comes in to play. Insurance carriers offer Silver plans with the Silver load as they have been. These plans are required to be sold both through the Marketplace and directly through insurance companies, but are intended mainly for purchase through the Marketplace. Insurance carriers also offer a set of Silver plans that are available only directly through the insurance company. These plans are substantially similar to the on-Marketplace plans, but the premiums do not contain the silver load, and so are lower.

Again, this is the sort of information which I normally would've pushed out to my readers last fall, before Open Enrollment started...except I didn't happen to catch it until today. Sorry about that! However, it's still handy for any Oregon resident who becomes eligible to enroll this year via a Special Enrollment Period, so there you go.