Advocates to HHS: Make Premium Alignment the Rule, not the Exception

via Amy Lotven of Inside Health Policy:

Advocates To CMS: Fix Rate Misalignment In Next Exchange Reg

A coalition of patient advocates is urging HHS to address high out-of-pocket costs by demanding that insurers selling marketplace coverage strictly adhere to the Affordable Care Act’s rate-setting requirements. Insurers have strayed from the mandate in recent years by underpricing silver-tier plans and overpricing the more-generous gold-level products, the advocates say, highlighting an issue that experts have been raising for years and that some states are already addressing at the local level.

But health experts also say that HHS must fix misalignments in the risk adjustment program - and that exchanges must have strong consumer decision support tools -for a policy fix to be sustainable.

By clarifying and enforcing the ACA’s single risk pool requirement, HHS could significantly reduce consumers’ cost-sharing burdens while also discouraging gaming, the advocates say.

What's this all about? Well, it's mostly about a health insurance pricing strategy that I and many other healthcare wonks have written about for years generally referred to as "Silver Loading."

Here's the shortened backstory about Silver Loading:

At full price, as you move up the metal scale, Bronze, Silver, Gold and Platinum ACA policies generally see their premiums increase while deductibles, co-pays and other cost sharing decreases...at least in theory.

For instance, a Bronze plan might cost $400/month with a $12,000 deductible, while a Silver plan costs $600/month with a $7,000 deductible and a Gold plan might cost $800/month with a $2,000 deductible. With the ACA's advance premium tax credits (APTC) baked in on a sliding scale, the premiums for each of these get knocked down substantially for most enrollees regardless of which metal level they go with. Pretty straightforward.

The ACA's Cost Sharing Reduction (CSR) subsidies, however (which cut down on deductibles, co-pays and coinsurance), change the equation for many enrollees, especially given how they work. As a reminder, while APTC subsidies can be applied to any plan at any metal level, CSR subsidies are only available to enrollees who select a Silver plan.

Until late 2017, the way CSR subsidies were paid for was that insurance carriers ate a large chunk of deductibles/co-pays/etc. for CSR Silver enrollees, and were then reimbursed by the federal government the following month for their losses. It was a bit clunky, but it worked.

In late 2017, however, carriers stopped being reimbursed for these expenses as a result of a long, stupid story I'm not gonna rehash again here. The carriers still had to cover those CSR expenses, however, so they started baking their losses into the premiums of the policies themselves. This led to dramatic (unsubsidized) rate hikes starting in 2018.

So, what's silver loading? Well, again, the full explainer is here, but the bottom line is that instead of spreading the CSR losses evenly across every healthcare plan, some carriers in some states started adding the full CSR cost to Silver plans only, since those are the only plans where the losses were actually coming from anyway. As a result, Silver plans might jump by a whopping 25% while Bronze, Gold and Platinum plans only went up 5%.

This, in turn, had several results: First, it caused many Gold plans to suddenly cost less than Silver plans (at full price), making Gold a better value than Silver for anyone who didn't qualify for CSR assistance. Second, it caused the APTC subsidies to jump dramatically for subsidized enrollees regardless of which metal level they enrolled in. This, in turn, caused the after-subsidy premiums to drop to nothing at all ($0/month) for many Bronze plans (and even some Gold plans).

Silver Loading by itself is a great solution to the CSR reimbursement problem: It makes the insurance carriers whole again in a way that doesn't require legislation, while also having the bonus effect of boosting financial assistance for millions of ACA enrollees, thus reducing their health insurance costs accordingly. The only downside, of course, is that it increases federal spending, but ACA subsidies weren't generous enough under the original version of the law anyway.

There are several problems with Silver Loading as it currently stands, however. For one thing, not every carrier in every state does it, and even among those which do, it's often done in a scattershot, hit or miss manner. The other problems are...well, that's where the Inside Health Policy story comes in:

The idea is among a list of priorities that the Health Partners coalition, which includes the Leukemia and Lymphoma Society, American Heart Association, American Lung Association and more than a dozen other groups, recently urged HHS to include in the 2024 Notice of Benefit and Policy Parameters (NBPP), which sets policy for insurers participating in the exchanges.

The White House Office of Management and Budget is currently reviewing the proposed NBPP. The issue raised by the advocates pertains to insurers’ compliance of the ACA’s single risk pool requirement, which prevents discrimination by barring insurers from adjusting premium prices except to account for variances in actuarial value or cost sharing.

The policy means, among other things, that plans with more generous benefits should have higher premiums than those with fewer benefits.

The short version is that officially, Silver plans are being priced as if the CSR assistance doesn't exist for the vast majority of those enrolled in them. Silver plans officially only have around a 70% Actuarial Value...that is, they supposedly only cover ~70% of the risk pool's medical expenses...even though CSR Silver plans actually cover as much as 94% AV, which is more generous than most Platinum plans:

...The law also requires insurers to provide cost-sharing subsidies to low-income consumers who enroll in silver-level plans, which lifts the actuarial value for that metal level from the 70% base to up to 94%. Yet, as experts have noted, insurers have not been required to account for the high number of enrollees in silver-tier plans with the higher actuarial value.

As a result, premiums and plan value are often badly misaligned, the advocates say. Silver-level plans are aggressively underpriced while gold plans, which must have 80% AV, and bronze plans (60% AV) cost more than is actuarily justified or permitted by law, they allege.

That's right: This coalition isn't just arguing that Silver Loading (nee Premium Alignment) should be the standard, they're actually saying that it should be mandatory...and beyond that, that it should be maximized. Furthermore, there are some cases where Bronze, Gold or Platinum plan premiums should be required to be changed to comply with their real world Actuarial Value as well.

...To fix the problem, HHS should clarify the rate-setting behavior violates the ACA and offer additional guidance in the 2024 exchange rule that ensures plans are priced in proportion to the value they offer, the advocates say.

The article goes on to note that many states have already implemented various Silver Loading / Premium Alignment policies, either via regulation or legislation...including, most recently, New Mexico and Texas, which actually went so far as to pass laws mandating that Silver ACA plans be priced 44% higher and 35% higher respectively than they would have been if CSR assistance wasn't available.

This has resulted in a boon for New Mexico ACA enrollees already, and is likely to do so in Texas in 2023 as well.

However, again, this is still a very scattershot approach, which is one reason why this coalition is asking Biden Administration to make Premium Alignment mandatory at the federal level. The IHP article quotes two colleagues of mine, Dave Anderson and Andrew Sprung, about the two main issues at hand:

...Instead the availability of lower-cost gold premiums has been partial and haphazard, Anderson and Sprung wrote, and they cite two main reasons why it played out that way: First, insurers underpriced the silver products to gain market share, and second, the risk adjustment program is flawed because it assumes consumers enrolled in cost-sharing plans that have the highest AV levels used the most health services -- but that has not proven to be the case.

Both problems should be addressed by HHS, they wrote.

...Sprung says that it is also critical that exchanges have strong consumer decision support tools to make sure enrollees are guided to select the right plan based on income level and needs. In New Mexico, for example, while it’s true that the policy shift spurred more consumers to enroll in gold-tier plans, the migration included about one-third of consumers who earn less than 200% of poverty and, thus, exposed themselves to higher out-of-pocket costs than they’d get if they signed up for a silver-tier cost-sharing plan.

The latter problem mentioned by Sprung is really more about the way that the different policies are listed on the various ACA exchange websites. Essentially, on the New Mexico exchange (and likely in some other states), some CSR-eligible enrollees end up getting directed towards a Gold plan even though they'd be much better off with a Silver plan:

...First, the short “plan summary” visible to exchange shoppers omits information on maximum out-of-pocket costs. Then, in the more detailed summary, the tool creates confusion by highlighting a consumers’ potential costs in a “really bad year,” which apparently assumes the individual may lose some or all their subsidies.

“If you're going to make gold cheaper than silver, you need really good guidance showing that at incomes below 200% FPL, silver is effectively platinum,” he says.

...which is exactly why I always refer to high-CSR Silver plans as "Secret Platinum."