Pennsylvania plans on becoming the 10th (12th?) state to offer supplemental ACA subsidies!

As I noted in my deep dive into "Gold or Better Enrollment" last week, there are three main reasons why nearly 63% of all ACA exchange enrollees nationally have healthcare policies with 80% or higher Actuarial Values this year:

  • The enhanced federal subsidies provided by the Inflation Reduction Act (set to expire at the end of 2025);
  • Some states (but not most yet, unfortunately) fully embracing robust Premium Alignment w/maximized Silver Loading policies; and
  • About half the states which operate their own full ACA exchange offering supplemental financial subsidies to either reduce premiums, reduce cost sharing or both.

The last bullet includes California, Colorado, Connecticut, Maryland, Massachusetts, New Jersey, New Mexico, Vermont and Washington State. In addition, both Minnesota and New York have large numbers of enrollees in their respective Basic Health Plan programs (New York just expanded theirs), which may or may not be considered "state-based subsidies" depending on your perspective.

Yesterday I noted that New York is also planning on offering their own Cost Sharing Reduction (CSR) assistance to those who earn too much to qualify for even the expanded BHP program (up to 400% of the Federal Poverty Level), which would place NY squarely in this camp.

Well, as Louise Norris discovered the other day, it looks like Pennsylvania is also planning on launching their own supplemental subsidies as well. Via their February 2024 Board of Directors Strategic Planning Session presentation (starting on page 27):

Affordability Program – Overview

In Governor Shapiro’s most recent budget address, he called for a $50M appropriation to improve affordability in the individual market.

The funding would fund Pennsylvania’s reinsurance program, allowing Pennie to use funding that has historically gone towards reinsurance to instead reduce costs for coverage through the marketplace.

The overarching goals of this new initiative include:

  • Revising Act 42 to allow Pennie to create a new health coverage affordability program through existing user fees.
  • Designing and implementing the new affordability program by this fall, so that Pennsylvanians can receive additional financial assistance for plan year 2025.
  • Deploying a marketing and communications campaign to raise awareness of this new form of financial assistance.

The wording of this slide is a bit confusing. Pennsylvania has an existing reinsurance program which uses a combination of state and federal passthru dollars to cover a chunk of the cost of coverage for high-risk exchange enrollees, with the federal portion of the funds paid for via the subsidy savings caused by lower premiums (which in turn reduce the amount of federal subsidies). The state portion of the reinsurance program is paid for via Pennie's "user fees" charged to the insurance carriers whch participate on the exchange.

My initial reading of this slide made it sound as though they plan on scrapping the reinsurance program and using the same funding to provide direct premium and/or CSR subsidies to enrollees instead. However, others have noted that it actually looks like they're talking about keeping the reinsurance program in place but shifting the revenue source for it from the user fees to the general state fund instead...freeing up the user fee revenue to go towards the new state subsidy program.

I presume there's some administrative restrictions in how the two buckets of money can be used legally, requiring this do-si-do maneuver instead.

In any event, here's more details on the proposed program, which is still being modeled:

State subsidy modeling is underway, with the following parameters:

  • Modeling options at a $40 million funding level
    • Aligns to amount budgeted for reinsurance program
    • Could increase subsidy in the future if funds allow for it
    • Allows for a contingency fund for enrollment-related overruns
  • Targeting premium subsidy wrap towards lower income levels
    • Targeted towards a subset of the population to ensure subsidy amounts are meaningful
    • Lower income levels still have the highest uninsured rates
    • Lower income levels are most price sensitive, so a relatively smaller per-person amount can have a larger impact on the ability to afford and enroll in coverage
    • For existing enrollees, a premium subsidy serves as an indirect cost sharing subsidy to “buy up” to health plans with lower out of pocket costs

Modeling will provide options for a subsidy structure at the $40 million budget level.

Pennie plans on using the criteria below to assess potential affordability program designs with the aim of maximizing the impact of a subsidy at the fixed funding level.

Proposed program design criteria:

  • Percentage of enrollees with access to a health plan under a defined premium dollar threshold (e.g. plans available under $0, $10, $25)
  • New enrollee generation
  • Impact on risk pool

There aren't any further details yet on how the program would work, but the $40 million budget provides some guidance. For instance, using the 2024 Open Enrollment Period data as an example, in Pennsylvania...

  • 93,000 enrollees earn 150 - 200% FPL who have to pay between 0 - 2% of their household income in premiums, but also qualify for 87 AV CSR Silver plans...but only around half of them actually selected Silver plans this year for whatever reason.
  • According to KFF, average deductibles (nationally) for CSR 87 Silver plans average around $737/year
  • Knocking these down by, say, $400 apiece for CSR 87 enrollees only would encourage the other half to select Silver CSR plans, while costing around $37 million if all 93,000 did so.

What if Pennie preferred to bring CSR 73 enrollees up to "Gold or Better" status instead? Well, PA has around ~68,000 enrollees in the 200 - 250% FPL income bracket, but only around 12,000 of them are enrolled in Silver plans. $40 million would allow all 68,000 to either have their premiums cut by $50/month or their deductibles to be cut by around $590 per year, or some combination.

There's any number of other ways Pennie could slice & dice the $40 million in funding, of course; these are just two examples.

Stay tuned...