Silver Loading

Over at Evensun Health, Wesley Sanders has written about two new bulletins from the Centers for Medicare & Medicaid Services (CMS) which, if followed to their conclusion, would cause massive changes to how ACA individual market policies are priced and marketed...along with dramatic changes to net premiums, deductibles, co-pays & other out of pocket expenses for exchange enrollees.

Warning: This one is not only absurdly wonky, it requires me to fire up the Wayback Machine and dig deep into the ACA's 15-year history. I actually wrote about this prospect back in January, but I haven't read or seen anything else about it since then...until today.

Here's the very short, very simplified version:

It's been about a week since the Centers for Medicare & Medicaid Services published the official 2024 ACA Open Enrollment Period Public Use Files, and I'm still digging through the mountain of data & demographics.

Today I want to address the question of Actuarial Value (AV)...that is, what percent of medical expenses (in aggregate) a given healthcare policy actually pays for. As a quick reminder, ACA policies are generally broken into four AV categories, labeled by metal levels: Bronze, Silver, Gold and Platinum, which generally cover roughly 60%, 70%, 80% or 90% of enrollees in-network medical expenses per year (there's a fifth category in front of Bronze called Catastrophic plans, but these have limited eligibility and hardly anyone enrolls in them anyway).

I say generally because there's a bit of wiggle room here:

...as of 2023, the de minimus range has been reduced, imposing the following actuarial value ranges for metal-level plans:

Note: I decided that while the original headline accurately reflected my feelings about this WSJ Op-Ed, it was a bit over the top, so I've changed it to something less crude.

For years, the Patient Protection & Affordable Care Act, generally shorthanded as the ACA or, more colloquially known as "Obamacare," was the top policy target of Republicans and other conservatives.

It seemed as though not a day went by without some right-wing opinion piece being published attacking the ACA for one thing or another. Once in awhile these attacks had some validity, but the vast majority were either completely baseless or grossly exaggerated.

And yet, after the dust settled on the infamous 2017 ACA "repeal/replace" debacle, it seemed as though the GOP had pretty much tired of their relentless assault on the healthcare law. They had failed to repeal it even with control of the White House, Senate, House of Representatives and Supreme Court, and ended up settling for zeroing out of the federal Individual Mandate Penalty as a consolation prize.

Thanks to the American Rescue Plan & Inflation Reduction Act, residents of every state + DC who earn less than 150% of the Federal Poverty Level (FPL), around $20,400/yr for a single adult, is eligible for a $0-premium "Secret Platinum" plan. If they earn between 150 - 200% FPL (roughly $27,200/yr), they're eligible for a slightly less-generous "Secret Platinum" plan with premiums less than 2% of their income (just $45/month for a single adult).

As I explained here, while Silver ACA plans normally only cover around 70% of the average enrollees' medical expenses (in aggregate), the ACA's "Cost Sharing Reduction" (CSR) subsidies mean that eligible enrollees who select "CSR Silver" plans will actually have 94% of their expenses covered for the < 150% crowd and 87% of their expenses covered for the 150 - 200% crowd.

Since Gold plans cover around 80% of expenses & Platinum plans cover roughly 90%, this means that "CSR Silver" is effectively "Secret Platinum" plans for anyone earning less than 200% FPL.

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.

The ticking time bomb is getting louder every day as time runs out for the expanded ACA subsidies which were temporarily provided by the American Rescue Plan to be made permanent:

The looming disaster on Obamacare subsidies keeps looking worse

Congressional Democrats are confronting a ticking time bomb that threatens both the health security of millions of Americans and Democrats’ own political security in the midterm elections. If they don’t act fast, it’s going to explode.

...Now, another group of Democrats outside Washington is getting increasingly nervous about this prospect. Democratic governors, many of whom are up for reelection this year, don’t want to watch while Congress makes life more difficult for their constituents.

Underscoring the point, a group of Democratic governors has released a new letter imploring congressional leaders to extend the enhanced subsidies.

I talked about it endlessly throughout 2017 & 2018, but it's been awhile since I last discussed the ACA's quirky Silver Loading pricing strategy in detail.

In order for the rest of this entry to make sense, we need to review what Silver Loading is and how it works:

• The ACA includes two types of financial subsidies. Advance Premium Tax Credits (APTC) reduce monthly premiums for low- and moderate-income.

• Cost Sharing Reductions (CSR), meanwhile, reduce deductibles, co-pays and other out-of-pocket expenses for low-income enrollees.

• In 2017, Donald Trump cut off CSR reimbursement payments in a failed attempt to sabotage the ACA, thinking this would cripple the ACA exchanges. Instead, insurance carriers implemented a very smart alternative pricing mechanism to make up for their CSR losses, which came to be known as "Silver Loading."

• The carriers basically calculated how much they expected owe in CSR expenses the following year...and then simply added that amount to their premiums for the following year instead.

• While there's several ways that carriers can add the extra CSR cost to their premiums, "Silver Loading" involves doing so by adding 100% of the extra cost to Silver plans only, as opposed to spreading it out across Bronze, Silver, Gold & Platinum plans.

I've written in-depth explainers before of how Silver Loading came into existence and how it works as part of longer blog posts, but I also wanted to have a simpler, standalone version, so here it is.

First, a quick backstory:

Welcome to the latest chapter in the long, epic CSR Lawsuit Saga which has been slogging along for six years now.

Here's a quick recap (again):

• The ACA includes two types of financial subsidies for individual market enrollees through the ACA exchanges (HealthCare.Gov, CoveredCA.com, etc). One program is called Advance Premium Tax Credits (APTC), which reduces monthly premiums for low- and moderate-income. The other is called Cost Sharing Reductions (CSR), which reduces deductibles, co-pays and other out-of-pocket expenses for low-income enrollees.

• In 2014, then-Speaker of the House John Boehner filed a lawsuit on behalf of Congressional Republicans against the Obama Administration. They had several beefs with the ACA (shocker!), including a claim that the CSR payments were unconstitutional because they weren't explicitly appropriated by Congress in the text of the Affordable Care Act (even though the program itself was described in detail, including the payment mechanism/etc.)

NOTE: This is a joint post by three of my colleagues and myself:
David M. Anderson, Charles Gaba, Louise Norris and Andrew Sprung

State policymakers have been prolific and creative in putting forward measures to strengthen their ACA marketplaces. Measures enacted since 2017 or in progress now include reinsurance programs, which reduced base premiums by an average of 20% in their first year in the first seven states to implement such programs; new or renewed state-based exchanges, which capture insurance user fees that can be used for advertising and outreach; state premium subsidies to supplement federal subsidies; and state-based individual mandates, which can provide funding for all of the above.