Alabama could have an individual market single payer plan next year.
It would be mostly unintentional and massively expensive to the Federal government but most people could be covered at a high actuarial value.
Here is how an accidental single payer system in Alabama could be created.
Right now, Alabama is due to have only a single insurer on the Exchanges in 2017. They would be the de facto single payer for the exchanges.
Subsidies are based on the cost of the price of the second least expensive Silver plan. The individual premium responsibility is defined as a percentage of the family income for a given income level as defined by the Federal Poverty Level. A person who earns under 400% FPL is only on the hook for the calculated family contribution amount for the 2nd Silver. The gap between the premium of the 2nd Silver and the personal contribution is the Advanced Premium Tax Credit (APTC).
If there is a large gap between the premium of the least expensive Silver plan and the second least expensive Silver plan, the buyer benefits. They get the full APTC and then they just have to make up the difference between the lower priced #1 Silver and APTC with money out of their pocket.
Philadelphia had this happen in 2014. Andrew Sprung looked into this:
Last year, low-income buyers in Southeast Pennsylvania got a windfall….
The windfall stemmed from the fact that the cheapest Silver plan in the region, Independence Blue Cross’s Keystone HMO Silver Proactive, was much cheaper than the benchmark second-cheapest plan (also a Blue Cross HMO), to which the subsidies are keyed. The difference was large enough to all but zero out the premium for a lot of low-income buyers.
Last year, almost all of Health Federation’s clients who were eligible to shop in the marketplace bought the cheapest Silver – which, thanks to CSR, had a deductible of $0 and wonderfully low copays – but also cost most of them nothing or next to nothing in premiums.
So how would accidental Single Payer with very low premiums work in Alabama?
Blue Cross and Blue Shield of Alabama would offer a simple HMO or EPO as the #1 Silver. It would be priced at an actuarial fair level where BCBS of Alabama could be profitable but not obscenely so. They would also offer another Silver, maybe set up as a PPO national network with all of the bells and whistles. This would be priced 50% higher than the first Silver. Gold and Platinum plans would be based on the basic HMO/EPO model with slightly richer benefits so a basic Gold would be less expensive than the bells and whistles #2 Silver.
The bells and whistles PPO would be the subsidy setting benchmark so bells and whistles would be fully subsidized. However the #1 Silver would benefit from the massive gap between the #1 and #2 Silver so for quite a few low income families their monthly premiums would be zero. For individuals who make under 200% FPL, the combination of a rich APTC and Cost Sharing Reduction (CSR) subsidies would allow them to buy platinum(ish) coverage for a few dollars per month with low deductibles. Individuals and families making between 201% and 400% FPL could be buying subsidized Gold coverage for less than their expected personal contribution.
Individuals who make 250% FPL could buy basic Bronze plans for almost nothing out of pocket. These individuals are probably in the group where Bronze is a reasonable gamble.
Hacking the exchange system like this would lead to significant enrollment growth in the 175% FPL and above cohort because the plans will have gotten significantly less expensive so the value proposition becomes a whole lot better. It would be an enrollment expansion and a one time profit center for BCBS of Alabama as other insurers would see the hack and see if they could get back into Alabama in 2018 or 2019. The Feds would spend more money on premium subsidies as enrollment skyrockets but this Administration and a probable future Clinton administration would be fine with that. This could be a triple win.
Luthe
Only semi-OT: I know the big focus is on trying to get single-payer (or at least universal coverage) in the health insurance market, but what about dental insurance? Wouldn’t that be a better market for trying out new systems of coverage and payment? It’s a system with many fewer players, procedures, drugs, and other moving parts. Plus, if you don’t (or didn’t) have health insurance, it’s almost guaranteed you don’t have dental, either. The dental market also avoids some of the controversies that plagues the health insurance market, too. No one argues about the sanctity of life in re: wisdom teeth or asks for extremely expensive drugs to extend their life because they have a root canal.
/me currently has four incipient cavities and no dental insurance
Snarki, child of Loki
@Luthe: Yeah, but aren’t dentists, on average, more conservative that primary physicians?
Because sadism, probably.
Major Major Major Major
That’s a cool little hack. What a kludge of a health insurance system we have here.
germy
I’m still not moving to alabama.
Mnemosyne
@Luthe:
IIRC, dental insurance is available on the Exchanges.
For your immediate problem, if you live anywhere near a university with a dental school, they probably have a low-cost clinic. Since it’s a teaching environment, you’ll probably have 4 or 5 dental students crowded around the chair while the professor does the actual work, but they usually do a good job. I had some minor work done at UCLA before I had work insurance.
Fair Economist
But what happens if Blue Cross exploits this to get 100% profit margins? BCBS is not a nice company – California pulled their “nonprofit” status because they chase a buck so relentlessly.
Benw
So wouldn’t it be in the interest of insurers and a sympathetic federal administration to have this hack implemented on every exchange?
Fair Economist
@Mnemosyne:
This is not risk-free, however. My husband used the free UCLA clinic long ago when he was a starving student and they damaged his jaw by forcing it open too hard. He can only open his mouth about half as much as normal now (although he couldn’t open it quite as much as normal before, which was why they forced it, I guess). It’s not too much of a problem in normal life except when he needs dental work, but it’s not fun when he has to have work done on his molars.
Richard Mayhew
@Benw: only works on single insurer regions. Otherwise collusion charges
Benw
@Richard Mayhew: I don’t know the legal definition of collusion, but if ACME insurance wants to grab some of those sweet new Alabama enrollees next year, isn’t their best plan to leave the gap in Silver pricing alone and offer competitive but still effectively 100% subsidized plans at all other levels?
rikyrah
See…this is why I love you here.
and, I will be sad when some bigger blog lures you away :(
You tell me stuff that NOBODY else is going to…especially not the MSM.
Richard Mayhew
@Benw: Here is the problem.. Let’s assume 2 Silvers are offered in 2017 by Company A.
Cheap Silver A1 — gets most of the membership
big price gap
Expensive Silver A2— sets the benchmark.with light enrollment
Company A makes a bundle on a captive market that is mostly federally funded.
So let’s go to 2018 when Mayhew Insurance decides to get into the lucrative Alabama market. Company A still offers 2 plans, and Mayhew Insurance offers 1 Silver.
Price order
Company A1 — still the cheapest.
Company a2 —2nd Silver sets the benchmark with a big gap
Mayhew Silver — priced over A2 and we get no membership
OR
A1, MS, A2 — IF Mayhew silver is near A1, we set the benchmark and can get some membership based on having a bit broader network that is still affordable and awesome customer service (although our brand value in a new market a time zone away is near nil)
If that is the pricing arrangement, the gap closes and the affordability hack is less effective. This is a one or two year hack at most. If BC-BS of Alabama makes too much money, new entries will enter Alabama and try to price near A1, crushing the hack.
Richard Mayhew
@Benw: Now if you mean could Mayhew offer a Bronze and a Gold without touching Silver… I know insurers must offer two or more metal bands on Exchange. I am not 100% sure if that means they have to offer Silver + something else or just two distinct bands. There could be a strategy where Mayhew Insurance offers Silver priced at Super High levels and then a Gold priced dirt cheap… then the hack could work….
Prescott Cactus
@rikyrah:
Oh speak not of such of blasphemy !
We will build a shrine, fit for a Mayan insurance blogger and he will (hopefully) stay.
Benw
@Richard Mayhew: yes, this second case is what I’m suggesting: how would regulators cope if several other insurers joined the exchange in Alabama without closing the Silver gap?
Richard Mayhew
@Benw: Really good question. I have sent this hack to a couple of people who are in a position to do something about it (ie encourage it). The short term conclusion is that a Democratic CMS/HHS would be okay with a non-egregious hack that really goosed enrollment but it would be very vulnerable to rule making under a GOP CMS
Richard Mayhew
@Prescott Cactus: no worries — besides a change in jobs/careers where would I go? I don’t want to go to Kos (different audiences, different objectives and far fewer fucks allowed to be randomly inserted into a piece), and this is too specialized for general purpose newspaper/magazine blogging
benw
@Richard Mayhew: I suppose a Republican state AG could cause enough trouble threatening collusion charges to put a stop to this as well. Do you know what the Silver gap in the federal exchange is, if the subsidies work the same way for that exchange? A large-ish gap would suggest the nefarious Obama administration is again up to no good.
Scamp Dog
@Luthe: yes, that’s how I’m getting dental insurance. Obamacare got me insured after a ten year gap, and then the next year the Obamacare ruled forced my employer to offer coverage since I’m enough over 50% time. Conservative predictions that the rule would make my employer offer less work proved wrong (not really a surprise if you pay attention to how conservative predictions work out).
They don’t offer me dental, so that’s on my own tab, but it’s just under $30 a month via the exchange, so it’s no big deal.
Mnemosyne
@Fair Economist:
Yikes! You do have to be a little more assertive going to a dental clinic than you might at a “real” dentist. I’ve heard horror stories from professional dentists, too, though. Is it a TMJ issue? (IANA dentist, just a nosey parker).
maeve
Alaska is going to have a single player on the exchange too – it only ever had 2, both are operating at a loss and one is withdrawing (from the exchange, not from group health plans)
Effect of small numbers – it has been proposed that the state create an emergency fund (from taxes currently paid by insurance companies) for catestrophic coverage. People would still get coverage from insurance companies but the plan would pay for catestrophic events.
Here is an article (and comments)
how-save-alaskas-failing-health-insurance-market
Carl W
@Richard Mayhew: It seems like the “second-cheapest Silver” basepoint for subsidies is awfully easy to game.. both in cases like this that are good for consumers and in other cases you’ve written about where insurers spray lots of similar plans to make sure they have both first and second-cheapest Silver at approximately the same price (probably bad for consumers). Any idea if lawmakers considered these problems, and what their thought processes might have been?
If you could change the law, would you change this part? (For example, “cheapest Silver”, “cheapest Silver plus 20%”, or “median-priced Silver” would all be more difficult to game — although not impossible, of course.)