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.