Rhode Island is silver gapping their exchange but the communication effort is horrendous.
two insurers – Neighborhood and Blue Cross & Blue Shield of Rhode Island – will be offering plans to individuals in 2017. A third carrier, UnitedHealthcare, declined to do so after attracting few customers this year and last.
The decline in average premiums for individuals is being driven by Neighborhood, a relative newcomer on the state’s insurance scene, which says its average premium will decline nearly 6% in 2017 compared with this year. Blue Cross says a weighted average of its premiums shows they will increase 5.9%.
In 2016, a 40 year old non-smoker sees an NHPRI plan for $259 and a BCBSRI plan for $263. It was a converged market. With the price changes for 2017, the NHPRI plan will cost about $246 while the BCBS plan will cost $278. This is a significant spread between the two plans.
NHPRI applied to Silver Spam the subsidy point as they filed three plans with the same network and the same plan type. That would set a subsidy attachment point around $250 for the forty year old single non-smoker. The cheapest plan would only be $4 less expensive than the benchmark plan. The BCBS plan would cost roughly $28 more. The market consequences of this approach is that NHPRI would get most of the cost sensitive membership that was healthy. BCBS would get more of the unhealthy membership and the less cost sensitive membership. Overall, the Rhode Island on-Exchange subsidized buying pool would be fairly old and comparatively unhealthy under the initial offering of three isomophic plan designs from NHPRI.
However, the Rhode Island exchange rejected two of the isomorphs. Now there is a single Silver offered by NHPRI at a very low price with the benchmark being set by the BCBS plan. Cost sensitive and healthy individuals will be getting a great deal on the NHPRI low cost Silver plan. An individual making $18,000 a year receives rougly a 50% discount on the NHPRI plan compared to the BCBS benchmark plan instead of a 5% discount they would have received under the silver spam scenario. The Silver gap strategy will see NHPRI get a very large and very healthy risk pool and the total buying population in Rhode Island should increase as the post subsidy price for a Silver plan will be significantly lower in 2017 than it was in 2016 for subsidized buyers. Healthy individuals facing severe cash constraints are the least likely buyers to buy insurance. By lowering their effective prices, we should expect to see more healthy buyers in Rhode Island which should improve the overall risk pool.