A very smart analyst that I respect asked me to think a bit more on the Cassidy bill from 2015 that I was writing about last week. So I’m working on that. Now I want to look at the distributional impacts of the Cassidy-Sessions bill. I’ll be using a pair of 27 years olds as I’m working my way through a couple of different scenarios. The Cassidy scenario is the state run and regulated HSA option #3.
The first thing we need to review is the individual level funding mechanism in Cassidy as money illustrates values. Cassidy Option #3 gives a flat per capita deposit to HSA that is determined by the funds that the eligible but not insured population would have received on the PPACA as is. A 5% discount from the PPACA money pool would be applied. This applies to states that have expanded Medicaid and also those that did not expand Medicaid. Non-Expansion states would see 95% of the theoretical federal Medicaid Expansion funds also go into the pool for the HSA’s.
So let’s look at a simple chart of who benefits and we’ll go through some of the scenarios below the fold:
So what does this all mean?
For people who are enrolled in states that Expanded and who are either Medicaid Expansion enrolled or make enough money to qualify for strong Cost Sharing Reduction subsidy support and enroll, PPACA is a very good deal. It is high actuarial value coverage with fairly low premiums. Individuals who are sick and not signed up are well off if they are Medicaid eligible as enrollment is year round and most states will have some retrospective enrollment where bills will be paid. Individuals who are either CSR eligible and not signed up or not-subsidy eligible and sick are okay. The healthy but low income have significant option value to sign up in either Open Enrollment or a Special Enrollment Period. The well-off and sick get access to guarantee issue and community rated insurance at a decent price without underwriting. The healthy and wealthy are paying a lot more for their coverage and paying higher income taxes to fund everything else. They are worse off with PPACA.
The same logic applies to individuals who earn over 100% Federal Poverty Level (FPL) under the status-quo in non-Expansion states. The big difference is the status of individuals who earn under 100% FPL. They are not eligible for Medicaid expansion as their states did not expand. They are also not eligible for subsidies on the Exchange as they don’t earn enough. They are in a hole where there is no help.
The critical thing that we need to note is the split between the signed-up and non-signed up categories. PPACA is an opt-in program. People are eligible for premium and cost sharing subsidies as well as Medicaid but they don’t sign up. If they don’t sign up, they are in a bad position.
Now let’s look at Cassidy. The first thing we need to remember is that it is an opt-out program. Everyone is assumed to be enrolled in at least a catastrophic, limited benefit program that is paid for by the HSA subsidy. They get some coverage with no out of pocket premium. They are better off.
People with significant incomes who are not PPACA subsidy eligible are better off. They get an age adjusted subsidy and the premiums will probably decrease as some essential health benefits are no longer covered.
The people who are in a worse position are people who signed up under PPACA and received significant subsidies through either Medicaid Expansion or APTC/CSR. They are still receiving a subsidy. But they are receiving a flat subsidy that is determined by their age. The subsidy pool is an allocation divided equally between everyone who is eligible for a QHP. A significant portion of the eligible population receiving the flat HSA deposit are people who are not eligible for any PPACA subsidy because they make too much money. A dollar going to a 500% FPL HSA is a dollar taken away from people who currently receive income sensitive subsidies and earn under 400% FPL. The baseline plan will be a low actuarial value plan (50% actuarial value (AV) is a good possibility). People earning under 150% FPL are either getting 94% AV or 97% to 100% AV (Medicaid). 60% AV is Bronze and that currently means a $7000 out of pocket maximum. Medicaid Expansion and 94% AV Silvers have deductibles between zero and $500. If an individual is healthy, the harm is real but minimal. If the individual in this bucket are either sick or unlucky, they are suffering significant harm.
These impacts will vary by state. If Texas went Option 3, the net benefit due to some Medicaid expansion will probably lead to a significant improvement in the general welfare. If a state like California went Option 3, there would be a lower level of general welfare. These are the extreme examples.