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Today in our ongoing national embarrassment…

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Red lights blinking on democracy’s dashboard

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Welcome to day five of every-bit-as-bad-as-you-thought-it-would-be.

Accountability, motherfuckers.

’Where will you hide, Roberts, the laws all being flat?’

… riddled with inexplicable and elementary errors of law and fact

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Prediction: the gop will rethink its strategy of boycotting future committees.

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They were going to turn on one another at some point. It was inevitable.

The current Supreme Court is a dangerous, rogue court.

I would try pessimism, but it probably wouldn’t work.

Historically it was a little unusual for the president to be an incoherent babbling moron.

… gradually, and then suddenly.

Republicans are the party of chaos and catastrophe.

Jack Smith: “Why did you start campaigning in the middle of my investigation?!”

Their boy Ron is an empty plastic cup that will never know pudding.

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You are here: Home / Anderson On Health Insurance / CSR non-payment and a silly Silver Gap idea

CSR non-payment and a silly Silver Gap idea

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The Cost Sharing Reduction Sword of Damocles hanging over the Exchanges for 2017. If CSR blows up in before December 2017, the Exchanges are destroyed for 2017. However if insurers assume that CSR will not be paid in 2018, they might have a very strange incentive set that hacks the exchanges in the direction of the 2009 House bill.

I’ve gone back and forth with a couple of experts on plan pricing. One of them does not believe my ramblings is plausible while another thinks it would be an interesting legal question. This is rank speculation as I am not a lawyer. It is based on p.8 of the 2017 Universal Rate Review Template:


The circled section allows for different pricing due to de minimas variation in actuarial value within a band. All else being equal, a Silver plan at 68% AV should have a lower premium than a Silver plan with a 72% AV.

And here is the possibility of a CSR repricing. If a carrier assumes that they are still to be obligated to offer CSR compliant plans but that they are not to receive CSR subsidies for those plans, they have to price the cost of CSR into their Silver plans. This would be a significant increase in premium as estimated by Kaiser.

Effectively, the average actuarial value of the Silver band would go from 70% to somewhere in the mid-80s. Now this is where my completely uninformed speculation comes into play:

IF CMS accepts Silvers have to be priced as if they are effectively mid-80s actuarial value, the least expensive Gold plan in a market is most likely less expensive than the benchmark Silver plan. CMS can not change the subsidy attachment point as that is a matter of black letter law. There is also a 23+ point priced AV gap between the Silver benchmark and the low cost Bronze plans. A 23 point AV spread probably leads to a 35% or more pricing spread between the benchmark and the low cost Bronze plan. Right now the cost spread between a Bronze and a Silver with the same network runs about 12%.

So what does this mean in my fevered brain for speculative purposes?

The subsidy point resets as if it is in the mid-80s for AV. More importantly, from my point of view, Individuals who qualify for low CSR (201% to 250% FPL) who receive a 3% AV bump on their Silver would be able to buy an 80% Gold plan for less than their 73% Silver plan as Gold is cheaper than Silver. People who qualify for 87% or 94% AV CSR Silvers but who have very good reason to believe that they are healthy could afford to gamble a little to save a few dollars per month while buying a Gold plan at 80% AV.

This gamble would also have the benefit of effectively much richer subsidies. There is a much softer fade. Bronze plans are effectively low to no cost for single individuals up to 300% FPL in most regions. They may be no cost up to 400% FPL in high cost counties.

I am not a lawyer. I have heard from two experts. One thinks that they would have to spread the CSR cost across the entire book of business while the other thinks there is nothing that currently precludes this idea.

Reader Interactions

11Comments

  1. 1.

    Another Scott

    I’m having trouble wrapping my head around this.

    Trump’s people not sending out the required payments could lead to better policies and lower costs for some/many people on the Exchange? Is that even remotely plausible? I can’t see it.

    What seems much more likely to me is, like the Bush tax cuts, there will be a few big winners, and a piddling amount claimed to be given to the hoi polloi (“You get a tax cut/cost reduction too!!11”), but the system as a whole will be decimated (in the modern sense, not in the 1/10th sense).

    My suspicion is that these noises are yet more of Trump’s people’s “negotiation” tactics and that they won’t really refuse to send the payments if the opposition stays strong. It’s an attempt to get Democrats to agree to less onerous cuts that they wouldn’t accept otherwise. Democrats should continue to refuse to play that game, IMO. They’ll continue to work on ways to break Obamacare in the background, but it won’t be something so overt as not sending the payments.

    But, that’s just my feeling, and we’ll see.

    :-/

    Cheers,
    Scott.

  2. 2.

    Major Major Major Major

    I have heard from two experts. One thinks that they would have to spread the CSR cost across the entire book of business while the other thinks there is nothing that currently precludes this idea.

    This all sounds like one of those 90’s family comedies. “Well, there’s nothing in the rules that says a gorilla CAN’T be an Olympic diver…”

  3. 3.

    artem1s

    I’m confused too. so how does all this jibe with yesterday’s post on actuaries risk planning for sabotage?

  4. 4.

    daveNYC

    Right, so:
    1) Insurers assume CSR goes away.
    2) Therefore they bump the price of their Silver plans to cover the loss of the CSR.
    3) This then means that the Actuarial Value (AV) of the plans increases, in this case to say 85% (or so).
    4) Premiums for said plans increase accordingly?
    5) And since subsidies for peeps at a certain income level are based on the Silver premiums, a certain subset of people will be able to use the now increased subsidies to buy a lower AV gold that still provides better coverage than one of the hypothetical 85% AV Silvers from step 2?

    Is this vaguely the thing? I think the initial confusion point for me is that after increasing the premiums, the system is then ‘reverse-engineering’ the Actuarial Value of the plan simply based on the premium increase relative to other plans. They’re charging more, and since the law says that all else being equal, the AV determines the premium, the higher premiums automagically mean that the plan has a higher AV.

  5. 5.

    David Anderson

    @daveNYC: Pretty much. The big question is where does the implied increase in AV get attributed to? If it is only attributed to Silver, then #5 logically flows. If it has to be attributed to the entire product portfolio, everything gets funky.

  6. 6.

    hilts

    OT

    NC lawmaker calls Abraham Lincoln a ‘tyrant’ like Hitler

    A day after setting off one firestorm, a Cabarrus County lawmaker set off another Wednesday by calling Abraham Lincoln “the same sort (of) tyrant” as Adolf Hitler.

    Republican Rep. Larry Pittman of Cabarrus County made the comparison in a Facebook post in response to a comment criticizing a bill he’d introduced that would nullify the U.S. Supreme Court’s decision on same-sex marriage in North Carolina.

    In his post, Pittman said North Carolina should uphold traditional marriage “in spite of the opinion of a federal court.”

    “And if Hitler had won, should the world just get over it?” he wrote. “Lincoln was the same sort if (sic) tyrant, and personally responsible for the deaths of over 800,000 Americans in a war that was unnecessary and unconstitutional.”

    h/t http://www.charlotteobserver.com/news/politics-government/article144233494.html

  7. 7.

    Bob Hertz

    This all leaves out the hideous effect on the non-subsidy eligible of another 20% increase, plus whatever other increases might have been planned.

    We seem heading for a state of affairs where millions of middle class people are now the uninsured.

  8. 8.

    Sab

    @Bob Hertz: Well, at least we will know we are uninsured, unlike the good old days when people thought they had insurance that mostly didn’t cover much.

  9. 9.

    Brachiator

    @David Anderson: I wonder if you have seen or reacted to the NPR (and other sites) story on proposed changes to Obamacare?

    Get Set For Trump Revisions To Your Affordable Care Act Insurance

    Repeal and replace is on-again, off-again, but that doesn’t mean the rules affecting your insurance will stay the same in the meantime.

    The Trump administration’s proposed rule aimed at stabilizing the existing health law’s insurance marketplace could have rapid, dramatic effects — perhaps as soon as early summer — on people who do not get insurance through work, and buy it on the Affordable Care Act’s exchanges instead.

    If the changes the administration proposed in February hold up in the final draft, which is expected out soon, look for a shorter enrollment window, tighter vetting of people who sign up outside of those open periods and efforts to penalize consumers who don’t maintain “continuous coverage.”

    The controversial proposal by the Department of Health and Human Services drew letters from nearly 4,000 organizations and individuals during an unusually short, 20-day public comment period that ended in early March. Consumer advocacy groups hate the proposal, saying it would wreak havoc by making it harder to get coverage.

    But some specialists in the health law, including Christopher Condeluci of CC Law & Policy in Washington, D.C., see the HHS proposal as helpful for insurers, though he also thinks more adjustments are necessary.

    I love how the Faux Populist in Sheep’s Clothing consistently favors business interests in his policies and proposals.

  10. 10.

    Uncle G

    @Bob Hertz: No it doesn’t. Under one of the scenarios outlined, only Silver plans would be impacted. Non-subsidized individuals would have no impact to their rates if they avoid Silver plans.

  11. 11.

    Uncle G

    @Another Scott: Yes, that’s how this crazy thing works. When premiums increase, the subsidies increase dollar for dollar. Anyone receiving a subsidy that purchases a plan lower than the benchmark ends up paying less due to the premium increase. Of course, non-subsidized individuals pay more as premiums go up.

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