Cost Sharing Reduction (CSR) subsidies are the source of great uncertainty for the 2018 Exchange plans. Uncertainty is insurance speak for expensive. We are already seeing insurers add 14 percentage points to their rate requests in North Carolina and 28 percentage points in Pennsylvania. We have looked at Anthem’s assumptions in Virginia where they will concentrate all CSR expense in only their Silver plans. I’ve heard insurers have been considering double-double filings.
The first pair of filings will be based on two different set of actuarial assumptions. The first set is a business as usual set of assumptions where the rate increases will be fundamentally be driven by price and utilization changes…. The second variant of this filing is a worse case filing….
The same corporate entity will offer off-Exchange low cost no-CSR plans and then high cost, CSR incorporated plans. This provides protection for off-Exchange buyers while giving the insurers protection against CSR.
I needed to visualize four scenarios. The numbers are hypothetical. The value of this chart is the relative position of the different bands.
Any plan that is offered on the Exchange must be offered off the Exchange as well. Insurers can offer plans that are only off-Exchange. . I assumes a single carrier offers only a single unique plan on-Exchange plus one additional unique off-Exchange plan for each band. This is an oversimplification for tractability. In this illustration, the Off-Exchange only plans are similar but not quite identical to the on-Exchange plans. The plans are assumed to be the same across all scenarios with the exception of how the CSR risk is spread. So with those mechanical notes, what does this all mean?
Normal is the base case. Adding actuarial value adds premium. Nothing interesting is going on here. This is boring and typical and it would be what happens if a CSR appropriations was signed into law this week. This is what 2014, 2015, 2016 and 2017 would fundamentally look like.
CSR Spread The cost of the CSR uncertainty is spread throughout the entire risk pool. Every metal band on and off-exchange is bumped up 20%. Kaiser Family Foundation estimated that not paying CSR would lead to a 19% premium increase. The major policy implication of spreading the cost of the CSR risk through all plans and all bands is the Federal government will pay more in Premium Tax Credits than they save in CSR payments. We would also anticipate a smaller and sicker off-exchange and non-subsidized market.
CSR Silver Concentrate This is the Anthem actuarial assumption. The entire cost of the CSR is put into the Silver plans. This increases the cost of the Silver plan so that it is above that of the Gold plan. This is weird. Bronze plans for subsidized buyers will be almost free and Gold plans will be cheaper than Silver plans. We would expect people who make between 200% and 250% Federal Poverty Line (FPL) and are eligible for weak (73%) CSR to eschew Silver and buy cheaper and better Gold plans. We might expect healthier people who earn under 200% FPL to buy some Gold plans. The average effective subsidy goes up dramatically. Off-Exchange, we will expect almost no one to intentionally buy a Silver plan. It will either be Bronze or Gold. People who would have bought Bronze, Gold or Platinum plans no matter what are no worse off. People who really wanted to buy Silver plans but either buy Gold or Bronze are worse off.
CSR Silver Concentrate and Split HIOS This is a twist on the Silver concentrate. Here, carriers create a separate off-Exchange only filing ID. They still concentrate all of the CSR cost into the Silver plan. The on-Exchange analysis is exactly the same. However, their off-Exchange only subsidiary does not have to price in the cost of CSR to any of their products. So they price those as if this is a normal rate filing. The people who really wanted to buy Silver in the previous example are no longer worse off. They are able to buy the subsidiary’s Silver.
There could be a CSR spread with a Split HIOS where the on-Exchange plans are just 20% more expensive than the subsidiary’s off-exchange only plans. But these are the basic flavors of choices that can be made to account for CSR costs. I needed to lay it all out visually so that I can track my thoughts better, so hopefully this was as helpful to you as it was for me.
Why would an appropriately AV priced Sliver without historical CSR be less ideal from a pocket book standpoint over gold (#3 scenario). From an up front cost perspective, I would think folks would still find the allure of slightly lower silver versus gold premiums attractive–although Silver price will rise.
(Unless I am missing the built in costs without CSR. MCOs will raise costs over usual AV value for silvers making them more costly than normal?)
@Bradley: This gets into the weeds.
There are three levels of CSR Silver. 94% and 87% actuarial value CSR Silver. These are both lower out of pocket committments than Gold at 80%. The last level of CSR is 73%AV. This is more out of pocket commitment than Gold. Furthermore since Gold will be priced cheaper than Silver in this scenario, it is a higher premium for worse value.
There will be some people who are eligible for Silver 87 and Silver 94 who will buy Gold 80 instead as it is cheaper with a bit more exposure. But the main effect is to see almost no one intentionally and actively buy Silver 73 under this assumption.