Two very interesting pieces of news as insurers file their rates in Tennessee.
The first is that Blue Cross and Blue Shield is continuing their Silver Gap strategy. More interestingly, they are expanding their Silver gap strategy. They have not filed all the details yet, but their summary is here.
They intend to offer four plans. A single Bronze and a single Gold plan will be sold. Then they will offer a pair of Silver plans. One Silver plan has a $250 deductible with a 50% coinsurance to a $5,000 out of pocket maximum. The other plan has a $2,500 deductible and a $5,000 out of pocket maximum. The first plan has an actuarial value between 66% and 67%. The second plan will have an actuarial value near 72%. Both Silver plans are using the same network so the pricing difference will mostly be driven by the difference in actuarial value. A 5.5% actuarial value difference will lead to Silver spreads greater than $100 for a 40 year old.
In 2017, BCBS of Tennessee Silver Gapped the central part of the state excluding Metro Nashville. They produced great deals. In 2017, Humana was the sole carrier around Knoxville. They offered only a single Silver plan in east-central Tennessee. They left the market as they attracted a very sick risk pool. In 2018, BCBS is moving into Humana’s previous turf. They are taking their Silver Gap strategy with them. It will produce a very different result than the dichotomous county level experience of the ACA in 2017.
In Perry County, a 40 year old earning $25,000 a year, which is slightly more than 200% Federal Poverty Level (FPL), saves $100 a month or roughly 5% of their income because of the Silver Gap compared to the same individual in Roane County. Going to a broader scenario, a married pair of 40 year olds plus a ten year old kid can earn up to $38,600 (~190% FPL) before they have to pay a dollar for Silver plan with Cost Sharing Assistance. In Roane County, that same family is paying $182 per month or 5.6% of their monthly income for their Silver plan.
If that family of three is a pair of 50 years olds and a 10 year old, the Perry County family can earn up to $45,000 a year before they have to pay a dollar for their Silver plan. Bronze plans are zero dollar premiums for this family when they earn just north of $75,000.
The same family in Roane County pays 7.2% of their monthly income for a Silver plan if they earn $45,000 a year. Their zero dollar Bronze plan ends once they earn more than $43,500.
Roane County will see deals similar to those seen in Perry County for 2018.
Now there is something else interesting in Tennessee. A carrier is entering the market for the first time. Oscar is jumping into greater Nashville.
Tennessee: Nashville is laying claim to its status as the country’s capital in health care technology and innovation, and always seemed like a natural fit for Oscar. While it’s a completely new market for us, we’ll be working closely with regulators to see if we can deliver a competitive product in Nashville’s individual market, and are filing for expansion there in 2018.
I have not seen the filing yet, but this is intriguing to say the least. If they can replicate their Texas experience, this makes sense. I am curious if they are planning to partner with Vanderbilt or HCA as the risk bearing entity in a branded narrow network or if they are doing something else. They think they can make money in Tennessee so they are putting their money on the line. That’s how markets are supposed to work. I don’t know if it will work but good luck.