Big deals in Tennesssee

Blue Cross and Blue Shield in Tennessee is one of the insurers that I am following intensely as they are being aggressive in their on-Exchange strategy. In 2017, they were the most aggressive Silver gappers in the entire country. Most of Central Tennessee where they were the sole carrier had a $95 or more spread between the least expensive Silver and the Benchmark Silver for a single 40 year old non-smoker. BCBS-TN is doubling down on that strategy.

First, they released draft plan designs. They are planning to offer four plans in their service areas. They will release a single Bronze and Gold plan. They intend to offer two Silver plans. Crtically, they are intending to release a 66% or 67% actuarial value Silver plan and an almost 72% AV Silver plan. In 2017, they could only spread the AV by 4%. New HHS regulations now allow a 6% AV spread for Silver plans. This means a lower premium and higher out of pocket maximum is allowed. And for people who are never going to hit their deductibles anyways, this is a win as they face a lower net of subsidy premium.

Secondly, they put out a press release describing their actuarial assumptions. It is a gold mine of information.

Health insurance rates also take into account region (because medical services have different costs in different areas) as well as age and plan type. For ACA plans, tax credits also play a role in how much each member is responsible for paying each month.

Rate increases for silver plans will be higher than the 21 percent average because those are the only plans where we have to account for the uncertainty of the CSR program.

Rate increases for bronze and gold plans will only be in the 3-8 percent range. Those increases are mainly because of how the risk pool could change if the mandate isn’t enforced.

Because of how the federal tax credits work, we expect many Tennesseans who qualify will have at least one plan option with a $0 monthly premium.

There are a couple of things to pull out of this paragraph. First, BCBS-TN is loading all of the Cost Sharing Reduction subsidy uncertainty onto their Silver plans. This is the CSR Silver Concentrate decision. It means the entire cost of uncertainty of CSR goes into the Silver band. Bronze and Gold plans are being priced for the re-institution of the premium tax (3%) and whatever uncertainty there is on the individual mandate enforcement.

Currently, a single 40 year old in zip code 37096, Perry County sees the following prices before subsidies are applied. $438 for Bronze, $525 Silver, $623 Benchmark Silver, $938 Gold. This means they pay nothing for the Bronze plan after subsidies if they earn less than $28,3000. They pay nothing for their CSR if they earn less than $21,200.

If we were to apply a 5.5% rate increase to Bronze and a 25% rate increase to Silver two things happen. First, the spread between the least expensive Silver and benchmark Silver increases from $98 to $123 just on pricing alone. Adding in a wider AV spread leads to an ever larger pricing differential. This means the no cost Silver income limit would now be $23,500. Far more importantly for relatively healthy people, the Bronze to Benchmark spread goes from $185 to $318. The extra $138 in spread means a single 40 year old can earn $40,000 and buy a $0 Bronze plan after subsidies.

A family of three with a pair of 40 year olds and an eight year old earning $40,000 will have a $0 cost Silver plan. That same family with the same assumptions would be seeing zero dollar Bronze plans even as they earn 300% FPL.

BCBS-Tennessee is aggressively Silver gapping and doing everything they can to maximize the value of that gap.