Earlier this week, the Hill reported that the Blue Cross and Blue Shield Association wanted Congress to appropriate funding for Cost Sharing Reduction (CSR) subsidies:
A leading health insurance group said Monday there is an “urgent” need for Congress to act to stabilize ObamaCare markets after the repeal of the individual mandate in December.
“There’s an urgent need to stabilize the market,” Justine Handelman, a senior vice president at the Blue Cross Blue Shield Association, told reporters at a briefing.
They argue that this will lead to lower non-subsidized Silver premiums and that is a desirable policy goal. In isolation, I agree. In general, I strongly disagree.
Most states loaded the cost of CSR into their Silver plans. A large number of states, most notably California and Pennsylvania loaded the cost of CSR into only their on-Exchange Silver plans while off-Exchange Silvers were sold at “normal” rates. Going forward, more states and more insurers are planning to engage in Silver Loading with the Off-Exchange Switcheroo option.
There is a good technical argument for the Blues. From 2014 to September 2017, CSR funding was tied to actual claims experience. Building estimated CSR costs into premiums introduces another source of variance. Variance can be dealt with but it is another source of potential error in correctly setting premiums.
I think there is a slightly more cynical reason to suspect why the Blues may want CSR appropriated. When states adopted Silver Loading strategies, the relative spread between the Benchmark Silver and other metal bands changed. Bronze plans became much cheaper for subsidized buyers and Gold plans either became less expensive than Silver Benchmark plans in 20% of the Healthcare.gov counties or far more cost competitive Gold offerings.
In regions where there is only a single insurer, this is irrelevant. However in regions where there is both a high cost insurer and a low premium insurer, introducing Silver Loading makes the low cost insurers’ subsidized products far more appealing on a relative basis than the were before. Reducing the Silver Benchmark by 10% to 15% reduces the premium spreads and makes high cost insurer products more attractive.
Re-instituting CSR means the pricing and risk adjustment advantage enjoyed by Medicaid-like carriers decreases. It could be that the Blues are trying to protect themselves from competition.
With the caveat about anecdata, I am paying twice as much for a bronze as I did last year for a cost-sharing silver. The same is true for my oldest kid and all of my exchange friends. It wasn’t just Anthem. The co-op and all the other insurers did the same.
It would be interesting to see what would happen here if CSR was restored. I’m in Virginia, where the majority of counties have only one insurer on the exchange and, at least in the Optima counties, there appears to have been minimal if any Silver loading (premiums for all metal levels at least doubled from 2017 – Gold actually being the worst; I got quoted over $1200/mo as a 42 year old non-smoker). Theoretically premiums should come down in single-insurer counties, but given the overall behavior of the industry I’m skeptical that the reductions would be meaningful. In any event, it’s hard for me to really enthusiastically cheer for something happening that might benefit people here when it’s likely to hurt many of the people who benefited from the Silver loading strategy.
So what happens if Congress does nothing, that is, they let the individual mandate stand and do nothing else? By the way, I am thinking that this would be the minimum reaction even if the Democrats retake the House, but not the Senate.
For us on the Exchange in Oregon the Silver loading CSR response saved us a tidy sum. Our big loss from the Repubs cheating on CSR and risk corridor payment promises is the loss of insurers. Our choices went from around 10 to 3. The most innovative and customer friendly outfits counted on the risk corridor payments cover better service and had the scaffolding knocked out from under them.
off topic but a great story on why we need Obamacare.
@Kelly: Thanks for linking to that story. There are lots of stories out there like it, but it is particularly well done.
Can someone dumb it down even more for me? Still not totally getting it.
Funding CSR probably helps high cost insurers’ bottom lines
@David Anderson: yes, but how exactly? Are they the high premium insurer you’re referring to in “Reducing the Silver Benchmark by 10% to 15% reduces the premium spreads and makes high cost insurer products more attractive.”
@please help: yes