Silver Gapping and Medicaid Expansion in Virginia

Virginia expanded Medicaid yesterday. This is an undisputed good thing for individuals who earn under 100% of the Federal Poverty Level (FPL). Right now, someone earning under 100% FPL does not qualify for subsidies for ACA plans. It is a messy analysis for anyone who currently earns between 100% and 138% FPL as this cohort qualifies for APTC subsidies to buy CSR Silver plans. The variation will be dependent on health status and the array of plans offered in each particular county/city in Virginia.

A monthly premium that can't "be less than $1 per month" is some petty shit. $1 isn't about raising revenue or discouraging so-called 'frivolous use' (i.e. it's not a copay). This is about punishing folks, some of whom are working at least 40 hours a week, for being poor. pic.twitter.com/pXmhp82oVQ

— MedicaidMatt, Esq. ⚖ (@mattbc) May 30, 2018

Medicaid offers between 98% to 100% actuarial value (AV) coverage where the insurer pays between 98% to 100% of all claims and the individual may pay small cost-sharing for some services. CSR Silver plans for people who make between 100% and 150% FPL pays on average 93% to 95% of all claims. Medicaid is a slight increase in actuarial value compared to the current next best alternative.

The challenge is on premiums.

A single 40 year old making 138% FPL who buys the benchmark Silver plan pays 2% of their income in premiums which translates to $28 per month. People who expect to be relatively healthy will often elect to buy the least expensive Silver. The APTC subsidy is fixed so the choice to buy a lower cost Silver plan means the a dollar for dollar reduction in out of pocket premiums. Significant portions of Virginia including greater Richmond, exurban NoVA and central Virginia between I-81 and I-95 have a Silver plan that is at least $28 less than the Benchmark Silver. This means that there is a $0 premium plan available for folks who will now be moving to Medicaid with a 2% premium. Since these folks are low utilizers, they are likely to be no better off and potentially slightly worse off than they would have been with no expansion.

Individuals who will soon be Medicaid eligible and are currently buying CSR Silver plans and who have significant healthcare needs are in a messy situation. Odds are that they are more likely to buy Silver plans that have more extensive networks and are more likely to buy the Benchmark or more expensive than Benchmark Silver plans than individuals with low anticipated healthcare needs. Here expansion’s 2% of income premium is likely to be a reduction in total premium paid for slightly more actuarial value.

These stories will change every year in every county but it is not a straightforward story that everyone who is currently on a QHP will be better off with Medicaid Expansion. The intuition is people with significant medical needs who live in low Silver spread regions (like the Greater DC inner burbs or Greater Norfolk) are more likely to be better off while relatively healthy people living in Silver Gapped regions are likely to be slightly worse off.