Last week HHS Secretary Azar bragged that the benchmark premium for the 2nd least expensive Silver plan on Healthcare.gov went down by 2% for 2019 compared to 2018.
That is good news for the US Treasury. A lower benchmark premium means smaller premium tax credits.
It might be good news for non-subsidized buyers as some plans are now cheaper.
It is slightly bad news for states with either a 1332 reinsurance waiver or a Basic Health Program (BHP).
It is either indifference or slightly bad news for subsidized buyers.
States that rely on pass through funding for either 1332 or BHP have an incentive to want high benchmark premiums in order to generate large pass through amounts that can be used for reinsurance or for the expansion of pseudo-Medicaid to 200% FPL which is the BHP program.
Individuals who get subsidies don’t care at all about benchmark levels. They care instead about the price spread between the benchmark plan and all of their other choices. Subsidized buyers are indifferent to the following two pricing scenarios:
|Subsidized Buyer Indifference Spreads||Low Premium||High Premium|
|Bronze||$ 400||$ 600|
|Silver 1||$ 500||$ 700|
|Silver Benchmark||$ 525||$ 725|
|Gold||$ 600||$ 800|
This price indifference is the core resiliency feature of the ACA that allowed it to muddle through in 2018.
I think that as more insurers enter and re-enter markets and the Silver gaps compress again due to more competition, we’ll see fewer subsidized buyers than we otherwise would have seen and a slight increase in the number of non-subsidized buyers.
One thing that hurts subsidized buyers is having the expensive benchmark insurer leave the market! I live in a rural county and next year we will be left with only one insurer on the exchange. As a result, my subsidized premium will increase substantially.