The 2017 Market Stabilization Rule and Silver loading

The Trump administration enhanced Silver Loading by the emergency Market Stabilization rule that the Center for Medicare and Medicaid Services (CMS) pushed out in April 2017.

This rule had several major elements. The relevant one is that the rule expanded the bands of allowable de minimas variation from the actuarial value target of each metal band. Under the old rule, a non-Cost Sharing Reduction (CSR) subsidy plan had to be within two points of the target. A CSR plan had to be within one point of the target. The new rule changed those bands for non-CSR plans. Now a Silver, Gold or Platinum plan could be up to four points under the target.

The allowable spread between a baseline Silver plan and a maximally allowed CSR plan variant increased. Under the original rule, a CSR 94 plan could be no more than 27 actuarial value points (41%) richer than the standard silver plan that someone is buying.

Under the new rule, the CSR 94 plan could still be a 95% AV plan. However the baseline plan could now be a 66% AV plan. This is a gap of 29 actuarial value points or 44% of the baseline plan. This would have been an interesting factoid if CSR was still being paid through a direct payment. However, as we all know, CSR is not being paid directly.  Instead, it is being paid by insurers calculating what the CSR costs would have been and then rolling those costs directly into Silver premiums.

If we were in a world of no CSR but no market stabilization rule changing the allowable minimal actuarial value, the benchmark bump would several points smaller as the gap between the purchased Silver plan and the CSR plan would be smaller.  The size of the total net bump would be dependent on state characteristics of the marketplace but back of the envelope, the market stabilization rule in a CSR world added an extra point to the silver rates in 2018 above and beyond normal premium increases.  An extra point is not a lot when Bronze and Gold rates went up by 17 points and Silver rates went up by 33 points, but it is meaningful as it increases the number of counties and families exposed to a zero premium plan by a marginal amount.