Yesterday, I published a piece at Health Affair’s blog which examined the policy implications of Utah’s desire to partially expand Medicaid to only 100% of the Federal Poverty Level (FPL) instead of the statuartory maximum of 138% FPL that is authorized for the enhanced ACA federal financing. The unique part of the piece was the look at the impact of Medicaid expansion and Silver Loading. Silver Loading is the practice of insurers putting the cost of Cost Sharing Reduction (CSR) subsidies that are no longer directly paid for by the federal government into the baseline silver plan premiums. Higher silver premiums leads to a higher premium tax credit benchmark which makes non-silver plans relatively cheaper for subsidized buyers. This is a new feature of the ACA and I poked at it:
For people between 100 percent and 150 percent FPL, CSRs bring the AV of a silver plan from 70 percent to 94 percent. For people between 150 percent and 200 percent FPL, the supplemental subsidies result in 87 percent AV silver plans, and for those between 200 and 250 percent FPL, the actuarial value is a more modest 73 percent. For reference, plans in the gold tier have actuarial values of 80 percent.
When considering partial expansion, we are particularly concerned about those with household incomes between 100 percent and 150 percent FPL, those that would be eligible for 94 percent AV silver plans. This income bracket overlaps the Medicaid expansion income group significantly. States that fully expand Medicaid end up with far fewer people in the most generous CSR bucket, as they have moved the 100-138 percent population to Medicaid
Pulling out most of the people who earn from 100-138 percent FPL significantly lowers the Silver Bump.
Let’s work through an absurdly simple toy model to start thinking about this.
We’ll assume a single insurer in the state. We’ll assume the insurer offers a single plan at precisely the target actuarial value. We’ll assume people don’t switch out of CSR silver plans to bronze or gold plans if they are qualified for a CSR silver plan.
So we need to do a rough calculation of the Silver Bump. We’ll assume 900 people in a hypothetical state are potentially CSR eligible.
|State Medicaid Status|
The non-expansion state’s rough Silver Bump is (300*(.94-.7)+300 (.87-.7)+300 (.73-.7)) / 900 =14.67 extra AV points
The expansion state’s Silver bump is: (100*(.94-.7)+300 (.87-.7)+300 (.73-.7)) / 700 = 12 extra AV points
This is an absurdly simplified model as I am making very strong assumptions of population distribution and I am also assuming a static enrollment picture instead of a dynamic reactive distribution of people staying in silver or going to bronze and/or gold.
But the fundamental point is that states which do not expand Medicaid have a much bigger pool of people on-Exchange who buy CSR 94 silver plans. And that much larger pool of CSR 94 buyers makes a much bigger Silver bump, all else being equal
So this means that Utah’s legislative plan isn’t just to screw the poor, it’s to use a partial Medicaid expansion to have the Feds holding the entire for everyone over FPL, by forcing them onto the exchanges. Since it will take a couple of years to sort this out, the state will pay more in the short run, but less in the long run, and those people will be able to get pretty good AV insurance anyway as long as they sign up for Exchange plans.
Pretty much that is the TLDR — and right now from the status quo of no expansion, the 100-400% group is being held no worse off and the <100% FPL group will be improved.
The critical question is the counterfactual --- are we basing the counterfactual on what is happening today (no expansion of any type) or is the right counterfactual Prop 3 passed in November of a straight up expansion starting on April 1, 2019