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You are here: Home / Anderson On Health Insurance / Standard plans and Silver gapping

Standard plans and Silver gapping

by | 19 Comments

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Washington State is about to pass major state level health policy legislation.  There are several moving parts:

  • Public Option at roughly 160% Medicare rates
  • Standard Benefit Design
  • Requirement that all insurers only offer the standard benefit on Exchange

Given Washington State’s market where there is at least one Medicaid Managed Care company in each rating area, I don’t think a public option will be price competitive as Medicare +60 is closer to “standard” commercial rates than either Medicare-ish or Medicaid-ish rates that Centene/Ambetter and Molina are paying their networks.

However, I think the real action is in the single standardized plan design requirement.  Centene/Ambetter is a low cost insurer.  They are in most rating areas.  They offer a number of silver plans that are all priced tight to the benchmark position.  This means two things.

First, they get most of the price sensitive and reasonably healthy very heavily subsidized folks as the next cheapest Silver plan offered by another company is significantly more expensive.  Secondly, since the benchmark plan is close to the cheapest Silver (also offered by Centene/Ambetter), there are very few great deals so the enrollment pool is smaller than it would be if there are larger silver premium spreads between cheapest silver and the benchmark.  This is the “silver-spamming”  strategy that Centene loves.

Single standardized plan requirements takes away this spamming strategy.  We can see this if we look at Washington State Rating Area 1 and 3 for 2019 (data via RWJF HIX Compare and premiums are for a single 27 year old)

Currently, in rating Area 1, the benchmark is $10 above the cheapest Silver. This means that a 27 year old earning $18,000 a year can buy a CSR-94 Silver plan for $51/month. If we assume that an insurer can only offer a single plan and they will offer their cheapest plan, the new benchmark would be offered by Molina and the cheapest Silver would still be offered by Centene/Ambetter. However, the silver spread is much bigger at $36. This means a 27 year old earning $18,000 could buy a CSR-94 Silver plan for only $25 per month. This is half the monthly outflow.

Single, standardized plans are not panaceas. In Rating Area 3, Molina has the cheapest plan while Kaiser Permanante is offering the benchmark silver. There is a $10 spread so there would be no change under the assumed rule I applied in Area 1 as there are two distinct insurers offering their cheapest plans already.

I think the single standardized plan rule is the biggest thing in the package that Governor Inslee (D-WA) will be signing as it an effective step that minimizes spamming of the exchanges and it will increase plan affordability for subsidized buyers. Off-Exchange buyers can be held harmless or at least harm can be minimized if the state allows for anything to be offered Off-Exchange. The distinction is that on-Exchange buyers are far more sensitive to premium spreads while off-Exchange buyers are indifferent to spreads and sensitive to levels.

Reader Interactions

19Comments

  1. 1.

    Butch

    Can you leave an Exchange plan at mid-year? I’m really sick of fighting Blue Cross and want to go back to the underwritten plan under United. It was better coverage for far less money.

  2. 2.

    David Anderson

    @Butch: yes, you can leave the Exchange at any time. Personally, I would make sure I had a new, valid contract with the alternative policy first before cancelling but that is just me.

  3. 3.

    Pensive

    Do you see any improvements for people making more than 15K per year with these changes? Thinking of my niece who is single, age 27, but makes around 30K per year. She just got off her Mom’s insurance so was shopping the exchanges for the first time and it seemed $200 per month was about the best she could do.

  5. 5.

    David Anderson

    @Pensive: Assuming that the simulation model closely reflects reality, it depends. In most of the state, she would see significantly cheaper plans. However if she lives in Rating Area 3 (North bank of Columbia River /north and east of Portland), there would be minimal to no change.

  7. 7.

    Dirge

    Just had a new enrollment window opened for me and was browsing the WA exchange.
    Ambetter seemed shady: lots of chiropractors and naturopaths offered as recommended nearby primary care providers.
    Tough to find a MD outside a hospital on their network. Maybe it’s just Seattle.

  8. 8.

    JaySinWA

    Will the public option at medicare+60 push the bids up from the current low cost carriers for networks? I would expect at least a little competitive pressure. Better for providers, not so good for low bidders and cost sensitive consumers?
    ETA OTOH could it help stem the loss of hospitals and providers in rural areas?

  9. 9.

    Barbara

    @JaySinWA: The 160% of Medicare is what I would call a reasonable but not luxurious reimbursement that could result in a more adequate network. Maryland has shown that getting everyone into the same fee schedule methodology regardless of payer class can work, and it avoids all kinds of unhealthy arbitrage and cost shifting.

    ETA: This could be a good alternative strategy to M4All by allowing states to fashion public options and obtaining federal waivers as necessary in order to integrate it with Medicare and other federal programs.

  10. 10.

    Julie

    David, I live in a Washington state county that has only 1 insurer left on the exchange. Will this legislation affect subsidized buyers in my county? Asking for many friends.

  12. 12.

    Jimmm

    @Julie: I’m facing the same issue here in Clallam county… setting aside the cost, having an option (public or otherwise) with adequate access to our current physicians is my main concern right now.

  13. 13.

    Ohio Mom

    Off- topic: just saw in a disability newsletter that several states are asking to have their Medicaid block-granted?!!!

    If this comes to pass, it is a guaranteed disaster for the disability community. So far it is Alaska, Tennessee and Utah — all Red states, naturally — considering this horrid idea.

    Any perspective to add, David?

  17. 17.

    David Anderson

    @Julie: If there is a single carrier and there are standardized plans, it depends on if the single insurer is a benevolent monopolist or an asshole monopolist. If Benevolent, the monopolist can maximize the spread so a public option could reduce the spread and make subsidized buyers who are price sensitive worse off. If the monopolist is an asshole, standardized plans with a single public option resetting the benchmark would increase the effective subsidy.

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