The ACA market is really two markets in a state: the subsidized market which has seen great deals due to Silver Loading and the non-subsidized market which saw several years of junk kicking rate increases.
— Modern Healthcare (@modrnhealthcr) August 14, 2019
The unsubsidized market has shrunk dramatically as premiums skyrocketed. States have tried to send some extra money towards the over 400% Federal Poverty Level (FPL) cohorts through either direct subsidies or through reinsurance which effectively blends in some money that is not derived from premiums with federal money that otherwise would have gone to individuals earning between 100% to 400% FPL. The last option states have is to built out alternative markets that are based on underwriting and exclusions to cover insurable risk instead of health management costs. This last choice is good for the healthy and makes the unhealthy but earning over 400% FPL worse off.
Sick and >400FPL is SOL. However combining a cap on premiums as a function of income and an underwritten market could work as I argued in March 2018:
Removing the cap on ACA subsidies so every family can access the ACA Silver plan for no more than 10 percent of its family income would provide immediate relief for Senator Cassidy’s constituents and others in similar situations. At the same time, the proliferation of underwritten plans will offer less expensive options for families without health challenges.
Patients and families will be able to choose the plans that will work for them. The ACA market will mostly cover the working poor who receive high subsidies and low deductibles, as well as the very sick who need to have comprehensive benefits and broad provider networks.
The underwritten market… will consist of healthier individuals whose premiums no longer subsidize the care of the chronically ill in the individual market.
Those costs do not disappear, as the size of the federal commitment to premium subsidies for the ACA plans will increase significantly. However, everyone will have access to health insurance with a premium ceiling and lower risk consumers will be better off.
Cliff policies are bad not because of the fall but because of the landing. The 400% FPL cliff has made many families go splat.