Silverloading will become law

The Mega-omnibus budget bill contains a few sections of particular interest to me. The biggest is Section 609 that makes Silverloading a default federal policy.

I guess Congress also doesn’t have a succinct way of describing what silver-loading is so they just said “the practice commonly known as silver-loading” in a law https://t.co/VxQmwWximO pic.twitter.com/8eQQK9IeQz

— Peter Sullivan (@PeterSullivan4) December 16, 2019

Silverloading is the practice that insurers and states have adopted in response to the termination of federal payment for cost sharing reduction (CSR) subsidies. States and insurers have placed the cost of the CSR benefits into only silver plans. This increases the benchmark premiums faster than all other premiums which makes not-silver plans comparatively cheaper for subsidized buyers.

My recent paper at Health Affairs shows the effect:

In August 2017, I was a lone and crazy voice arguing that CSR payments should not be appropriated as inaction would lead to a change in baseline and expectations for the ACA in the direction of the 2009 House bills that were watered down in the Senate.

Kevin Drum asked for a blog post instead of a tweet storm regarding my argument that over the long run not paying the Cost Sharing Reduction (CSR) subsidies is a massive liberal policy win….

If we make some assumptions that everything is relatively equal, most subsidized buyers will see Bronze plans (60% AV) are less expensive than the Benchmark Silver and one additional Silver plan is less expensive than the Benchmark Silver. Gold (80% AV) and Platinum (90% AV) are, for the same network at the same insurer in the same plan type, more expensive than the Benchmark Silver….

let’s assume that insurers and their state regulators either think that CSR won’t be paid or know that it won’t be paid. Insurers are still obligated to increase the actuarial value of the Silver plans bought by people with incomes between 100%-250% FPL. They won’t give that benefit away for free. Instead they will increase premium rates. They can either increase the rates on all plans or only increase the rates on Silver plans. Most will increase the rates only on Silver plans….

If we assume that the benchmark Silver has cousins at Platinum, Gold and Bronze where all of these plans have the same networks and same basic benefit design, the relative, post subsidy price order will look like the following: Platinum and Silver are roughly equal, Silver is more expensive than Gold by 15% and Silver is more expensive than Bronze by 40% or more. This is a significant inversion of the current scenario where Benchmark Silver has a price advantage over Bronze by a little bit, and is significantly under-priced compared to Gold and Platinum….

What this does is anchor expectations of what “reasonable” publicly subsidized insurance looks like…..

The biggest thing that I got wrong with this analysis is that Silver is now priced like Gold instead of Platinum for a variety of competitive and risk adjustment reasons but the logic holds. But once Repeal and Replace fizzled and Graham-Cassidy-Heller went no where, elite consensus was that CSR payments needed to be funded with likely significant Democratic policy concessions. That was the premise of Alexander-Murray. The politics of inertia changed once insurers had enough time to plan a response.

Now federal policy is catching up to the summer of 2017 geek debate. Silverloading is now an officially sanctioned act instead of merely a convenient work-around.