Health Affairs has published a new research article that I cowrote with Coleman Drake of the University of Pittsburgh. We were curious about what happens to county level enrollment in the ACA when more people are exposed to plans that cost them nothing after subsidy. We are not studying whether or not people choose the zero premium plans (our data would not allow that) but whether or not enrollment changes due to a plan being offered at zero premium instead of “merely” low premium.
We took advantage of Silver Loading again. From 2014-2017, most zero premium plans were only available to people who earned under 150% Federal Poverty Level. These folks have a low expected contribution for the benchmark Silver plan and are eligible for strong CSR assistance. In 2018 and 2019, Silver Loading spiked the number of people who were exposed to at least one plan that had a zero premium.
Lots of people were now exposed to at least one plan that cost them nothing after subsidy. And this matters. We found that the presence of a zero premium plan increased enrollment by 14% for the group of folks who earn between 151-200% FPL if their county had a zero premium plan. This is after controlling for premium spreads and premium levels as well where demand curves behave in the expected manner — cheaper prices leads to more enrollment as well.
We think zero is weird and special. This is well established in the behavioral economics literature. We could hypothesize two stories that explain this weirdness. The first is an anchoring story. The default display on Healthcare.gov is to show lowest premium first. If the first number a person sees is zero, maybe everything else looks reasonably priced? We would expect to see people who are exposed to zero premium plans to not overwhelmingly purchase the zero premium plan. The second story is more of an administrative burden/cognitive load management story. Paying bills is a pain in the ass. Juggling yet another bill involves a lot of management where it is affordable if everything works out just right but if there is a bad week/month, stuff has to give and adding one more bill into the pile of things that have to be juggled is a significant weight. A zero premium plan removes the cognitive burden of additional juggling. If this is the story, we would expect most of the people who are exposed to a zero premium plan to be buying the zero premium plan. I suspect, without any micro-data evidence, that it is a bit of both. We will have future work teasing this out.
Most of the zero premium plans are Bronze plans although there are some zero premium Silver and Gold plans (this entire research question started due to me seeing zero premium Gold plans in Oklahoma). Bronze plans are very high deductible and cost sharing. If someone is eligible for CSR-87 Silver plans at a reasonable premium, I would recommend that they go to Silver even if the monthly payments are higher. However, the relevant comparison for a zero premium Bronze plan is against uninsurance. At that point, a zero premium Bronze plan with a high but capped deductible dominates a zero premium uninsurance plan with an infinite deductible.
Now where does all of this fit in?
From a state rule making point of view, this strongly suggests that states should encourage their insurers to offer very cheap bronze plans that are fully subsidizable. This means allowing insurers to offer plans that are only essential health benefits. It also means allowing insurers to offer at least one plan with maximum deductibles and out of pocket amounts.
From an insurer point of view, zero premium plans should improve retention and decrease risk variability as it is very hard to terminate a member for non-payment of premium when there is no premium to pay. We think that we will see a significant difference in enrollment length for people who have a zero premium plan and people who have selected a low dollar ($1 -$10 ) plan.
Nothing Matters A Lot.