Gold benchmark and technocratic tinkering

Yesterday, Matt Fiedler of the Brookings Institute released a short policy paper advocating that Congress stop Silverloading by explicitly appropriating Cost Sharing Reduction subsidies and using those savings for smarter ACA subsidies such as moving the benchmark from silver to gold while upping CSR for targeted populations.

I fundamentally agree with Matt. Silverloading is dumb. It has the great advantage of being the politics and policy of inertia.  I wrote the following in August 2017 as I argued that doing nothing would produce liberal preferred policy results at no political cost:

I don’t think this is cost effective way to cover more people. Expanding Medicaid and then expanding Basic Health Plans would be much more efficient.

What this does is anchor expectations of what “reasonable” publicly subsidized insurance looks like…. And people will get used to this being the standard and we can work to improve from there.

But the advantage of Silverloading in the context of 2017 to present is that it does not require an active step, a vote or a CBO score to enact. That is quite valuable even if the outcome is mostly effective but inefficient. So Matt is trying to think through what could replace Silverloading so the ACA is a bit less confusing, a bit more efficienct, and less vulnerable to administrative rule-making monkeywrenching in the future. This is a good goal. However, there is one line that I really want to pull on for a bit.

I’m very worried about non-attentive inertia and re-enrollment into strictly dominated plans.

— David Anderson (@bjdickmayhew) May 20, 2021

If we were to adopt, via legislation, a “Gold Benchmark” with appropriated CSRs that are attached to the Gold plans, we need either a massive amount of technocratic tinkering going on in the background or we should expect a massive number of people who are currently in Silver CSR plans to be stuck in distinctly inferior plans. The technocratic tinkering would either be a one time fix where anyone who was in a Silver CSR plan was moved to a Gold plan with similar CSR as the automatic re-enrollment default, or a more complex set of new defaults where people are placed in the highest AV plan priced at or below a net premium ceiling when we hold insurer, network and plan type constant. These are eminently doable pieces of tinkering.

These are also quasi-required chunks of tinkering because we know inertia matters a lot. We know inattention dominates plan choice. We know that people don’t move in response to modest price shocks and they move even less to modest benefit shocks. We know that the marginal enrollee is almost buying entirely on price alone so a Silver plan with a 70% AV value is likely to be a zero premium plan fairly high up the income scale in a Gold benchmark world.

I think that a Gold benchmark world is a cleaner choice environment and likely to lead to higher average realized actuarial value as Silver plans at 70% AV will dominate Bronze plans at 62% AV in zero premium choices. The enhanced CSR benefits would also marginally help. But in order to get there, we need to think through the implementation challenges that acknowledge that people act as people, all messy and realistic, instead of frictionless choice maximizing agents.