Free CSR plans aren’t always free

The American Rescue Plan Act of March 2021 significantly altered the ACA subsidy schedule.  It made the benchmark plans cheaper for anyone who previously had qualified for premium subsidies and then it expanded the subsidy eligibility range to anyone facing plans that were more expensive than 8.5% of income.   These changes are in place for the 2021 and 2022 plan years.  The current reconciliation drafts propose to extend these enriched subsidies for several more years.  Additionally, the current reconciliation bill being drafted intends to offer ACA plans with enhanced benefits to individuals who are in the Medicaid Gap in states that have refused to expand Medicaid.  These individuals would be deemed to have an income of 100% of the federal poverty level (FPL) and thus they would qualify for a choice between two zero premium silver plans.

HOWEVER there is a caveat on zero premium plans.  The ACA subsidy system only pays for the portion of premium that is designated to be caused by claims for “Essential Health Benefits” (EHB).  EHBs are a set of ten service categories that have to be covered and they vary between states. States usually look at a large group employer plan as a reference for what is typically covered in a state.  There is variation between states as to what is covered as an EHB.  If an insurer offers a plan that has 100% EHB only benefits, the subsidy applies to the entire premium and a consumer is able to see zero.  However, if an insurer adds in a non-essential health benefit like voluntary abortion coverage (sometimes mandated by a state) or adult vision care or infertility treatments, the gross premium is a combination of the EHB component of premium and the non-EHB component of premium.  A plan with 99.9999999% EHB can not be a zero premium plan as the individual must write a check/set up a direct debit/charge to a card to cover the few pennies of a non-EHB benefit.

This is increasingly common.  I looked at the 2022 Healthcare.gov Landscape, and Benefit and Cost-sharing Public Use files to identify counties where both the cheapest silver plan and the second cheapest silver plan, EHB component only, are not 100% EHB plans.  320 out of 2,449 counties served by Healthcare.gov meet this definition of no zero availability in 2022 for CSR silver plans.

Why does this matter?

We know that zero premium plans increase early plan take-up because there is no need to set up a payment mechanism.  Setting up a payment mechanism is a friction and a potential administrative burden.  We know that nominal premiums lead to significant declines in Medicaid enrollment.  We know that administrative burden falls most heavily on people who have the fewest resources to deal with hassles.  We know that zero reduces burden.

So if the intent is to have low income individuals able to buy low friction health insurance plans, small premiums create a lot of grit that can break the chains of action that are needed for enrollment. This is a current challenge in the ACA markets, and it would be exacerbated if a federal work-around to Medicaid Expansion hold-out states was enacted.

Map below the fold: