Over the past eight years, there have been a number of times where a single insurer is the only insurer in an entire state for the ACA subsidized individual health insurance market. At that point, the optimal pro-subsidized consumer strategy is for the single insurer to jack up their benchmark silver premium, offer a dirt cheap silver plan and play silver gap games as I described how Alabama could have gotten to an accidental single payer system in 2016.
Right now, Alabama is due to have only a single insurer on the Exchanges in 2017. They would be the de facto single payer for the exchanges.
Subsidies are based on the cost of the price of the second least expensive Silver plan. The individual premium responsibility is defined as a percentage of the family income for a given income level as defined by the Federal Poverty Level. A person who earns under 400% FPL is only on the hook for the calculated family contribution amount for the 2nd Silver. The gap between the premium of the 2nd Silver and the personal contribution is the Advanced Premium Tax Credit (APTC).
If there is a large gap between the premium of the least expensive Silver plan and the second least expensive Silver plan, the buyer benefits. They get the full APTC and then they just have to make up the difference between the lower priced #1 Silver and APTC with money out of their pocket… The bells and whistles PPO would be the subsidy setting benchmark so bells and whistles would be fully subsidized. However the #1 Silver would benefit from the massive gap between the #1 and #2 Silver so for quite a few low income families their monthly premiums would be zero. For individuals who make under 200% FPL, the combination of a rich APTC and Cost Sharing Reduction (CSR) subsidies would allow them to buy platinum(ish) coverage for a few dollars per month with low deductibles. Individuals and families making between 201% and 400% FPL could be buying subsidized Gold coverage for less than their expected personal contribution.
This general strategy of goosing the silver benchmark and getting everyone to not buy silver benchmark and buy either cheapest silver CSR or below benchmark NOT SILVER holds true in the silverload world as well. It is often a one and done strategy as the insurer should make unusual profits and attract new competition but the incumbent insurer benefits from getting a lot of new and somewhat sticky enrollment as well as filling out their data sets at a profit.
However, I’m not sure if this is optimal strategy in the ARPA world where the benchmark plan is zero premium for people under 150% FPL. I think it is as the silver gap matters for people earning between 151-200% FPL who qualify for high value CSR as well.
This speculation really only matters for Delaware in 2022 as they are the only state with a single insurer for the entire state. Below is their premium pricing in Kent County (similar in the other two counties of the state) for 2020-2022 for a single non-smoking 40 year old.
The silver spread is shrinking over time. This means that the cheapest silver plan is getting more expensive for people earning over 151% FPL. This is a weird strategy to me. It is even weirder as the gap between cheapest bronze and benchmark is also shrinking since 2020 where it was ~$175 and now it is $133. Cheapest gold relative to benchmark has bounced around with the variance of a good cup of coffee since 2020.
What am I missing here? Is Highmark leaving both profits and enrollment on the table?
Parmenides
My first guess would be that utilization in the low cost silver groups has been above projections in the past that slightly overwhelms the expected uptake of lower prices. Or they could be trying to disincentive uptake of the gold plans as I could see utilization at imagined gold prices could drive a huge upswing in utilization amongst a portion of the population.
Don’t know, interesting.
guachi
You’d think by now every insurance company would have this Silver Gap strategy down by now.
Stan Dorn
What are gold and bronze premiums like?
David Anderson
@Stan Dorn: Gold is about ~$20 under benchmark for all three years.
Bronze was ~175 under benchmark in 2020 declining to ~$135 under benchmark for 2022.