Position rank instability on the ACA marketplaces

Kong, Shepard and McIntyre ** in last week’s JAMA Health Forum have a new article that looks at how often does a zero premium silver plan change year over year on Healthcare.gov. They looked at 2021 and 2022 data. They found massive amounts of instability.

This study found that turnover of zero-premium plans was quite common, with 93% of HealthCare.gov counties (weighted by enrollment) experiencing at least 1 zero-premium plan in 2021 turning over to nonfree in 2022; 84% of counties experienced turnover of all $0 silver plans from 2021 to 2022. This turnover affected an estimated 1.36 million people with incomes below 150% of FPL.

So what does this mean?

The presence of zero premium plans is a good thing. We know that zero premium plans reduces administrative burden, increase enrollment , and increase retention. We also know that people tend to stick around in the plans that they choose even if there is a better plan available. People have fairly high inertia on choice. The automatic re-enrollment system currently prioritizes placing people in the same plan that they chose last year for this year instead of helping people avoid a bad choice due to changing circumstances. We also know that insurers routinely enter and exit markets.

The American Rescue Plan Act (ARPA) greatly increased the probability that someone would see a zero premium silver plan in 2021 and 2022 by lowering the family contribution to zero for people earning under 150% FPL and non-zero but lower than standard ACA subsidies for everyone else.

In an ARPA world, many people earning under 150% FPL will be qualified for an array of zero premium plans that are comprised of some number of bronze plans and no more than two silver plans. In an ACA world, the same group of people will be potentially exposed to some number of zero premium bronze plans and no more than one zero premium silver plan. These sets can be large over time. However the composition of these sets will vary over time. Sometimes a plan that was a zero premium plan in year one for a particular family is no longer a zero premium plan in year 2. Sometimes it will remain a zero premium plan.

Kong et al found that for silver plans, there is massive rank order instability in just one year. New entrants to markets and insurers like OSCAR, BRIGHT and FRIDAY that are trying to buy market share can and frequently do undercut pricing on the silver plans in order to gain new enrollees. And likely in 2023, there will be another re-ordering. I’m working on a manuscript after this post publishes and I refill my coffee that looks at this problem from a longer perspective.

So if we think that zero premium plans are valuable because they eliminate a form of administrative burden, and if we recognize that inertia is real, we either need to accept a lot of people will be placed into potentially dominated plans with the current automatic re-enrollment system or we will see a lot of one year enrollment that is discontinued because of friction and not real desire.

** As disclosed in the article, I read an initial draft of the paper and gave some feedback. I received nothing for my feedback beyond an entry into the unobserved favor and karma bank that is the fundamental cornerstone of the academic quasi-gift economy. Dr. McIntyre is a friend and we routinely bounce ideas off each other.