Silver to Gold ratio and lower deductibles

Stan Dorn in today’s Health Affairs Forefront highlights the action that New Mexico has taken to reduce underinsurance in their ACA marketplace. Underinsurance occurs when the cost sharing is so high that the policy does not cover much short of getting hit by a meteor or a cancer diagnosis. New Mexico has a state policy that changes the pricing regulation so that Gold plans (covering roughly 80% of costs) are priced below Silverloaded Silver plans (covering roughly 70% of costs).

Instead, the changes resulted from the insurance regulator requiring consistent and rigorous adherence to Affordable Care Act (ACA) insurance rating rules. Previously, insurers in New Mexico, like those in most other states, had engaged in de facto “medical underwriting,” by varying plan premiums based on the characteristics of the people who were expected to enroll in each metal-tier level. New Mexico officials prohibited this approach, instead requiring each metal level’s premium to reflect the statewide characteristics of all individual-market enrollees. The resulting drop in gold premiums, while increased silver-tier premiums raised advance premium tax credit (APTC) amounts, let many consumers save money on net premiums while lowering out-of-pocket cost sharing by moving to relatively generous gold-tier plans. Several other states are already moving in New Mexico’s direction, and many more should consider following suit…

To ensure that “silver premiums will reflect AV parity rather than a varying mix of AVs from subjective projections of different CSR variant distributions,” OSI instructed all carriers to assume a constant, statewide distribution of silver QHP enrollment among high-AV variants. As a result, silver QHPs were priced based on claims costs 44 percent higher than those in baseline silver coverage with 70 percent AV.

And it worked.

Average actuarial value in the New Mexico market increased significantly. There are some concerns about risk adjustment and within metal level variations between insurers that I am leery above. But several states, including Texas and Pennsylvania either have already or will be going down this pathway in 2022 and 2023. This is a regulatory action that state or federal regulators can take on how the single risk pool requirement is interpreted and thus use Silverloading as a means of creating a significantly richer benefit for more Americans as well as creating more zero premium Bronze plans.