Illinois implementing premium alignment for the ACA

The Illinois state Senate just passed HB-5395 and sending it to the Governor for his signature.  There are a lot of insurance provisions in the bill.  But the one I want to highlight is the following:

(c-5) Unless prohibited under federal law, for plan year 2026 and thereafter, each insurer proposing to offer a qualified health plan issued in the individual market through the Illinois Health Benefits Exchange must incorporate the following approach in its rate filing under this Section: (1) The rate filing must apply a cost-sharing reduction defunding adjustment factor within a range that: (A) is uniform across all insurers; (B) is consistent with the total adjustment expected to be needed to cover actual cost-sharing reduction costs across all silver plans on the Illinois Health Benefits Exchange statewide, provided that such costs are calculated assuming utilization by the State’s full individual-market risk pool; and (C) assumes that the only on-Exchange silver plans that will be purchased are the 87% and 94% cost-sharing reduction variations. (2) The rate filing must apply an induced demand factor based on the following formula: (Plan Actuarial Value) 2 – (Plan Actuarial Value) + 1.24. In the annual notice to insurers described in subsection (c), the Department must include the specific numerical range calculated for the applicable plan year under paragraph (1) of this subsection (c-5) and the formula in paragraph (2) of this subsection (c-5).

What the hell does that mean?

It means that the Not Silver health insurance plans for both subsidized and non-subsidized Illinoisans will be cheaper in 2026. Silver plan premiums will be calculated on the basis of blended CSR actuarial value so they will be priced as if they are near Platinum plans instead of being priced as if they were near Gold plans. Bronze and Gold plans get a bit cheaper (see Aims 2 and 3 of my dissertation) and we should expect substantial enrollment boosts for folks earning over 200% FPL.

This policy is known as “premium alignment.” Several states, including Texas have adapted variants of it. My early research shows that it is not having big market effects but big enrollment effects.