Yesterday, we briefly talked about Delaware receiving approval for a 1332 reinsurance waiver. This waiver will reduce non-subsidized premiums. It will make insurance for folks earning above 400% FPL more affordable. State regulators expect a 20% decline in premiums. Some of that decline is from the state funding and some of it is from reduced federal spending on premium subsidies for the 138-400 percent FPL population. Reinsurance, all else being equal, helps the unsubsidized and hurts the subsidized.
However, Delaware has an opportunity to both help the non-subsidized and subsidized. In 2019, the state is a monopoly market. The single insurer has three silver plans offered. The 2019 spread between the least expensive silver and the benchmark silver is $25 for a single, non-smoking 40 year old. The spread between the most expensive silver plan and the cheapest silver plan is $55. Next year, assuming a uniform 20% reduction in premium and no other changes, the relevant spreads are $20 and $44.
This is an opportunity.
| State | County | Metal Level | Issuer Name | Plan ID | 2019 Premium | 2019 Premium Spread | Projected 2020 Premium | Projected Premium Spread | Included for Max Spread | Projected Max Spread |
| DE | Kent | Bronze | Highmark BCBSD Inc. | 76168DE0410018 | $449.00 | -$235 | $359 | -$188 | Yes | -$212 |
| DE | Kent | Expanded Bronze | Highmark BCBSD Inc. | 76168DE0410010 | $478.00 | -$206 | $382 | -$165 | Yes | -$189 |
| DE | Kent | Silver | Highmark BCBSD Inc. | 76168DE0420004 | $659.00 | -$25 | $527 | -$20 | Yes | -$44 |
| DE | Kent | Gold | Highmark BCBSD Inc. | 76168DE0410012 | $672.00 | -$12 | $538 | -$10 | Yes | -$34 |
| DE | Kent | Silver | Highmark BCBSD Inc. | 76168DE0410013 | $684.00 | $0 | $547 | $0 | No | |
| DE | Kent | Silver | Highmark BCBSD Inc. | 76168DE0410020 | $714.00 | $30 | $571 | $24 | Yes | $0 |
| DE | Kent | Platinum | Highmark BCBSD Inc. | 76168DE0410021 | $780.00 | $96 | $624 | $77 | Yes | $53 |
If all else is being held equal, Highmark and state regulators could continue to increase affordability for the unsubsidized population while also removing most of the increased net premiums paid by elements of the subsidized population. The way to do this would be for Highmark to not offerthe middle priced silver plan that is the current benchmark. Doing that would make the least expensive silver plan significantly cheaper for subsidized buyers and the sole gold plan slightly less expensive in 2020 for subsidized buyers than it was in 2019. Bronze buyers would still be worse off if the buyers earned between 200 to 400 percent FPL.
There are several states and sub-state markets where there is a monopoly insurer offering more than two silver plans where spreads can be increased to increase affordability for the subsidized. When these policies are combined with reinsurance, it is almost a no lose situation for all people who are looking to buy insurance on the exchanges.
On the Road and In Your Backyard
Bra
David
On net 2019 vs 20, however, Bronze still cheaper for 2-4x FPL, correct?
Brad
Chris Johnson
I would think it could only be a monopoly, or a market, but not both at the same time.
?
Another Scott
Interesting.
You’ve probably discussed this before, but (briefly) why would a company want to go through the hassle of having 3 similar plans when 2 would be more compelling for customers? Especially if few or no other companies are competing for the same customers? (I can see the benefits of market segmentation in selling, say, cell phones or blue jeans, but not in selling closely similar insurance policies. Changing the stitching or colors is cheap, changing the plans and having more people evaluate claims, appeals, etc., is expensive.)
Thanks.
Cheers,
Scott.
David Anderson
@Bra: Bronze would still be the cheapest premium. Depending on benefit design and its interaction with actual healthcare utilization, it may or may not be cheaper on net than silver or gold.
However, someone who earns 250% FPL this year and is in the cheapest Bronze will see a premium increase for any choice they make next year.
David Anderson
@Another Scott: That is a damn good question. I will reply at length tomorrow.
The short version is YOLO.
Some times insurers think that there will be competition that does not appear but they had already done all the plumbing work. Other times, they think that the different benefit designs will be very attractive to very different sub-segments. Other times, the P&L owner is scared shitless of taking away options and does not intrinsically understand the actual dynamics of the subsidized market.