On the whole I want as many insurers and states to engage in a Silver Gap strategies. However there are situations where it can be used offensively to bugger and beggar competitors. Let’s walk though an example.
The scenario needs one insurer that actually wants to cover people in a county. It also needs an insurer that for political/strategic/publicity reasons wants to be on Exchange while selling as few policies as possible. I can think of at least one situation where that is an accurate assessment of the pricing configuration. The way that a company stays on Exchange but does not sell many policies is to offer a plan design that meets minimum requirements but is a horrendous value proposition while being priced very high compared to its competing plans.
Silver Spamming strategies by the active insurer enable this sit out and wait strategy by the passive/avoiding insurer. Mild Silver Gapping strategies where the active carrier offers a low price narrow network Silver and then a broader network plan priced 12% higher as the benchmark Silver when the passive Silver is priced 80% above the benchmark will also allow for a passive presence with low enrollment.
However if the active carrier decides that it wants to screw its competitor it can by embracing an extreme Silver Gap strategy. It would offer its low cost narrow network plan only. All of the sudden, the passive carrier’s Silver is now the #2 Benchmark Silver. The #1 Silver by the active carrier has extremely low post-premium prices so it will suck in all of the healthy risk in the market. The plan that was supposed to be a placeholder gets significant membership that the offering carrier was not anticipating and it is higher risk membership.
So in odd corner cases like this, the Silver Gap strategy can be deployed offensively.