We assume that gravity works. We assume that when we cut a coconut from a tree it will fall to the ground and bonk a monkey on their furry little head. We should be shocked when a coconut rises from the ground and punches a coconut harvester in the face thirty feet in the air. ** When our analysis shows contragravity coconuts we either have something wicked cool or we messed up our analysis.
Affordability in the ACA is like contragravity coconuts.
Virginia has a reinsurance program for their ACA market. Reinsurance adds some non-premium funds to pay for some portion of claims. Since premiums typically are expected to cover both claims and administrative overhead and profit, an outside source of money means premiums will decrease. Sixteen states, including Virginia, have an ACA reinsurance program. The goal is to make ACA plans more affordable because the premiums go down.
However (and this is a chunk of a paper I have under review with two great co-authors) the ACA is WEIRD. The key thing for most ACA buyers is not the premium level which is what the reinsurance program targets to drop, but the difference in premium between the plan that an enrollee chooses and the benchmark plan which is the 2nd cheapest silver plan. Most ACA buyers have always been spread sensitive rather than price level sensitive.
The state of Virginia may be pausing their reinsurance program because of an appropriations fight in the legislature:
The analysis projects individual coverage would rise by 28.5% in 2024, after the reinsurance program the state financed — in tandem with a much larger federal sum — cut this year’s premium rates an average of 17.2% from 2022’s average premium rates.
Wow this sounds bad!
IT IS CONTRAGRAVITY COCONUT TIME!
Higher price levels are great for most on Marketplace ACA enrollees.
WHAT! Higher prices are good?
Yeah, now let’s get weird.
ACA Affordability and Contragravity CoconutsPost + Comments (8)