Tuesday, August 01, 2017

Peter Lee to HHS: Marketing makes the risk pool

Covered California, the golden state's ACA marketplace, released preliminary health plan rates for 2018 today. In a marketplace supported by political stability, the top line would be nothing to write home about -- a 12.5% average weighted increase, discounting a surcharge to be added to silver plans if the Trump administration or Congress does not guarantee CSR payments through 2018. 

But given the "unprecedented uncertainty" generated by active administration sabotage and a seven- month effort to repeal core parts of the ACA, those results are impressive. CoveredCA further claims that "If a consumer shops and switches to the lowest-priced plan in their same metal tier, they can reduce their 2018 rate change to an average increase of less than 3.3 percent." More on that in a bit.

In a telephone press conference, CoveredCA's executive director Peter Lee made a striking claim that speaks not only to the current market uncertainty but to the effects of seven years of unrelenting sabotage of the ACA marketplace by Republican senators, congressional reps, governors, state legislators and insurance commissioners. Asked how central marketing would be to enrollment in the coming year, Lee said (paraphrasing here):
If you don't sell, those who knock on the door are sick people.
Lee went on to cite a stat highlighted in the rate report: CoveredCA's average risk score (measuring the medical care usage of enrollees) was 20 percent lower in 2016 than that of the federal marketplace, which covered 39 states in 2017. That's not entirely or even primarily due to marketing: California is a relatively wealthy state, and since it embraced the ACA Medicaid expansion, eligibility for marketplace subsidies begins at a higher income level (138% of the Federal Poverty Level rather than 100%)  than in the states that refused to implement the expansion. 18 of 19 refusenik states use the federal marketplace, healthcare.gov,  and over a quarter of enrollees in the hc.gov states have incomes in the 100-138% FPL range. Those low income enrollees are sicker on average than higher income enrollees; a CMS study estimated that refusal to expand Medicaid raised premiums an average of 7%  in the refusenik states.

Still, CoveredCA's active outreach, coupled with active management of its insurance market, has doubtless had a beneficial effect on its risk pool and so on healthcare costs. That's in marked contrast not only to the many states using the federal exchange that since the marketplace's 2014 launch have declined to do active outreach or actively manage their insurance markets, but to a Trump administration that cut off marketing as soon as it took office, in the last week of 2017's open enrollment; spends marketing funds to denigrate rather than, er, market, the products on offer; buries enrollment information on its public-facing websites;  signals that the individual mandate will not be actively enforced -- and most importantly, threatens constantly to cut off federal reimbursement for the Cost Sharing Reduction subsidies that insurers in the ACA marketplace must offer to enrollees whose income qualifies them, thereby raising and maintaining the specter of total market collapse.

In the face of the Trump administration's constant threats to cut off CSR payments, the CoveredCaA has been admirably proactive in shielding prospective enrollees from the destabilizing effects. CoveredCA instructed insurers to submit dual rate requests for silver plans sold on the exchange: rates with and without the CSR tab picked up by the federal government. Today's rate report reflects those dual filings. Moreover, CoveredCA is not only going out of its way to emphasize that subsidized enrollees are shielded from the rate hikes (with or without the "TrumpTax," as Charles Gaba dubs the pricing in of CSR uncertainty) by increased subsidies, but to actively encourage insurers and unsubsidized buyers to do business off-exchange, where silver rates will not include the TrumpTax:
o... Covered California is directing the health plans to offer a virtually identical Silver product off the exchange that does not include the CSR surcharge. These policies have been critical to giving health plans the certainty they need to participate in California’s individual market in 2018. They will also protect consumers by applying the CSR surcharge only to Silver-tier plans, where consumers will receive increased federal subsidies. Consumers enrolled in Bronze, Gold and Platinum plans will not be directly affected.

o While subsidized consumers at the Silver tier would see an increase in the gross cost of their premiums, they will also see an increase in the amount of financial assistance they receive in the form of a larger Advanced Premium Tax Credit (APTC). The increased tax credit will offset the CSR surcharge for most Silver-tier consumers and increase the amount of APTC that can be applied to purchasing other tiers for consumers selecting Bronze, Gold and Platinum plans.

o Covered California will conduct extensive outreach with unsubsidized Covered California will conduct extensive outreach with unsubsidized consumers, both those with a health plan through Covered California and those who enroll directly through a health insurance company off the exchange. Covered California looks forward to working with its contracted health plans, insurance agents and other enrollers to make sure consumers understand that they do not need to pay the CSR surcharge. For those enrolled through Covered California, their options include moving to a Bronze, Gold or Platinum product — without the CSR surcharge — or moving to the off-exchange Silver product that does not include a CSR surcharge.
Aside from the inevitable global effects of political uncertainty, these measures hold prospective enrollees harmless from the effects of a cutoff of federal CSR reimbursements. For the CSR-eligible, nothing changes (a higher premium is offset by a higher subsidy); for those eligible for premium tax credits but not CSR, there's a windfall, as both bronze and gold plans will be more affordable with a subsidy adjusted to cover inflated silver premiums; and for the unsubsidized, off-exchange silver should theoretically be unaffected by the CSR cutoff.

I did find one claim in the rate report somewhat anomalous: that enrollees can avoid almost the whole effect of premium hikes by selecting the cheapest plan at the metal level in which they're currently enrolled. In each rating area, the average hike for the cheapest silver and bronze plans is much higher than the claimed average increase for those who switch to the cheapest option. To take an extreme example, here is Rating Area 16, covering part of LA:


Here's what I suspect is going on here. That weighted rate change for plan switchers includes subsidized enrollees (82% of the total) and unsubsidized -- and does not include off-exchange enrollees (who are in the same risk pool). The subsidized pay less if they were not in the cheapest plan last year and they switch this year -- that is, if the cheapest plan is significantly cheaper than the benchmark (second cheapest), which determines the subsidy. Those who were in the cheapest plan in their metal level last year and switch to this year's cheapest may pay more or less, depending on how the difference between cheapest and benchmark compares in the two years. The (small) average weighted increase is almost entirely accounted for by the unsubsidized -- 18% of the market -- who may well experience steep increases.  That goes as well for the unsubsidized who buy off-exchange.

In any case, if the ACA is not repealed or legislatively disfigured, the California marketplace at least should weather the storm.

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