Wyden Waiver: New CSR attachment points

The Wyden Waiver (or Section 1332 waivers or State Innovation Waivers) are part of the Affordable Care Act.  A Wyden Waiver allows states to revamp their health insurance system in whatever way they want as long as the new model is no worse than deficit neutral from the federal perspective, and it is no worse than what was happening in the state via the Exchange.  I am very curious about these, as I think this is the next big area of interesting policy making in both Blue and Red states if the Supreme Court correctly laughs at the plaintiffs in King.

Andrew Sprung at Xpostfactoid has been pushing hard on the issue of Cost Sharing Reduction (CSR) subsidies that are attached to Silver plans.  CSR reduces the out of pocket maximum of a Silver plan depending on income.  People making between 100% and 150% Federal Poverty Level (FPL) have CSRs that make their Silver plans into Platinum plus plans (94% Actuarial value (AV)), while people making between 150.1% FPL to 200% FPL have CSR that transform Silver into Gold Plus (87% AV), while people making between 200.1% FPL to 250% FPL see their Silver plans get a small bump to 73% FPL.  Andrew has long argued that Exchange design has played a significant role in the degree of Silver with CSR bought by people making under 200% FPL.  I agree with his evidence.

Here is where a Blue State Wyden waiver could come into play to expand high AV coverage to more people.    

Right now, a health plan offers five banded products at five price points (Catastrophic, Bronze, Silver, Gold and Platinum) with eight benefit configurations per base plan.  Those benefit configurations are Catastrophic, Bronze, Silver, Silver 94% AV, Silver 87% AV, Silver 73% AV, Gold and Platinum.  When someone searches on Exchange, they see the premium and a subsidy calculated as function of their family income and the price of the second Silver.   If a person qualifies for CSR, they don’t see the cost of those subsidies reflected in their purchasing information.  However insurance companies know exactly how much they expect to get from a 28 year old at 152% FPL from the combination of cash premium, federal premium subsidy, and cost sharing reduction subsidies.  And the insurer knows exactly the revenue they expect from any other age and income combination.  It is two distinct invoices derived from the same calculation.

Currently, CSR is only attached to Silver plans.  What if states decided to change their subsidy attachment point as part of the Wyden Waiver?

If a state decided to look at the total cost of providing the second lowest Silver in determining subsidy levels instead of just looking at the second lowest premium for Silver, average actuarial value would increase as choice space increases.  The change in subsidy formula would be the sum of premium plus CSR subsidy cost minus the individual contribution = subsidy.

Let’s work through an example.  A 35 year old individual making 140% FPL in zip  code 90210 qualifies for a CSR Silver at $34 per month and a $200 premium tax credit.  The cost sharing subsidy bumps the actuarial value from 70% to 94%.   The same individual qualifies for a Platinum plan at $98 per month.  The Platinum plan covers 90% AV.  The incremental bump in AV from 70% to 90% costs $64, so the incremental bump from 90% to 94% AV is probably another $15.  The total cost to the government for this person to buy the CSR Silver is about $280 per month.  The total cost is $314 per month.

Inserting total bundled cost of a policy in place of premium into the subsidy formula would re-order the offer a much wider choice set.  This same individual could get a CSR Silver at 94% AV for $34 per month, a Platinum at 90% AV for $20 per month, CSR Silver 87% for $14 per month, Gold at 80% AV for almost nothing in monthly premiums.  Straight Silver and Bronze plans would almost not be worth wasting time looking at.

Plumbing this type of dynamic premium subsidy attachment is fairly straightforward.  Insurers already have projections what each age band for each product produces in cost sharing subsidy revenue, so new reference tables would be needed, but the data is already present.  It would increase the average expected actuarial value of Exchange coverage, especially for the people who can least handle a $3,200 surprise bill while also increasing choices.  It might make sense for a relatively healthy 35 year old making 140% FPL ($1,375/month) to accept a little more risk of an $800 deductible instead of a $350 deductible to reduce premium expenses by $22.  At the same time, someone who is in poorer health and qualifies for an 87% AV CSR Silver plan could decide the bumping up to a 90% Platinum for an additional $17 per month might be a good choice.

 






14 replies
  1. 1
    Larry Levine says:

    Richard,

    I follow your posts and have learned a lot about health insurance from your insider perspective. However, I have a problem with these discussions about the pros and cons of various metal plans from a consumer perspective. Regardless of choosing in network providers, we are constantly hit with surprise EOBs for out of network providers we didn’t have a choice in selecting (e.g., radiologists, anesthesiologists, etc.) and which the provider did not disclose in advance when they looked at our insurance card and said we were “covered.” These charges are outside our regular deductible and are not apparently capped by ACA. As far as I know only NY state has passed any legislation to deal with this issue. BTW – ours is not a narrow network and we selected the plan after checking that our key existing doctors were in network. In the face of this, your explanation of possible Wyden waiver improvements seems irrelevant to the average person trying to make an informed choice.

  2. 2
    Steeplejack says:

    @Richard Mayhew:

    Another good, informative post. I have nothing to add, just didn’t want to see it sitting here lonely with no comments.

  3. 3
    raven says:

    @Steeplejack: roger that

  4. 4
    Violet says:

    Hi, Richard, thanks again for a great post. You are so knowledgeable on this issue, I’ve wondered if anyone in the administration has contacted you to work with them or some sort of PR to explain the process to people. You’re an incredible resource.

    I was also wondering if there is something available that helps people assess their current plan if it’s employer-based. I mean to figure out what level it is–gold, silver, bronze, whatever. In most workplaces you get what you get or maybe you have a couple of choices. But I haven’t seen them branded “Gold plan,” “Silver plan” so it’s kind of hard to do an apples-to-apples comparison.

  5. 5
    C.V. Danes says:

    The problem with this is that it still does nothing for those who have employer-provided healthcare. My employer, for example, just converted everyone to high-deductible plans where I’ve seen my out-of-pocket costs literally more than quadruple. Yet, Obamacare is still more expensive without the rebates, since I would have to cover the full, unsubsidized cost of the plan.

    Many people have seen their healthcare situation improve with the enactment of the ACA. Which is great. Unfortunately, most of the people at my company, and probably many others, have seen their healthcare continue to get worse. It would be great if it had opened up competition in the employer-based market.

  6. 6
    gvg says:

    Yes Richard. I read all your posts but don’t comment because it’s all learning on my part.

    I do think it would be interesting to people to see their employer plans compared. I have no complaints about mine but I paid my premiums for about 19 years with not much happening, then I had a serious cancer and found out that yes my insurance was actually worth it. They didn’t hassle me or deny payment but once which was apparently just a delay because even that just cleared up without my making any calls when I was too sick to want to deal with making a system work. Also found out my employer was good too. No problems with family medical leave or paper work from them either. There is no way to be sure though until you have to use it. State of Florida Av med if anyone needs to know. University of Florida employer. I also had over a 1000 hrs sick and vacation time accrued before I got sick.

    All the while I was sick I thought about other people without that insurance, fair employer, and years of good health and built up leave were all to often screwed. I dealt with many parents who weren’t as lucky and what it did to the family finances. First year the petition because of medical bills, 2nd year because they lost their job…..I had no energy to deal with anything like a buracracy either.

  7. 7
    Violet says:

    @C.V. Danes:

    It would be great if it had opened up competition in the employer-based market.

    It sure would. It would also be great if there was a way to compare employer-based plans with those on the exchanges. And then petition to get a subsidy or whatever if you can find much better insurance on the exchange but aren’t eligible for the subsidy because of your employer plan.

  8. 8
    Eric NNy says:

    Thanks Richard. My head hurts. Single pAyer would have to be simpler no? One can always dream…..

  9. 9
    jnfr says:

    Joining in the thanks for your excellent posts here.

  10. 10
    gogol's wife says:

    Yes, thank you for your posts.

    Now, tell me — is it worth watching Oklahoma Kid (Bogey and Cagney in the Wild West) and China Seas (Gable and Harlow) tonight — either or both?

    I know it has nothing to do with health care.

  11. 11
    Richard Mayhew says:

    @Larry Levine: Larry, I agree, the invisible providers (ie providers you have no ability to make an informed choice to go see such as anesthesiologists, emergency room docs, pathologists, radiologists etc) that are magically out of network while working at in-network facilities is a massive problem. There was a really good article from the New York Times last September that highlighted this problem:

    http://www.nytimes.com/2014/09.....bills.html

    This is something the state regulators have to manage.

  12. 12

    […] Valued commenter,  Violet,   asked a really good question earlier today: […]

  13. 13

    @Larry Levine:

    It may be worth it to file a complaint against your insurer with both your state department of insurance and the Feds at Healthcare.gov. If they don’t hear from consumers that they’re pissed about these shenanigans, they won’t do anything to fix it. Sending letters to your state and congressional reps and senators is a good idea, too. Basically, complain to anyone remotely involved in regulating health insurance in your state. If other people tell you they’ve had the same problem, urge them to file an official complaint as well.

  14. 14
    Larry Levine says:

    @Mnemosyne (iPhone):
    I know it’s easy to get mad at the insurance companies, but the providers also bear some responsibility. We had a case where we needed to see an in-network dermatologist (skin cancer removal). Tried to make an appointment and they said he was out for a few weeks but we could see someone else at the same facility. They took our standard in network co-pay when we arrived and then found out this second dermatologist was out-of-network when we saw the EOB. Turns out different doctors at the same clinic may be in or out of specific insurance networks. Another expensive lesson.

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