From Silver Spam to Silver Gap — APTC Hacks

A Tweep sent me word that Blue Cross and Blue Shield is engaging in a Silver Gap strategy in rural Georgia.

I went to Health Sherpa to look at what is currently being offered in zip code 30503 for a 40 year old non-smoker without subsidy on Exchange.

This zip code has a carrier engaged in a Silver Spam strategy. The #1 Silver plan is from Kaiser Permanante of Georgia and it is priced at $321. The second Silver which sets the subsidy benchmark is also from Kaiser. It is priced at $321 as well. The two plans are both HMO’s attached to the same network. The difference between them is $250 in deductible and a shift between co-insurance and co-pays. In my mind, those are minor benefit configuration tweaks that are merely designed to produce cloned plans that beat the minimal federal rule on “meaningful difference”.

After that, the #3 Silver is at $330 and it was offered by Coventry/Aetna. The plans seemed to be reasonably tightly clustered in price and design which is what we would expect from a reasonably competetive market. This is good for people who are buying with low to no subsidy. It is bad for people who are getting heavily subsidized.

This individual who earns $18,000 per year will pay $62 per month for the #1 Silver and $63 per month for the #2 Silver. These Silvers come with Cost Sharing Reduction subsidies so the value proposition for anyone who is vaguely inclined to think they are sick will keep them in Silver instead of moving to the zero dollar post-subsidy Bronze.

Most of the carriers in this market are pulling out for 2017. Blue Cross and Blue Shield which had a $336 Silver plan which would have cost this individual $80 per month is now offering the #1 and #2 Silvers in the market.

The new 2017 #1 Silver for this individual will be $385 per month. The new benchmark Silver will be $417. That is a $32 gap. The same individual who makes $18,000 per year as a 40 year old will now have a Silver with Cost Sharing Assistance that could cost him $31 per month. This will do two things to the subsidized buyers market. It will bring in a significant number of low income but healthy individuals into the market as $31 a month is a lot easier to find than $62 per month. And almost as importantly, it will increase the subsidy level for Bronze plans for higher income individuals. Someone making $36,000 a year would now have a subsidy of roughly $90 per month. That will make some of the Bronze plans significantly cheaper. These actions will improve the risk pool from this zip code.

The risk pool problem is on the non-subsidized and off-Exchange universes. These price increases will drive some of the healthy individuals away from the marketplace. If there are off-Exchange carriers offering super-narrow and low cost plans which are priced significantly below the 2017 Silver rates and close to 2016 rates, the damage will not be significant. If the pricing is no better than on-Exchange rates, then the off-Exchange market will get significantly sicker and the actuarial value of the coverage bought will decline.

6 replies
  1. 1
    lurker dean says:

    hi richard. good stuff as usual. i wonder if you have any comments on the uwe reinhardt death spiral story on vox. he seems to be fairly rational (or at least not overtly partisan), so his prediction is a bit worrying.

  2. 2

    @lurker dean: Uwe’s concern is that Congress would not appropriate funds for the APTC. And from there, that leads to a death spiral. However, on Exchange, APTC is an automatic appropriation so we don’t have to worry about that as long as there is one Democratic held veto point (House, Senate, White House). Off-Exchange is another matter but we’re not seeing that yet. The question will be total enrollment — if it stays flat or goes up in 2017, we’re ok, if it declines, we’re in trouble off-Exchange.

  3. 3
    lurker dean says:

    Thanks Richard, that makes sense. My brother sent me that uwe article so it’s nice to have your response to help explain the issue, which wasn’t clear to me either.

  4. 4
    KlareCole says:

    Thanks, Richard, for the info. There is such detail to understand about the ACA. Good to hear a little good news for it’s stability.

  5. 5
    MikeS says:

    So Richard, what it the fix for this? Is it administrative change to clarify “meaningful difference” or does it need congressional action?

  6. 6

    @MikeS: That’s tomorrow’s post that I wrote last night :)

    But you get it on #1 — tougher meaningful difference regulation makes Silver Spamming a very thin needle to thread.

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