New Mexico has released their ACA rates for 2018. I looked at their region 2 non-smoker rates and noticed something unusual. The four different insurers have two different means of loading CSR costs into their baseline rate structure. Christus, Health Care Services Corporation (a Blue) and the New Mexico Health Connections, a co-op, all loaded any CSR uncertainty into the general rate structure. Silver plans were always less expensive than the Gold plans that each company offered.
Molina did something different. They put all of their CSR costs and placed it directly into the Silver plan. This changed the order of their relative pricing. Molina’s pricing order was Bronze, Gold and then Silver. For a 40 year old, Molina’s Gold plan is $85 less expensive than the benchmark Silver plan offered by HCSC. The Molina Gold plan is priced like it is everyone else’s Bronze plans. Molina’s Bronze plan is priced $158 less than the benchmark Silver.
What does this mean?
First, from a technical level, it means that at least some states are allowing anything to go. I was surprised when I saw that New Mexico approved two very different rate structures and solutions to the CSR problem. I naively thought that states would have chosen one approach.
Secondly, the market is heavily tilted towards Molina getting almost all of the healthy people enrolled. For people who earn under 150% Federal Poverty Line (FPL), they qualify for a Silver 94% actuarial value Cost Sharing Reduction (CSR) plan. Molina is price competitive with the rest of the silver plans. However only the people who strongly believe they will be sick will stay in CSR plans. Someone making $17,000 a year can either pay $47 for the least expensive CSR Silver or $1 for the Molina gold plan. Healthier individuals may gamble that the $500 a year in premiums will be a net savings over the difference in deductible exposure.
People who earn between 150% and 200% FPL are eligible to buy a CSR 87% AV Silver. An individual making $19,000 a year could pay roughly $70 a month for a plan with a $1200 deductible or $1 a month for a Molina Gold plan with perhaps a $2,000 deductible. The price differential means almost everyone who has any chance of not being admitted to the hospital in the first week of January is better off (network/provider relationships excluded) by moving to the Molina Gold plan.
After that, Molina’s Gold plan is priced like everyone else’s Bronze plans while the Molina Bronze is $75 less than the Molina Gold plan for a 40 year old. Even people who qualify for CSR 73% AV Silver are significantly better off by moving to Molina Gold unless they strongly value their current relationships with their docs as the Gold plan is less expensive and will have lower out of pocket costs.
The only markets which will be competitive for the remaining insurers are people earning under 150% FPL and who want the CSR benefit. Molina will clean house. Off Exchange, Molina will clean house among anyone who is not intensely loyal to their doctors. On net, Molina will have incredible risk adjustment outflows but very large membership due to being the only insurer using a Silver load strategy.
I think the Silver Load strategy under most conditions is a dominating strategy. If anyone else attempts to use other strategies without incredible baseline price advantages, they are giving away membership. States that allow mixed strategies will see significant insurer exits in 2019 as the non-Silver Load insurers will have lost money in 2018.