Misunderstanding the No CSR World

I want to highlight a story that I think reports a fundamental mis-analysis of the individual health insurance policy world where there are no more Cost Sharing Reduction subsidies being paid.

Now the piece that has me scratching my head is from the Washington Examiner and a story about Senator Johnson (R-WI) willingness to appropriate CSR in exchange for policy concessions from Democrats:

Johnson told the Washington Examiner Friday he hopes to put out legislative text sometime next week on a proposal that funds insurer payments in exchange for reforms to Obamacare. His proposal includes expanding the duration of short-term plans and expanding health savings accounts….

Johnson said he is talking with some House Republicans to get their support for a deal. This is key because Republicans have derided the CSR payments as “bailouts.”…”I hope this would inform them what type of deal the Senate would have to come to with any hope of passing the House,” he said. “People need to realize there is a strong resistance to doing this among conservatives.”

Johnson also wants to let all Americans buy catastrophic plans, not just those under 30 years old as is the practice now.

He seems to think that Democrats need to offer policy concessions to protect the individual market. I think he is wrong.


At least forty states have taken steps to protect all on-Exchange buyers from CSR costs in 2018. The Congressional Budget Office predicts that all states will converge to local regulations that shift the entire cost of CSR to only Silver plans thus lifting the relative price point of the subsidized Benchmark plan. This higher premium for the Benchmark plan means that Bronze and Gold plans are significantly cheaper for subsidized buyers. Insurers will also quickly figure out that they need to offer unique Off-Exchange only Silver plans to protect the non-subsidized buyers.

The CBO also projects that not paying CSRs and having insurers cover their CSR costs through higher premiums will lead the federal government to spend an additional $194 billion dollars over a decade. Some of this increased cost is due to higher enrollment but most of the increased costs is not tied to increased claims costs. It is a shift from a narrowly structured, tightly means tested subsidy to a more broadly structured, loosely means tested subsidy. This gives states a lot of flexibility. Steven Chen at Health Affairs outlined how California could use CSR uncertainty to fund aggressive 1332 waivers.

These are acceptable long term outcomes for Democrats and liberals. More people get covered. If there are no 1332 waivers, the coverage expansion is expensive and inefficient. If states use 1332 waivers to subsidize off-Exchange individuals with a reinsurance program, more people will get covered and the spending will be more efficient. The transitional year of 2018 will be a scramble but from a political perspective, this is acceptable for Democrats as the public believes that the Republican party should be responsible for health care.

Inaction means, over the long run, more people will get low(er) out of pocket expenses/lower deductible insurance for lower premiums through structured, subsidized exchanges. I think that after a year or two, the expected social contract of what “acceptable” publicly subsidized insurance will move to Gold instead of Silver plans. Lower cost Gold plans and very affordable Bronze plans will increase long run uptake of PPACA insurance among people who earn between 200 percent and 400 percent FPL. This is a group with more political power than Medicaid recipients and Medicaid recipients were able to successfully mobilize to defend their interest this year. Appropriating CSR and thus maintaining the status quo is closer to conservative policy and ideological preferences than resetting the effective benchmark to Gold.

So as I argued in August, CSR inertia favors Democratic policy preferences. Senator Johnson does not realize that the ground has shifted.

All of this CSR stuff is convoluted, complex, unneccessary and weird in its implications and end results.

NB: Finally, I don’t understand the mechanical impact of expanding Catastrophic plans to everyone. Catastrophic plans are 57% AV plans that can be sold to people under the age of 30 or who otherwise cannot buy an ACA plan. Catastrophic plans are part of the shared risk adjustment process but they are not part of the common index rate. Catastrophic plans have their own risk adjustment but interact with the common index rate. Most counties will have a less expensive Catastrophic plan than the least expensive Bronze plan because the Catastrophic plan is covering a healthier group of people right now. However if Catastrophic is opened up to everyone, it is just a slightly funkily designed Bronze plan with no pricing advantage. If the conservative goal is to offer a lower premium but higher out of pocket plan, then they should really go to the Copper design at 50% actuarial value. This is a minor piece of mechanical confusion on my part.






44 replies
  1. 1
    Baud says:

    The other political problem is that you can’t negotiate with terrorists. Trump shouldn’t be encouraged to do harm in order to gain bargaining leverage against Democrats.

  2. 2

    @Baud: He has no leverage, that is the thing.

    There was leverage in January-August, but once September was paid, the leverage mostly disappeared.

  3. 3
    Joey Maloney says:

    If you factor into your calculations that Ron Johnson is dumb as a bag of hammers (from which all the smart hammers have been removed), does that help reduce your confusion?

  4. 4
    Steeplejack says:

    @Mayhew:

    Editing note, first line:

    I want to highlight astories a story [. . .].

  5. 5
    Wayne says:

    There was an article in the Miami Herald sunday with a headline “experts: fla. wins after trump scraps subsidies”.
    It said something about a financial windfall for insurers and better coverage options.
    Living in Florida, is that true or BS? Thanks.

  6. 6

    I think we’ve seen that Democrats are not going to compromise between spaghetti and tire rims and anthrax. They’re not going to strengthen Obamacare in one way, and weaken it in others.

  7. 7
  8. 8
    low-tech cyclist says:

    And time to bug your Congresscritters about CHIP again. It’s been nonexistent for two weeks – time to bring it back to life.

  9. 9
    Brent says:

    @Wayne: Insurers who assumed that the CSR would not be paid, when setting their pricing, stand to gain from this move. That is what has happened in Florida.

  10. 10
    David Anderson says:

    @Wayne: true

  11. 11

    @Steeplejack: Thank you; when I wrote this over the weekend, I was originally going to look at two stories but cut the other one from the piece as it was not valuable enough to mention.

  12. 12
    Wayne says:

    Thanks everyone.

  13. 13
    Lee says:

    @Wayne:

    Yeah this is really complicated and I think I finally figured it out.

    Insurers in Florida assumed that the CSR would not be paid. So they set the price of the standard policy at (previous year +45%). This ‘standard price’ sets the amounts for all the premium subsidies (as opposed to the cost sharing subsidies). So the government ends up spending more money in the long term (sending more money to FL & other states).

    From the article:

    Over the next decade, the CBO reported, the federal government would save $118 billion by canceling the cost-sharing subsidies — but spend an additional $365 billion for the increase in premium subsidies.

  14. 14
    Snarki, child of Loki says:

    Well, there’s always the GOP FREEDUM Catastrophic Healthcare Coverage.

    Here’s how it works: for a low, low monthly premium, when you get that catastrophic fatal diagnosis (which you will get billed 100% for, but won’t have to pay, read on!), you get:
    1. MASSIVE amounts of insanely powerful firearms,
    B. ENORMOUS amounts of ammo for those firearms,
    thirdly, A MAP to Trump supporters in your area.

    Guaranteed admission to Valhalla afterwards, also, too.

  15. 15
    MomSense says:

    @low-tech cyclist:

    9 million children cut off from their health insurance. It’s infuriating. So far I’ve had a thoughtful response from Sen. King but I haven’t heard from the other two yet. UGH

  16. 16
    Boatboy_srq says:

    Given Senator Johnson’s demonstrated aptitude and ability to grasp complex issues, you could leave it at “Senator Johnson does not understand.”

  17. 17
    Ransom says:

    Did Br’er Rabbit just get thrown in?

  18. 18
    Fake Irishman says:

    @Lee:

    Right. The other thing that is happening in many states — as David, Charles Gaba and Louise Norris have been working to quantify — is that all the price increases are getting pushed into on-exchange Silver plans. Since the subsidy is linked to the second-lowest Silver plan, those subsidies are going to go way up, the effective price of Gold and Platinum plans is about to go way down for people who qualify for subsidies in these states — this will be especially beneficial for people who earn between 200 and 400 percent of the poverty line, who qualify for minimal or no CSR subsidies, but do get their premium payments capped. These middle class people are going to be able to buy a much better plan for lower rates.

  19. 19
    Another Scott says:

    @MomSense: According to TheHill, at least as I read it, the program is still going, but funding is running out (at different rates) to the states (from October 1):

    Congress was on track to miss the deadline earlier this week, and though the Senate released a bipartisan, five-year bill to reauthorize the program, a vote wasn’t scheduled.

    The House Democratic Caucus chairman, Rep. Joe Crowley (D-N.Y.), blamed Republicans for missing the deadline in a tweet on Sunday and said CHIP should be a priority for Congress.

    States won’t run out of CHIP funding in the immediate future. Three states and Washington, D.C., are expected to run out of money by December, and the majority of states will run out by March, according to a July report from the Medicaid and CHIP Payment and Access Commission.

    Another study by the Kaiser Family Foundation found that 10 states would run out money by the end of the year.

    The deadline to reauthorize the program passed after Senate Republicans spent much of the last few weeks pushing to pass an ObamaCare repeal bill co-sponsored by Sens. Bill Cassidy (R-La.) and Lindsey Graham (R-S.C.).

    That bill wasn’t introduced for a vote on the Senate floor after three Republicans announced their opposition, killing its chance of passing.

    A spokesperson for the House Energy and Commerce Committee said earlier this week that the committee “continue[s] to have bipartisan negotiations” to reauthorize CHIP as it considers combining CHIP funding with money for community health centers.

    The Teabaggers won’t do anything until their backs are against the wall. Since (apparently) nobody has run out of money yet, they feel no need to do anything…

    :-(

    Cheers,
    Scott.

  20. 20
    rikyrah says:

    story about Senator Johnson (R-WI) willingness to appropriate CSR in exchange for policy concessions from Democrats:

    They are always about the hostage situation, Mayhew.

  21. 21
    MP says:

    I think I follow why dropping the CSRs and the silver-loading that is occurring is beneficial to those that receive subsidies. However, one thing I don’t follow is what incentive insurers have to offer off-exchange Silver pians to protect non-subsidized buyers. Why wouldn’t they just offer an extremely expensive on-Exchange silver plan or a skinny off-exchange plan that is riddled with exclusions?

  22. 22
    mak says:

    @David Anderson: Does this mean that the September payment covered the rest of the year? Because I’ve been looking (apparently in all the wrong places) for an answer to this simple question: when do the subsidies end?
    We receive a substantial subsidy which makes our family policy affordable. If the subsidy goes away, so does our insurance. So perhaps a better question, in my case, is: when does my insurance end?
    ETA: We’re in Pennsylvania, fwiw.

  23. 23

    @MP: Offering only wicked expensive Off-Exchange policies means the insurer gets a wicked sick risk pool.

  24. 24

    @mak: MAK

    You continue to get your Advanced Premium Tax Credits no matter what. You won’t pay each month for your premiums.

    If you make between 100% and 250% Federal Poverty Line AND you have a Silver policy, you continue to get your Cost Sharing Reduction help that lowers your out of pocket expenses. The only thing that happens is the insurance company won’t get paid for that bump on the back end.

    You see nothing different on the front end.

    I will highlight this question tomorrow morning as it is a good concern to address.

  25. 25
    mak says:

    @David Anderson: Thank you, that’s a huge relief. I’ve seen references to CSR and “out of pocket,” and I was aware that certain silver plans also qualified for reduced co-pays, but haven’t seen any reports which drew a clear distinction between the premium subsidies and co-pay reductions. If anything, the impression I get from most reporting is that the subsidies disappeared with the stroke of Trump’s crayon.

  26. 26
    Dabba2 says:

    FYI, to see how this is playing out on the ground, I took a look at the Covered CA website. Looks like Anthem and HealthNet are pulling back, and it seems to me that they’re encouraging non-subsidized people (for a couple, that’s anyone making over $64k/year, or a family of 4 with income >$97k) to go directly to insurers and avoid on-exchange products. Spouse and I fell into this group last year and the year before.

    Special considerations for Covered California enrollees for 2018

    Covered California members will soon begin receiving renewal notices. Starting Oct. 11, consumers can use the Shop and Compare Tool to find out their plan options and monthly premium price for 2018 coverage.

    In 2018, Anthem Blue Cross and HealthNet are leaving some parts of the state. Affected consumers will receive notices directly from their health plan as well as Covered California informing them they need to select a new plan for 2018. Those consumers who received notices can find additional information in the FAQ fact sheet.

    This year, Covered California offers a provider search tool to help consumers find health insurance plans with the doctors they want. Learn more about searching for providers available in plans you are considering for 2018.

    Due to uncertainty at the federal level, an additional surcharge will be added to 2018 premiums for all silver plans. This cost-sharing reduction surcharge will increase the gross premium price of Silver-tier insurance plans. Most consumers will not see a significant change in the net price of their monthly premium because their financial help will increase as well.

    Covered California consumers with Silver-tier coverage who do not receive a subsidy to help them pay their premium each month may be able to avoid certain rate increases in 2018 by switching to a different metal tier (Gold or Bronze) or shopping directly with an insurance company. Consumers in this situation are encouraged to contact an expert Certified Insurance Agent or Enrollment counselor for assistance.

    ****************
    Some sample prices for 2018 for a 54 yo in the Bay Area (not eligible for subsidy) — note Kaiser HMO Gold is cheaper than Silver.

    Bronze:
    Kaiser HMO – $574/mo, $6,300 deductible
    Kaiser HMO HDHP – $573/mo, $4,800 deducible
    Blue Shield PPO – $788/mo, $6,300 deductible

    Silver:
    Kaiser HMO – $883/mo, $2,500 deductible
    Blue Shield PPO – $1,080/mo, $2,500 deductible

    Gold:
    Kaiser HMO – $850/mo, $0 deductible
    Blue Shield PPO – $1,240/mo, $0 deducible

    My evil side is annoyed that my Trump loving sister-in-law, who lives rent free and chooses to work part-time, will feel absolutely no pain from these changes.

  27. 27
    Jerry says:

    My brother-in-law is currently on Facebook bitching about his new premiums increase of 250% here in NC. That sucks. However, he’s laying the blame completely on the Democrats. /sigh That’s how the Republicans get away with it

  28. 28

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  29. 29

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  30. 30

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  31. 31

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  32. 32

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  33. 33

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  34. 34

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  35. 35

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  36. 36

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  37. 37

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  38. 38

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  39. 39

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  40. 40

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  41. 41

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  42. 42

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  43. 43

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they […]

  44. 44

    […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they […]

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  1. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they […]

  2. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they […]

  3. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  4. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  5. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  6. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  7. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  8. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  9. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  10. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  11. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  12. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  13. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  14. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  15. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  16. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

  17. […] their plans. But Mr. Anderson said he thought the upside was strong enough that Congress should abandon its efforts to restore the canceled subsidies. “A lot of people are going to see during open enrollment that they are […]

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