I believe that the Catastrophic coverage eligibility expansion in Alexander-Murray is a risk adjustment play. I want to estimate what the potential risk adjustment related pricing increment could be using 2017 Healthcare.gov public data.
My data is here. I used the Healthcare.gov PUF Landscape file to identify all counties with both a Bronze and Catastrophic plan. I used the pricing for a single 40 year old non-smoker. I took the least expensive on-Exchange Bronze and Catastrophic plan by county/state dyad and calculated the difference in premium (Bronze-Catastrophic). Positive numbers means Catastrophic has a lower premium than Bronze. I did not adjust for the actuarial value of Bronze (allowable range 58%-62% AV in 2017 and Catastrophic has an AV of 57.5%) so I may be biasing the premium spread to be higher than a true apples to apples comparison.
Bronze plans are part of the Metal risk adjustment process. A portion of Bronze premiums are sent to cover the expenses of Platinum, Gold and Silver buyers. Catastrophic plans are risk adjusted only against themselves. Catastrophic dollars within a state only need to cover Catastrophic buyers.
This leads to a pricing delta which can be significant.
There are a few things to note.
1) Not every state nor every county within a state has a Catastrophic plan
2) Not every county has a Bronze plan
3) Something strange is happening in Texas and Oklahoma as BCBS-Tx and BCBS-OK Catastrophic plans are often more expensive than BCBS Bronzes in the same county.
4) Most other county/state combinations where there is a Bronze plan less expensive than the least expensive Catastrophic plan is because one insurer offers the low price Bronze but does not offer a Catastrophic plan.
However, out of the 2,362 county-state combinations with a 2017 Bronze and Catastrophic plan on Healthcare.gov, 1,847 have a lower priced Catastrophic plan than Bronze plan. Of that 1,847 counties with a less expensive Catastrophic plan, 1,170 counties see the same insurer issue the least expensive Bronze and least expensive Catastrophic plan.
Within this subset of 1,170 counties, there is an average of $73 pricing spread between these plans in these counties. I am making the strong assumption that the catastrophic and Bronze plans are sharing the same network and the same underlying administrative expense models. Most of the delta is due to the lack of risk adjustment transfers from Catastrophic to the higher AV metal bands.
This is the play that is being made in Murray-Alexander.