the average premium for the Second Lowest Cost Silver Plan (SLCSP) is expected to drop by 1.5 percent.
This brings up a good example of the conflict between levels and spreads. Average premiums across the county went up by about 3%.
If average premiums went up and a specific subset of plans went down, that implies other plans went up faster than the overall aggregate increase in premiums. If this situation was for anything other than the benchmark plan it would be a meaningless idiosyncrasy. However it is the benchmark plan.
Subsidies are tied to the level of the benchmark plan. The subsidy is the gap filler between an individual’s expected contribution and the final premium. If an individual buys a plan that is less expensive than the benchmark, they get a dollar for dollar in the premium that they pay. If an individual buys a plan that is more expensive than the benchmark, they pay the entire incremental increase in premium.
If the benchmark decreases and other plans increase, this means that the plans that are less expensive than the benchmark in 2018 are still less expensive than the benchmark in 2019 but the gap is smaller. A smaller gap means higher premiums that the individual pays every month. For plans that are more expensive than the benchmark, the lower benchmark and higher everything else implies higher net of subsidy premiums for the buyer as well.
Lower benchmark premiums in the context of generally higher premiums for everything else is good for the federal government’s budget and potentially good for a small subset of off-exchange buyers but it is either neutral or higher premiums for everyone else.