Nevada had used Healthcare.gov as their individual health insurance marketplace until November 2019. They switched to a state based marketplace (SBM), the Nevada Health link. This choice was made because the federal marketplace is fairly expensive and since 12:01 PM EST January 20, 2017, federal messaging and navigation assistance through the marketplace channels have been actively working against enrollment. Insurers were charged a fairly high percentage of premium and not getting a lot of value. Across the state line, Covered California, the California marketplace, had aggressively invested in outreach and their efforts have led to higher enrollment across policy and premium shocks than states that used Healthcare.gov. Finally, if a state wants to do anything with a 1332 waiver that is more complex than a simple reinsurance program, a state based marketplace gives significant flexibility that can not be counted on from Healthcare.gov.
Nevada’s exchange is also cheaper than Healtcare.gov even after an emergency pandemic special enrollment period was added in on the fly.
SBM transition news – even with expenditures needed to update IT for an exceptional circumstance SEP in light of the COVID-19 pandemic, @NVHealthLink is still finding cost savings from running its own marketplace platform https://t.co/8ive2fZYfb pic.twitter.com/aHKJ7f9we8
— Rachel Schwab (@RachelE_Schwab) July 7, 2020
I want to focus on a narrow part of this tweet. The four year (2021-2024) savings are projected to be about $5 to $6 million dollars per year. Who benefits from those efficiencies?
It really depends!
If the percent of premium fee charged is reduced so that the SBM is a break-even exchange, then non-subsidized enrollees are the biggest winners as their premiums will decrease slightly. Subsidized enrollees who buy plans priced above benchmark will modestly benefit as the premium spreads will slightly shrink. The federal government will pay out less in premium tax credits. However subsidized enrollees who purchase plans priced below the benchmark will face higher net premiums. The dynamic enrollment calculation is fuzzy but if we are just doing simple elasticity estimates, there are plausible cases where total insured populations go down.
Now if the SBM reinvests the savings into marketing and outreach to hard to reach and enroll groups, the dynamic gets a bit tougher. Premium levels would be flat on the first, static analysis. If we assume that marginal enrollees are, on average, healthier and cheaper, than average enrollees, premiums will go down slightly. I think that there are no facially plausible scenarios where total enrollment decreases and many where total enrollment increases slightly.
We can get more complicated. If premium charges to the exchange are held constant and the extra $5 to $6 million dollars are sent to the state to fund a reinsurance 1332 waiver, that benefits unsubsidized and subsidized buyers of above benchmark plans and slightly harms subsidized buyers of below benchmark plans. Most of the benefits are transfer payments to currently insured non-subsidized buyers.
If we want to hold the subsidized harmless, the state could use the surplus funds to make direct subsidy payments to non-subsidized buyers or target some funds towards incentivizing people to purchase higher quality plans. This would help non-subsidized and hold harmless the subsidized.
Nevada Health Link is highly likely to be an efficiency. However given the way that the ACA plumbing works, premium efficiencies have potentially very weird effects on different populations.