Delaware is a small state. It is the only state on the ACA market this year with a single insurer, Highmark. The pricing portfolio makes absolutely no sense to me, and has not made sense to me for years. CMS has been releasing a lot of structural data over the past couple of days and I want to just gaze in befuddlement at two lines of data from Delaware.
Delaware had a competitive market from 2015-2017 with two corporate parents of three insurers. In 2018, it became a monopoly state.
From 2015-2017, Bronze was significantly discounted relative to benchmark because it has a a larger out of pocket limit. Not everyone who was subsidy eligible got a dirt cheap bronze, but a lot of people did. This make sense. Few people got a dirt cheap silver plan. In 2015, Highmark decided to spam the benchmark point with a $3 spread between the cheapest plan and the benchmark plan. This was a replication of Highmark strategy elsewhere to capture a lot of market share of a comparatively smaller market. Highmark and Aetna silverspammed each other over the next couple of years. In 2018, Aetna left the Delaware market. This created an opportunity for a strategy change.
Highmark did not significantly alter their strategy. The cheapest silver relative to benchmark for a single 40 year old non-smoker in these three years ranged from $18 to $27 cheaper. Individuals earning just a smidge too much for Medicaid expansion might get a dirt cheap CSR silver plan. Very few other people will see a zero or near zero dollar silver premium. The number of people who will see a zero or near zero dollar Bronze premium is also decreasing!
This makes no sense. Highmark has a monopoly. Highmark is a sophisticated, large, well capitalized entity that has been in the ACA markets since 2014. They should know how to design plans to hit price points. Highmark has no risk adjustment concerns. They are taking on full market risk as they are the monopolist. Their margin is a combination of how well can they manage the costs of individuals who know they are sick and expensive to cover and who will sign up no matter what, and how many price sensitive and reasonably healthy people who sign up.
A monopolist is able to generate premium spreads between their benchmark and their cheapest Bronze and Silver plans to make zero or at least <$10/month plans extraordinarily common. This is good for the enrollment pool as more healthy people come in, it is good for the bottom line and it is good for the actuaries’ ulcers as more healthy people removes variance from the projections.
So what exactly is Highmark thinking in Delaware?