Come for the politics, stay for the snark.

Since when do we limit our critiques to things we could do better ourselves?

Good luck with your asparagus.

Technically true, but collectively nonsense

Usually wrong but never in doubt

Screw the Judean People’s Front. Splitters.

There’s some extremely good trouble headed their way.

I’m going back to the respite thread.

We have all the best words.

Come for the politics, stay for the snark.

Call the National Guard if your insurrection lasts more than four hours.

… down to kool-aid drinkers and next of kin at the trump White House

Make the republican party small enough to drown in a bathtub.

We are aware of all internet traditions.

Today in our ongoing national embarrassment…

I’d try pessimism, but it probably wouldn’t work.

The cruelty is the point; the law be damned.

It’s the corruption, stupid.

We need fewer warriors in public service and more gardeners.

Naturally gregarious and alpha

The revolution will be supervised.

Wetsuit optional.

It’s always darkest before the other shoe drops.

Sitting here in limbo waiting for the dice to roll

Shock troops for the Unitarian Jihad.

You are here: Home / Archives for David Anderson

I'm a research associate at Duke University Margolis Center. I used to be Richard Mayhew, a mid-level bureaucrat at UPMC Health Plan. I started writing here and have not found a reason to stop.

David Anderson has been a Balloon Juice writer since 2013.

David Anderson

Partial year contracts and declining effective actuarial value

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Yesterday, it leaked that the Biden Administration is inclined to re-open Healthcare.gov. In some ways, Healthcare.gov has been partially open since last April with a broad Special Enrollment Period (SEP), but there is a good argument that a full Open Enrollment Period(OEP) which does not require administrative burden to prove worthiness combined with elite messaging and validation as well as significant advertising will insure more people.

However, one of the challenges of an SEP and a partial year OEP is that the value proposition of the insurance gets worse as we get deeper into the year. ACA insurance contracts are designed on a twelve month cycle. The actuarial value of a plan is for the entire year and the entire pool. Shortening the length of the contract means that the actuarial value (the share that the insurer pays out of general premiums) goes down.

I want to take four utilization patterns and illustrate what is happening when a contract starts in January compared to when it starts in March.  For this purpose, I am assuming a single policy with a combined $3000 deductible/Maximum out of Pocket with no other cost-sharing for simplicity sakes.

  • Low Use — barely touches the system, a PCP visit, an urgent care visit and a prescription
  • Medium Chronic Condition — routine expenses of prescription drugs and specialist visits but no acute emergencies
  • Acute Emergency — BABY!!!  or APPENDICITIS and otherwise looks a lot like a Low Use individual
  • Expensive Chronic Condition — My niece Claire with her leukemia treatment is going to be consistently running up high monthly costs so her family is shopping on the combination of network and out of pocket maximums as they hit the MOOP in the first month no matter what.

Partial year contracts and declining effective actuarial value

The low use individual is indifferent to when their contract starts. They are unlikely to hit MOOP at any point in any scenario.  The Medium Chronic Condition person hits their deductible in July under as 12 month contract and in September under a 10 month contract. More importantly, the 12 month contract has the insurer paying for 47% of their claims out of premium revenue while the 10 month contract has the insurer paying only 31% of their annual claims from premium revenue.  The effective AV dropped significantly.  The individual with an acute emergency with a 12 month contract hits their deductible in the first month of a 12 month contract but never hits it under a 10 month contract.  The person with the expensive chronic condition hits the deductible as soon as the policy goes live in either scenario.

These are stylized examples (for example, an acute emergency that happens in July would be fully MOOP-ed in either scenario).

However, the intuition that for a given benefit configuration (deductible, co-insurance, co-pay, maximum out of pocket), the shorter the contract length, the lower the effective actuarial value being offered stands. As plans start later in the year, the effective actuarial value goes down.  A Gold plan transitions into a Silver plan in the middle of the year, and then a nominal Gold plan becomes, in reality, Bronze as hot chocolate weather arrives.  Bronze becomes Tin and Copper as well.  The speed of metal decay will vary depending on cost sharing designs (deductible heavy designs decay faster than co-pay heavy designs) but it is a simple unidirectional reality.

This matters.  The monthly premium for an ACA plan is the same if the plan starts in January or if it starts in March or if it starts in November.  The value proposition for an ACA plan gets worse as the start month gets deeper into the year. The actuarial value declines while the monthly premium stays constant.  This is a problem for future nerds to figure out a solution and then advocates to get that solution implemented via either legislation or regulation, but this is something that we need to be aware of as a limitation on the size of impact an unexpected mid-year OEP could do.

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Late winter open-enrollment on Healthcare.gov

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The Washington Post reports that Healthcare.gov is likely to open up for a new open enrollment period in the next couple of weeks:

Under one order, HealthCare.gov, the online insurance marketplace for Americans who cannot get affordable coverage through their jobs, will swiftly reopen for at least a few months, according to several individuals inside and outside the administration familiar with the plans. Ordinarily, signing up for such coverage is tightly restricted outside a six-week period late each year.

I think that this will be helpful in enrollment as there are some number of individuals and households that selected a plan in December but failed to complete the entire activation chain by mid-January.  They had indicated a strong preference for insurance but got tripped up in the administrative burden.  These folks are likely to take advantage of an extended Open Enrollment Period.

I think that a late winter/early spring OEP will be interesting from an attention span dynamic as well.  We have strong evidence that people are financially stressed and cognitively overwhelmed around Christmas.  Choosing insurance is a cognitively complex task.  People with few attention reserves or resources are likely to rage quit even if they were unlikely to rage quit when they were not operating with no attention reserves. We are also entering the primary income tax and EITC return period where people are highly likely to get a big cash infusion.  Big cash infusions are likely to lower stress and increase the ability of people to make better cognitively complex choices.

I also think that without increased advertising, outreach, elite messaging and support that a spring time OEP won’t do much.  The Department of Health and Human Services has, to use a technical term, a big honking pile of money available for these purposes:

 


Executing those contracts and staffing up while coming up with a plan will take some time but there are resources for outreach.

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Expanding the subsidy system in the ACA — how does zero matter?

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Charles Gaba at ACASignups has been digging into President Biden’s American Rescue Plan for ACA related items.

Depending on how you look at it, this is really three provisions:

  • Temporary COBRA subsidies
  • Killing the ACA’s APTC 400% FPL Subsidy Cliff
  • Beefing up the ACA’s APTC Subsidy Formula below 400% FPL

The COBRA subsidies are important but would be temporary. The other two, however, would presumably be permanent, and are my main focus of course.

COBRA is a bridge based on the assumption that most people who are currently out of work are only temporarily out of work and reducing transition costs is a desired goal.

Charles did some digging with Rep. Underwood’s (D-IL) office for the proposed subsidy schedule:

Given this language, there is a strong chance that Medicaid Expansion will be rendered irrelevant in the states that have not yet expanded. But that is an aggressive interpretation of what “UP TO” means.

I want to focus on the 0% applicable percentage for people who earn up to 150% Federal Poverty Level (FPL) means. This is a big change. It means that the benchmark plan, currently a silver plan with a 94% actuarial value, would have a monthly premium of $0. Currently a single individual earning $18,500 pays $59 per month for the benchmark silver plan. This is a reduction in premium of over $700 per year. Notably, this $700 a year reduction in premium also applies to any plans priced above the benchmark. Someone who earns 200% FPL would see their benchmark premium be cut by more than half (6.49% income now to 3% income proposed)

Zero premium plans are quite valuable in that they reduce administrative friction. I’m part of a research team that has looked at plan effectuation and duration effects in Colorado. We found that zero premium plans significantly increased enrollment duration. Adrianna Macintyre and her co-authors at Harvard found that switching people to zero premium plans instead of nominal premium plans led to significant retention of enrollment. Administrative costs are significant in the ACA and other individual insurance markets. Furthermore, zero premium benchmark plans for people who earn under 150% FPL and highly likely zero premium below benchmark CSR silver plans for people earning up to 200% FPL should significantly decrease the probability individuals choose significantly inferior plans that have massive cost sharing but slightly lower premiums.

I’m still scratching my head about the competitive dynamics.

Right now, there is a clean divide in plan choice at 200% FPL. Below that, silver plans are overwhelmingly chosen as they have high CSR and fairly low cost sharing. Above 200% FPL, people get away from silver and towards either gold which is priced near silver and has better cost sharing than baseline silver, or dirt cheap bronze premiums with big cost-sharing. The dominant strategy for an insurer that has a comparatively cheap silver offering is to “compress the spread” where they offer a dirt cheap silver and then a second silver plan to grab the benchmark. This makes every other insurer be comparatively more expensive to cost sensitive buyers. If there is a $30 spread between the benchmark and the first plan offered by a different insurer, that is a big gap when the benchmark premium is $60/month. $90 could be a lot of money for someone earning $18,000. However under the proposed subsidy scheme, that plan would now by only $30/month which is less than the benchmark the person is facing. I’m also stuck trying to figure out what would happen to the strategy of the plan offered below the benchmark. There is little upside to an insurer to offer a very wide gap. This may decrease deductibles for that plan.

I’m still trying to think through the incentives of pricing for the above 200% FPL segments.  I’m not sure what the strategy would be there.

This is a complex system.  Simpler systems would be better if that is on the choice menu.  I think that the proposed subsidy scheme would be a significant simplification as there are far fewer weird income thresholds and inflection points as well as a massive reduction in administrative burden and friction for millions of more people.  This system would be quite advantageous to the people of West Virginia where the current average net of subsidy premium level is among the highest in the country as the state has broadloaded.  It would also lead to significant financial support of rural hospitals as more people would be covered by insurance that pays above Medicare rates as their net, personal premiums would be lower.

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COVID and Lags

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Just a reminder.  COVID is a nasty nasty virus as it has just enough lag on median phase changes that we simple, slightly evolved East African Plains Apes have challenges in intuitively getting cause and effect.

Let’s imagine that someone was not infected in the last minutes of the Trump Presidency but was infected sometime in the first few hours of the Biden administration.

We have a few scenarios and option trees.  Let’s go with a simple one where the person is not part of a screening testing program and is not being quickly contact traced.

Day 0 (January 20) — infected

Day 2 (January 22) — infected and infectious and feeling fine.

Day 3 (January 23) — infected, infectious and feeling a bit off

Day 4 (January 24) — infected, infectious, feeling off and goes to get a test

Day 6 (January 26) — infected, infectious and the test comes back positive and the person enters isolation after talking with their primary care provider.

This is a 6 day lag between the actual infection moment and the confirmation of infection.

Day 11 (January 31) — infected, not infectious and feeling like crap.

Day 13 (February 2) PCP tells their patient to go to the hospital (7 day lag between identification and hospitalization; 13 day lag between infection and hospitalization)

Day 19 (February 8) — Patient has consistently low blood oxygen saturation even while proned and coagulation problems.  Patient is moved to ICU 6 days after they are admitted to the hospital.

Day 23 (February 12) — Patient dies.

 

That is not a particularly unusual hypothetical timeline.  Some people will be tested and get their results earlier or later.  Others will never be tested as they felt fine and were minimally symptomatic.  Some people will be admitted to the hospital and be out in a day or two. Others will be admitted straight to the ICU.  There is a lot of variance.

But there are, on average,  notable lags between infection, identification, hospitalization and death.

Anything we do today will show up in next week’s infection counts and next months mortality data.

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Staffing matters

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Dr. Ben Sommers is both wicked smart and going into the Administration to work on the Department of Health and Human Services internal research and data team.

Nine of his ten most cited papers are Affordable Care Act and/or Medicaid papers.  His research on Medicaid work requirements and the implicit administrative burden in Arkansas was critical evidence that partially led to the federal courts to be extremely suspicious of Medicaid work requirements.

Staffing matters.

Dr. Sommers is just one example.

There are a number of people going into HHS (which is where I have a professional interest in knowing who is whom) that have an active interest in making insurance accessible, affordable and usable for as many people as possible.

The staff transition at the deputy undersecretary and deputy assistant levels is going to be a whiplash in what plans can even be discussed much less implemented.

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We did it — the ACA survived

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Over the past few days, my little corner of nerd and advocacy world has been having a long collective de-stressing breath that most of us had not realized we had been holding in for four years and three months.  The Affordable Care Act has survived.  In some ways, the individual market components of the ACA are now closer to the House Democrats vision in Spring 2009 than how it was operationalized by the Obama Administration in Winter 2017.  Silverloading has done weird things! That was not a likely outcome of a Republican trifecta.

I want to pull back something from May 2017:

In a previous thread, a troll was FIRST!! with the advice to “Just quit, we lost this fight in November”

I reject that.

We aren’t going to win often but we get to choose how to lose. We can roll over without trying to defend our values and our morals or we can fight as hard as we can to either get a policy win or inflict significant political costs on Republicans to increase the probability of future policy wins by either putting the fear of losing their seats into them which constrains future opportunity space or flipping those seats in 2018.

More subtly, we tell stories to ourselves. I want those stories that I tell to myself about me to be true. Defending and improving the ACA is one of those stories that I tell myself. The ACA benefits 2009 me far more than it benefits the 2017 me. It is a gut check. Am I full of shit or do I actually believe in what I think I believe in.

We did that.

We got policy wins.  We got political wins.

There is still need to moot a farcical suit that is currently at the Supreme Court.

But the ACA is likely to be around in 2022.  It is likely to get a highly needed update and corrections revisit by Congress.

That is not what I would have put any money on four years ago today.

 

 

We did it — the ACA survivedPost + Comments (72)