Advanced Premium Tax Credits (APTC) are only relevant for people who buy policies on the Exchanges. However the subsidized universe is only about half of the entire individual market. The non-subsidized and off-Exchange universes will help us determine how carriers embark on their Silver pricing strategies.
If an individual would have qualified for an APTC but buys an off-Exchange policy for whatever reason, they do not get any subsidy to help offset the premium. They pay full price. There are some non-subsidized buyers on the Exchanges. A common case will be people with variable incomes who are not sure if they are subsidy eligible. They may overestimate their income so they don’t have to pay the APTC back but if they have a bad year, they can collect the Premium Tax Credit the following year when they file for their tax refund. People who know that they can not qualify for the Exchange have no reason to shop on Exchange. Indeed, they have a mild incentive to look off-Exchange.
Policies that are sold on Exchange must be offered off-Exchange. However carriers can offer policy and plan designs off-Exchange that they do not offer on Exchange. Mayhew Insurance did that in 2014 with an experimental product as we needed data to see if our hunch was right (we weren’t). Carriers can decide to only participate off-Exchange if they wish to do so. The advantage of selling off-Exchange is that the population is a bit higher income and that tends to correlate with two things; better health and more stability in paying bills. Even though policies are offered off Exchange, the on and off-Exchange policies in a single metal band in a state are in a common risk pool for risk adjustment purposes.
Off Exchange has a typical policy buying decision maker earning over 400% Federal Poverty Level (FPL). On Exchange, subsidized buyers have a median policy decision maker earning around 200% FPL. These are very different market segments. And those differences can feed some insight into why a carrier that has the ability to capture the #1 and #2 Silver positions would engage in either a Silver Spamming or Silver Gapping strategy.