There are many ways a state can improve its own individual marketplace. Some are effective at lowering premiums and increasing enrollment and others merely are full of sound and fury and contain no real money flows. We need to differentiate these actions as some states do a bit of both but have rules and cultural/political norms that hobble the markets more than anything that they have done since January 20, 2017.
New Jersey is a good example of both performing protection of their marketplace and performative projections.
New Jersey has a Democratic trifecta. It has passed a state based individual mandate that went into effect on January 1, 2019. It uses the revenue from the state based mandate to partially fund reinsurance. It is in the process of transitioning to a state based marketplace. It can free ride on New York and Maryland state based exchange awareness advertising.
These steps all actively improve the guaranteed issue, community rated individual market. There are also some performative protections as Andrew Sprung at Xpostfactoid lays out:
On May 31, New Jersey legislators introduced, with Governor Murphy’s support, a raft of bills* that codify in state law the ACA’s coverage rules in the individual and small group health insurance markets, including protections for people with pre-existing conditions
Separate bills maintain a ban on medical underwriting or exclusion of pre-existing conditions (S626), mandate coverage of the ACA’s Essential Health Benefits (S562) and a set of preventive services (S3803), and limit age rating — the degree to which the oldest enrollees can be charged more than the youngest adult enrollees — to the ACA’s 3-to-1 ratio (S3810).**
Many other states with Democratic governors and legislatures have passed or have in progress similar laws that duplicate the ACA’s federal standards. Such laws are redundant by definition; they are designed as protection against future further Republican action to undermine the ACA.
Some of these are typical state insurance regulations of varying degrees of wisdom. But there is a fundamental challenge to a state trying to protect the ACA benefits and regulations without federal funding — money matters for the ACA market to by functional:
State-based ACA-mirroring laws would not mitigate the damage if the Supreme Court strikes down the entire ACA, however — including the marketplace subsidies and the Medicaid expansion. Guaranteed issue, modified community rating and Essential Health Benefits together would render coverage unaffordable for the majority of current enrollees without the federally funded subsidies, which the states could not afford to replicate. Pre-ACA, states like New York and New Jersey that had enacted guaranteed issue were prohibitively expensive. New Jersey enacted guaranteed issue in the individual market in 1993; by 2003, enrollment had been halved and stood at 78,000, compared to about 300,000 today…
It is a statement of values and intent but without the money, it is also a statement of unaffordability.
New Jersey has another step that it could take that would increase coverage in the state, improve affordability for both on and off-exchange individuals and make the markets more functional but so far they have not done anything about a state based policy that makes the market smaller and more expensive than it could be.
New Jersey has fairly strong requirements of allowable cost sharing within a metal band. Silver plans in New Jersey are all at or over 70% actuarial value and Bronze plans must hover around 64% actuarial value. The possible spread in New Jersey is between 6 and 8 actuarial value points. The Center for Medicare and Medicaid Services (CMS) allows for Bronze plans to range from 58% to 65% actuarial value and Silver plans to range from 66% to 72% points. The maximum allowable spread is 14 points. As a rule of thumb, the bigger the spread in actuarial value points for the same insurer and network between the benchmark plan and the least expensive plan, the cheaper the plan is for subsidized buyers.
We have talked about premium spread strategies on this blog for years. I have several papers under review/accepted that play with this idea that should be out sometime in the second half of 2019 or early 2020. This is not a new idea.
New Jersey has the ability to maximize the spread. It could mandate all Silver plans to have actuarial values above 70% while mandating all insurers offer a low actuarial value Bronze plan and then anything else that the insurer wants. It could do that. Doing so could potentially double the spread which would dramatically increase affordability for subsidized buyers. Improved affordability for subsidized buyers brings in a healthier and cheaper, on average, risk mix which lowers non-subsidized premiums.
Yet, the decision New Jersey has made is that it wants to lower top end exposure for people who are insured at the trade-off of having more people uninsured and facing an infinite deductible. That is a viable trade-off to make, but it is one that weakens the market.
We need to separate signal from noise and make trade-offs explicit when we look at what states are doing to their individual health insurance markets.