Silver-Spamming is the practice of an ACA exchange insurer offering two nearly identical silver plans as the cheapest plan and the second cheapest silver plan. This strategy compresses the silver spread between the benchmark and cheapest silver. Smaller spreads reduce the affordability margin between the cheapest plan available to the benchmark plan when compared to a counterfactual universe where the benchmark silver plan is significantly higher. This higher benchmark could be because of monopolist pricing strategies designed to maximize enrollment or the benchmark being offered by a second insurer. Silver-spamming is bad for subsidized enrollees as it raises relative prices of all plans except for the benchmark plan. Silver spamming as a strategy is a choice by the low cost insurer to accept a larger proportion of a smaller and sicker enrolled population.
— Patrick O’Mahen (@PatrickOMahen) October 25, 2016
Virginia has a bill that seeks to make Silver Spamming less plausible as an actual strategy:
“Narrow network plan” means a silver-level plan offered on the exchange that includes fewer than 20 percent of the health care providers in the geographic region in which such plan is offered as in-network providers.
“Silver-level plan” has the same meaning as provided in 1302(d) of the Patient Protection and Affordable Care Act, P.L. 111-148, as amended.
B. No health carrier that offers a narrow network plan in a geographic region shall offer any additional narrow network plan in the same geographic area if any two narrow network plans offered by such health carrier in the geographic region would have the two lowest monthly premiums of any silver-level plans offered by the health carrier in the geographic region.
A very narrow network insurer can offer multiple silver plans in a given region. An insurer can offer a broad network and a very narrow network. That broad network can have a dozen different plans layered on top of it. The theory is that when all else is equal, a narrow network will be lower premium than a network with more providers.
I think that a 20% of available providers definition of a “narrow network” is a very low bar to clear as a network. Important work by Weiner and Polsky from 2015 applied a “T-shirt” size system to networks. They defined a Medium network at 40% of available providers. Applying a “medium” threshold to this law would make it much harder for an insurer to offer a 15% of local provider network and a 21% local provider network that would just clear the requirement to effectively silver spam the region. An insurer could still offer a 15% network and a 41% network but the premium spread is far more likely to be significant due to the broader network.
States have significant capability to shape their individual marketplaces to be more or less friendly to buyers. States can find ways to manage spreads and product quality to achieve local goals. Higher benchmark premiums can and often will lead to greater affordability for buyers.