Monthly premiums for Benchmark Silver plans in the Affordable Care Act's (ACA) Federally Facilitated Marketplaces (FFM) for individual health plans will increase by an average of 25 percent from 2016 to 2017. The magnitude of these increases has raised concerns about the viability of the marketplaces and the affordability of the ACA, and has fueled criticism of the law. In fact, the new administration and Congress have described the repeal and replacement of the ACA as a top priority.
The 25 percent figure has received wide publicity, which also could depress participation in the individual insurance market. This estimate, however, does not account for the associated increases in premium subsidies, the financial assistance provided to low- and moderate-income consumers with incomes up to 400 percent of the federal poverty level (FPL) who purchase marketplace insurance plans. As has been widely reported, these tax credits could effectively shield the majority of marketplace enrollees from premium increases. What has been overlooked is that the mechanism for updating the tax credits could actually result in reduced post-subsidy premiums for many marketplace enrollees.
Focusing only on premiums for the Benchmark Silver plan can be misleading. The Benchmark plan is defined as the second-lowest-cost Silver plan offered in a county; most counties have a less expensive Silver plan option. The amount of the premium subsidy is calculated so that an individual's required contribution to the Benchmark plan's premium does not exceed a cap that varies by income (ranging from 2.04 percent of income for those between 100 and 133 percent of the FPL to 9.69 percent of income for those between 300 and 400 percent of the FPL in 2017). Importantly, enrollees may apply the subsidy to any marketplace plan.
Thus, post-subsidy premiums will decrease for subsidy-eligible enrollees in the lowest-cost Silver plans if the increase in premium for the Benchmark plan is greater than the increase in premium for the lowest-cost Silver plan (Note 1). (Depending on the county, the specific plans that constitute the lowest-cost silver plan and Benchmark second-lowest-cost silver plan might vary from year to year.) And in fact, analysis of the 2016 and 2017 FFM marketplace premiums by county shows that the 2016 to 2017 increase in Benchmark Silver plan premiums was larger than that for the lowest-cost Silver plan, on average (Exhibit 1).
Exhibit 1: Mean County-level Changes in Monthly FFM Premiums for Silver Plans
The graph displays the mean year-to-year change at the county level in the monthly premiums for the Benchmark Silver plan and the lowest cost Silver plan as defined in each year. A small number of counties have only a single Silver plan offered; in these counties, the Benchmark and lowest cost Silver plans are the same. This figure presents means across counties and are not weighted for enrollment.
Source: Authors' analyses of FFM data.
Distribution Of Post-Subsidy Premium Savings By Income And Geography
More specifically, because subsidies are greater at lower income levels, post-subsidy monthly premiums in 2017 will decrease from 2016 levels, on average, for enrollees in the lowest-cost Silver plan who remain in the lowest-cost Silver plan and whose incomes are at or below 250 percent of the FPL (Exhibit 2); the magnitude of the decrease will depend on the plans offered in the relevant county. The decrease also would be larger for anyone who switches from a Benchmark Silver plan in 2016 to the lowest-cost Silver plan in 2017. An estimated 78 percent of 2016 marketplace enrollees were below 250 percent of the FPL.
The potential savings are greatest for the poorest enrollees. For example, individuals at 138 percent of the FPL who are currently enrolled in the lowest-cost Silver plan would, on average, have 16 percent lower post-subsidy premiums in 2017 if they remain in the lowest-cost Silver plan. Enrollees who switch to lower-premium plans would see their premiums drop even more. In contrast, enrollees with incomes at 250 percent of the FPL who stay in the lowest-cost Silver plan would see only 3 percent lower post-subsidy premiums, and those with incomes closer to 400 percent of the FPL would, on average, face post-subsidy premium increases. Those above 400 percent of the FPL, who receive no subsidy, will see larger premium increases in 2017, on average.
Exhibit 2 displays the average change in post-subsidy monthly premiums for those in the lowest-cost Silver plan in both years for selected income levels.
Exhibit 2: Mean County-Level Year-To-Year Changes in Post-Subsidy Monthly Premiums by Percent of FPL
The graph displays the mean changes from 2016 to 2017 in the post-subsidy monthly premiums for a single enrollee aged 40 who chooses the lowest-cost Silver plan in their county in both years. The numbers are not weighted for county enrollment and reflect the percentage change in the mean premiums from 2016 and 2017.
Source: Authors' analyses of FFM data.
Furthermore, the changes vary across counties and states. For example, because Benchmark Silver premiums increased by over 100 percent in Maricopa County, Arizona (Phoenix) from 2016 to 2017, the subsidy there also increases substantially; Maricopa County marketplace enrollees with incomes at 138 percent of the FPL would pay 67 percent less in 2017 than they did in 2016 if they were in the lowest-cost Silver plan in both years.
Implications for the 2017 Open Enrollment Period
Increasing participation in the individual health insurance market will be critical for the stability of the marketplaces—and likely any alternative framework introduced under President Trump—over the next few years. Thus, with the start of the 2017 open enrollment period, it will be important for all connected with the marketplaces, including navigators and brokers, to communicate clear information to enrollees about the actual changes in premiums — particularly if the enrollees are eligible for premium subsidies. Enrollees should also be informed about strategies for lowering premiums, such as switching to lower-cost plan options. Our estimates assume stability of an individual's income; the 2017 subsidy for a particular enrollee will ultimately depend on his or her 2017 income (and family composition for family enrollees) — thus, communication efforts will have to consider these factors as well.
Furthermore, there could be relevant changes in provider networks, drug formularies, or plan utilization management requirements, even for enrollees remaining in the same plan. It will be important for marketplace navigators and insurance agents, as well as other formal advisors, to make clear the tradeoffs associated with each plan option, accurately estimate the net financial implication for each enrollee, and provide sufficient support when enrollees are making these decisions. More research would be useful on how best to clarify the tradeoffs for enrollees, such as the potential implications of provider networks with varying numbers of specialists or different hospitals, the implications of switching networks given existing medical conditions, and the potential impact of the differences in networks on an enrollee with a given risk profile.
Long Term Implications
Over the longer run, the subsidy structure could deepen the divide between subsidized and unsubsidized enrollees in the individual health insurance market, especially if premiums for the Benchmark Silver plan continue to increase. Recent estimates, however, suggest that a large number of currently unsubsidized enrollees—about 2.5 million, according to HHS—would qualify for subsidies if they were to enroll through the ACA marketplaces instead of choosing off-marketplace insurance plans. Effective communication to these potentially subsidy-eligible persons could encourage them to use the marketplaces, gain subsidies, and reduce their monthly premiums substantially.
Increased federal spending on subsidies, of course, has implications for current or future taxpayers, though the current premium subsidy for the entire nongroup market, including marketplaces, represents only 10 percent of federal health insurance subsidies — these subsidies are dwarfed by those for Medicaid, employer-sponsored health insurance, and Medicare. Finally, these findings do not lessen the need to continually improve the value of the health care system in the United States, including addressing medical spending growth in both FFM and non-FFM components.
As premiums increase from year-to-year in ACA marketplace plans, the implications of the increases differ substantially across enrollees. For most FFM enrollees, the premium increase from 2016 to 2017 results in larger subsidies, which could make their post-subsidy premiums drop. This is especially true for enrollees with lower incomes.
Note 1
Bronze plans have even lower premiums than Silver plans, so persons switching from Silver to a Bronze plan would certainly pay a lower premium. However, we do not consider Bronze plans here because, on average, it is not sensible for those with incomes below 250 percent of the FPL, and especially those with incomes below 200 percent of the FPL, to give up the cost-sharing subsidies that come with the Silver plan. Those above 250 percent of the FPL who are ineligible for cost-sharing subsidies and are now in Silver plans could move to a Bronze plan and lower their premiums.
from Health Affairs BlogHealth Affairs Blog http://ift.tt/2fVv5CL
No comments:
Post a Comment