The increases to premium subsidies in the ACA marketplace provided through 2022 by the American Rescue Plan Act (ARPA) have been a policy success, helping to boost marketplace enrollment by 21% this year.
The subsidy boosts -- benchmark silver plans free to enrollees with incomes up to 150% FPL, premiums reduced at all income levels and capped at 8.5% of income for those with income over 400% FPL -- went a long way toward establishing an ACA worthy of its name. The revised subsidy structure, paired with Medicaid expansion in the 38 states (plus D.C) that have enacted the expansion, is at least in range of offering affordable coverage to all who lack access to other affordable insurance.
During Democrats' long, weary negotiations over the Build Back Better bill in the fall, the extension of those subsidies was taken as a given. A party in power can't roll back an unqualified policy success. It was worrisome when the subsidy extension in the last BBB iteration was reduced from permanent to three years (through 2025), as Republicans are likely to a) control at least one house of Congress and b) let the enhanced subsidies expire. But letting the ARPA subsidies expire in advance of enrollment for 2023 seemed unthinkable.
Now, suddenly, it's thinkable. Insurers will soon be preparing their rate proposals for 2023. Manchin keeps dismissing the revival of anything closely resembling the BBB bill. Anxiety among ACA watchers is spiking. The ARPA subsidy boosts are at risk.
As Democrats' legislative hunger games devolve into starvation games -- a struggle to get a few scraps of BBB into lean legislative sausages -- one floated proposal is to fund the ARPA-level subsidies by funding the marketplace's Cost Sharing Reduction (CSR) subsidies in the original, statutory way, directly reimbursing insurers for their CSR costs. That would end silver loading -- the pricing of the value of CSR directly into silver plan premiums (since CSR is available only with silver plans), which has created sometimes-dramatic discounts in bronze and gold plans, as premium subsidies are set to a silver benchmark (enrollees pay a fixed percentage of income for the second cheapest silver plan) and rise when silver premiums rise. Silver loading began in 2018, after Trump cut off direct CSR reimbursement in October 2017.
Silver loading made free bronze plans widely available at incomes up to 200% FPL* and often beyond (the discounts increase with age, as premium subsidies rise to cover premiums that rise with age, and spreads between the benchmark silver plan and cheaper plans increase as well). In some regions and whole states, gold plans are available with premiums below that of the benchmark silver plan. That's because most enrollees in silver plans have incomes below 200% FPL, and below that threshold CSR raises the value of a silver plan to roughly platinum levels. Thus, silver plans have higher actuarial values on average than gold plans. Five states, with behemoth Texas to follow, have effectively required insurers to price gold plans near or below silver plans.
In a post-ARPA market with strict silver loading, enrollees with incomes below 200% FPL can get CSR-enhanced, high-AV silver plans for free or cheaply (topping out at 2% of income for benchmark silver at 200% FPL), and enrollees with incomes over 200% FPL can get gold plans (80% AV) at or below a premium deemed affordable by ACA standards, i.e., below the cost of benchmark silver (between zero and 8.5% of income).
Silver loading is expensive. In August 2017 the Congressional Budget Office, anticipating Trump's cutoff of direct CSR reimbursement, forecast a 10-year cost of $194 million. In October 2021, CBO estimated the cost of permanently extending the ARPA subsidies (as the Sept. 15 iteration of the Build Back Better bill would have done) at $209.5 billion.
Those estimates are four years apart, and silver loading has not worked out quite as CBO (following prior analysis by the Urban Institute and HHS) anticipated, in that gold plans have not been consistently priced below silver. Silver plans remain broadly underpriced relative to bronze and gold (given the average AV obtained by silver plan enrollees, a large majority of whom obtain the strong CSR available below 200% FPL). Analysts including Stan Dorn of Families USA attribute the misalignment in part to CMS's risk adjustment formula, which allegedly favors silver plans. The average benchmark silver plan premium in 2022 is 9% below the average in 2018, when silver loading began, rendering the premise that silver loading would increase premium subsidies by an average of almost $20 billion per year over ten years somewhat counterintuitive. Nonetheless, Brookings' Matt Fiedler, comparing metal level pricing since 2017 to the pre-2018 trend, estimates that through 2021, silver loading had raised silver plan premiums (and so, federal subsidy costs) by 25%.
Those complexities and uncertainties notwithstanding, it's fair to say that the savings from ending silver loading (funding CSR) are in the ballpark for offsetting the 10-year cost of making the ARPA subsidies permanent. What about the merits?
The Build Back Better bills would have "paid for" ARPA subsidy extension by other means. But the last iteration, constrained by the perceived demands of Manchin and Sinema, would have only extended the subsidies through 2025, at a cost estimated by CBO at $73.9 billion. Manchin reportedly demanded that BBB's myriad of programs funded only short-term be replaced with a smaller group of priorities funded permanently. If ARPA subsidies make the cut, permanently funded, all good.
If, however, a choice boils down to funding the enhanced subsidies for three years (or two, or four..), or funding CSR reimbursement and making the ARPA subsidies permanent, I'd have to say that the permanent boost would be worth the price of giving up silver loading.
I have what you might call an emotional investment in silver loading, developed through anticipating it, describing it at the emergency outset, tracking its effects on enrollment, advocating for its intensification, worrying about its pre-ARPA side effects, and tracking the results of state initiatives. Paired with ARPA, and if maximized by regulation, it guarantees that everyone eligible for marketplace coverage has access to at least one health plan with an actuarial value of at least 80% (or, at lower incomes, 87% or 94%) at a cost at or below the benchmark premium. Making 80% AV coverage affordable at incomes over 200% FPL completes the ACA's "affordable care" equation.
That said, the ARPA subsidy boosts provided a more sweeping and fundamental reboot of the marketplace than silver loading did. Silver loading probably boosted marketplace enrollment by about 5%; the ARPA subsidies, by 21%. Moreover, the value of large increase in free bronze plans at low incomes generated by silver loading has been largely eclipsed by ARPA's major boost to the affordability of benchmark silver enhanced by strong CSR (free to 150% FPL, 2% of income at 200% FPL) at low incomes. Silver loading does, however, create strong value for enrollees with incomes over 200% FPL, especially in markets where gold plans are available below benchmark.
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* Free bronze plans at low incomes are something of a mixed blessing, as bronze plan deductibles average about $7,000, while silver plan deductibles average less than $200 at incomes up to 150% FPL and around $800 at incomes in the 150-200% FPL range. In the silver loading era, silver plan selection at incomes up to 200% FPL dropped from 87% in 2017 to 78% in 2021. The ARPA subsidies appear to have reversed that slide, at least in the emergency Special Enrollment Period that ran from Feb. 15 to Aug. 15 in 2021, with ARPA coming into effect in March and ARPA premiums posting in April.
CBO Oct 19
https://www.healthaffairs.org/do/10.1377/forefront.20211021.257493
https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Letter_Honorable_Jason_Smith.pdf
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