Nav: Home

Silver loading and switching: Unintended consequences of pulling health policy levers

June 20, 2019

PITTSBURGH, June 20, 2019 - A move by the White House in 2017--decried by many health policy analysts as an attempt to undercut the Affordable Care Act (ACA)--had unanticipated consequences that improved the affordability of health insurance for Marketplace enrollees, a University of Pittsburgh Graduate School of Public Health-led analysis confirms.

The findings, reported today in the journal Health Services Research, show that the Trump Administration's cut of the ACA's cost-sharing reduction payments to health insurers caused insurance providers to compensate by changing the distribution of premiums in ways that increase federal government subsidies to Marketplace enrollees. And, surprisingly, geographic markets where a single insurer has a monopoly resulted in the best pricing for low income enrollees.

"The narrative about monopoly markets has largely been doom and gloom," said Coleman Drake, Ph.D., assistant professor in Pitt Public Health's Department of Health Policy and Management. "But actually, in terms of affordability, monopoly insurance markets are resulting in very low- to no-cost premiums for Marketplace enrollees. On the other hand, this is a really inefficient way to spend federal tax dollars to create affordable health insurance."

The federal government provides premium tax credits to people with incomes at or below 400% of the federal poverty level who buy health insurance through HealthCare.gov or similar state-based Marketplaces. The amount of the tax credit or subsidy varies depending on the market, or region, where the person is buying health insurance, because different insurers offer different plans with different premiums.

Every health insurer participating in the Marketplace offers health insurance plans that correspond to a "metal level"--bronze, silver, gold and platinum--with bronze costing the least and offering the lowest benefit generosity. The subsidy is determined based on each market's "premium spread," defined as the difference between the second lowest cost silver plan--the "benchmark"--and the lowest cost plan offered in the market.

For example, a single enrollee in 2018 whose income is 180% of the federal poverty limit would be expected to pay $100 per month for health insurance. If the premium on the benchmark plan in their region was $200 per month and the lowest cost plan was $140, then the premium spread would be $60. That enrollee would pay $40 for the plan with the lowest cost premium, which is equal to that person's $100 expected monthly contribution less the $60 subsidy for the premium spread.

When it was first enacted, the ACA also provided additional help to Marketplace enrollees with incomes at or below 250% of the federal poverty level by enabling them to obtain policies with lower co-payments and deductibles, also known as cost-sharing reduction subsidies. In turn, the government compensated insurers for the additional costs associated with offering these more generous benefits to very low-income enrollees. These cost-sharing reduction subsidy payments to insurers are what the Trump Administration cut in October 2017.

In response, state insurance commissioners in 42 states instructed insurers to "silver load," which means increasing the premium for benchmark silver plans to cover these additional costs, thereby increasing the premium spread and creating larger premium subsidies. Silver loading works best in markets with only one insurer because that monopoly insurer sets the premium for both the benchmark silver plan and the lowest cost plan.

The average monthly premium spread before the cost-sharing reduction cut was about $60. Following the cut, the average monthly premium spread jumped to $133.52 in 2018 and $147.94 in 2019.

But that approach did not benefit individuals who bought their insurance outside of the Marketplace or who did not qualify for premium tax credits. As a result, insurance commissioners are increasingly encouraging "silver switching," whereby insurers are allowed to sell off-Marketplace plans that are very similar, but not identical, to on-Marketplace plans in terms of benefits, but only the on-Marketplace plans are silver loaded. This allowed the off-Marketplace plans to retain lower premiums and was permitted in 24 states in 2018 and 29 in 2019.

States that allowed both silver loading and silver switching saw a 121% jump in premium spreads, compared to a 71% jump in states that only allowed silver loading, indicating that insurers were cautious about losing off-Marketplace customers with the increased premiums in states that allowed silver loading but not silver switching.

Coupling silver loading and silver switching thus maximizes premium affordability for enrollees on and off the Marketplace.

"States that are taking this second step and allowing both silver loading and silver switching are trying to ensure that insurers continue to operate in the individual market and that consumers at middle and higher incomes can afford health insurance," said coauthor Jean Marie Abraham, Ph.D., Wegmiller Professor of Healthcare Administration in the Division of Health Policy and Management at the University of Minnesota School of Public Health. "Of course, an important trade-off is that such policy responses ultimately lead to higher federal government spending than would have otherwise occurred under the original policy."
-end-
This research was funded by the Robert Wood Johnson Foundation.

To read this release online or share it, visit http://www.upmc.com/media/news/062019-drake-csr [when embargo lifts].

About the University of Pittsburgh Graduate School of Public Health

The University of Pittsburgh Graduate School of Public Health, founded in 1948 and now one of the top-ranked schools of public health in the United States, conducts research on public health and medical care that improves the lives of millions of people around the world. Pitt Public Health is a leader in devising new methods to prevent and treat cardiovascular diseases, HIV/AIDS, cancer and other important public health problems. For more information about Pitt Public Health, visit the school's Web site at http://www.publichealth.pitt.edu.

http://www.upmc.com/media

Contact: Allison Hydzik
Office: 412-647-9975
Mobile: 412-559-2431
E-mail: HydzikAM@upmc.edu

Contact: Wendy Zellner
Office: 412-586-9777
Mobile: 412-973-7266
E-mail: ZellnerWL@upmc.edu

University of Pittsburgh

Related Public Health Articles:

Public health guidelines aim to lower health risks of cannabis use
Canada's Lower-Risk Cannabis Use Guidelines, released today with the endorsement of key medical and public health organizations, provide 10 science-based recommendations to enable cannabis users to reduce their health risks.
Study clusters health behavior groups to broaden public health interventions
A new study led by a University of Kansas researcher has used national health statistics and identified how to cluster seven health behavior groups based on smoking status, alcohol use, physical activity, physician visits and flu vaccination are associated with mortality.
Public health experts celebrate 30 years of CDC's prevention research solutions for communities with health disparities
It has been 30 years since CDC created the Prevention Research Centers (PRC) Program, currently a network of 26 academic institutions across the US dedicated to moving new discoveries into the communities that need them.
Public health experts support federally mandated smoke-free public housing
In response to a new federal rule mandating smoke-free policies in federally funded public housing authorities, three public health experts applaud the efforts of the US Department of Housing and Urban Development to protect nonsmoking residents from the harmful effects of tobacco exposure.
The Lancet Public Health: UK soft drinks industry levy estimated to have significant health benefits, especially among children
The UK soft drinks industry levy, due to be introduced in April 2018, is estimated to have significant health benefits, especially among children, according to the first study to estimate its health impact, published in The Lancet Public Health.
More Public Health News and Public Health Current Events

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Teaching For Better Humans
More than test scores or good grades — what do kids need to prepare them for the future? This hour, guest host Manoush Zomorodi and TED speakers explore how to help children grow into better humans, in and out of the classroom. Guests include educators Olympia Della Flora and Liz Kleinrock, psychologist Thomas Curran, and writer Jacqueline Woodson.
Now Playing: Science for the People

#535 Superior
Apologies for the delay getting this week's episode out! A technical glitch slowed us down, but all is once again well. This week, we look at the often troubling intertwining of science and race: its long history, its ability to persist even during periods of disrepute, and the current forms it takes as it resurfaces, leveraging the internet and nationalism to buoy itself. We speak with Angela Saini, independent journalist and author of the new book "Superior: The Return of Race Science", about where race science went and how it's coming back.