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  #1  
Old 11-01-2019, 05:40 PM
Pamela Wells Pamela Wells is offline
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Default Happy ACA Open Enrollment!

Let the chaos begin.
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Old 11-04-2019, 10:45 AM
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Subsidy leveraging is going to be interesting this time around.
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Old 11-04-2019, 12:39 PM
WhosOnFirst WhosOnFirst is offline
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Subsidy leveraging is going to be interesting this time around.
I haven't worked with an ACA product in awhile. What is different with the subsidies this year versus last year?
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Old 11-04-2019, 02:38 PM
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I haven't worked with an ACA product in awhile. What is different with the subsidies this year versus last year?
Benchmark premiums in aggregate are decreasing. Bronze and gold are not. As a result, the net subsidy premium will be leveraged up. Some brokers were chiming in with massive rate increases for low income folks because a new entrant slashed the benchmark plan premium.

https://www.cms.gov/CCIIO/Resources/...oiceReport.pdf
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Old 11-04-2019, 06:45 PM
Pamela Wells Pamela Wells is offline
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Yep. I'm expecting a rocky year.
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Old 11-05-2019, 08:39 AM
fieldflowers fieldflowers is offline
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I have already started to plan my vacation around the bigger work load this year.
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Old 11-15-2019, 07:24 AM
ImSpartacus ImSpartacus is offline
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Originally Posted by exponentialpi View Post
Benchmark premiums in aggregate are decreasing. Bronze and gold are not. As a result, the net subsidy premium will be leveraged up. Some brokers were chiming in with massive rate increases for low income folks because a new entrant slashed the benchmark plan premium.

https://www.cms.gov/CCIIO/Resources/...oiceReport.pdf
Why is that? Are insurers just now taking advantage of the increased 66-72% de minimis range for silver plans?
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Old 11-15-2019, 08:16 AM
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what's the income cap for getting subsidy? state is GA if that matters - i'm on the P&C side and don't know much about this
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Old 11-15-2019, 11:46 AM
Pamela Wells Pamela Wells is offline
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what's the income cap for getting subsidy? state is GA if that matters - i'm on the P&C side and don't know much about this
It's not an income cap specifically. I would have to go look up the specifics to be certain, but I believe it's set such that a family should pay no more than 9% of their income in premiums, provided their income is below 400% FPL. FPL is set based on family size, and is uniform everywhere except Alaska. But the premium component is variable, and it depends on the benchmark premium in that rating area, not the state as a whole. The benchmark premium is the price that a given family would pay for the second lowest cost silver plan sold in their rating area (even if it's not sold in their county).

The calculation the cost of the 2nd lowest silver for the family, and subtracts 9% of their income. The result of that then is the "bucket of money" subsidy - the same amount is applied to whichever plan they actually choose. In the event that the family chooses a plan that costs less than the total bucket of money available for their subsidy, they pay $0, but they don't get extra money.

This has some interesting side effects. When the price of silver plans in the market go up, then so does the subsidy amount. When areas get more competitive, and the prices of silver plans goes down, then the subsidy also reduces. This means that for a highly subsidized low income family, they could end up paying more for coverage when premiums are low than when premiums are high.

Additionally, because premium varies by age, but neither poverty level nor income necessarily does, this also means that older people get much larger subsidies than younger people do. At very low incomes, close to the bottom end of 133% FPL, this is proportionally reasonable. But as incomes approach the upper limit of 400% FPL, there's a disproportionate effect. Younger people see their portion of premium increase in a way that is relatively smooth, and approaches the full amount. Older people, however, end up with a high subsidy until they reach 400% FPL, at which point they can see a dramatic cliff in their premiums.

Last edited by Pamela Wells; 11-15-2019 at 12:00 PM..
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Old 11-15-2019, 12:00 PM
Pamela Wells Pamela Wells is offline
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Why is that? Are insurers just now taking advantage of the increased 66-72% de minimis range for silver plans?
I doubt that's the dynamic. The risk adjustment transfers in the market place vary by the metallic level as well as by the level of cost share reduction on that plan (among several other factors). Payers get a higher effective risk level for having more customers in higher AV plans. The highest CSR level for silver is at 94%, which is quite a bit higher than the 80% for Gold. Additionally, customers are faced with lower point-of-service cost shares on the CSR plans if they qualify.

There are many moving parts, but generally speaking, payers are in better net financial positions if they can get as many people as possible into higher AV plans. This intersects with selection on the part of the customer, where generally healthier people tend to choose leaner plans (Bronze) and sicker people tend to choose richer plans (Gold). Once the subsidy and the CSRs are incorporated though, that relationship gets very murky. What we see, in general, is that unsubsidized sick people will tend to choose Gold plans, and that very healthy people will choose Bronze plans, regardless of whether they're subsidized or not. Sicker subsidized people will choose Silver plans.

But if carriers can bring the cost of the Silver plans down in the market, they can attract a portion of the subsidized healthy people to Silver plans, where the carrier receives a higher risk score.

Lowering Silver prices while keeping Bronze and Gold fairly flat is a tactic to increase risk level relative to the market, which leads to somewhat better financial positions overall.

But it's not without risks of its own. As mentioned to yoyo above, lower prices on Silver plans also means lower subsidy levels, which leads to increased perceived cost on the part of subsidized individuals. If only one carrier makes this move, it can be advantageous. For example, if a carrier has one very low cost silver plan that comes in materially below a competitor's silver, then the competitor becomes the benchmark, but the carrier with the lowest cost silver is more likely to see an increase in membership in their silver plan from highly subsidized moderate to unhealthy customers, which can be a good thing. On the other hand... if other competitors use the same tactic, then the entirety of the subsidy in that market decreases, and the risk transfers effectively re-balance themselves. None of the carriers win... and customers lose subsidy.

ACA is an inherently unstable market. This dynamic between pricing, risk transfer, and subsidy is one of the factors that makes it unstable.
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