Marketplace Pulse: The Unsubsidized Will Always Be With Us

The Marketplace Pulse series provides expert insights on timely policy topics related to the health insurance marketplaces. The series, authored by RWJF Senior Policy Adviser Katherine Hempstead, analyzes changes in the individual market; shifting carrier trends; nationwide insurance data; and more to help states, researchers, and policymakers better understand the pulse of the marketplace.

Understanding the premium increases for individual market plans presents more complications than usual this year because of the ways that states and carriers approached the last-minute suspension of the cost-sharing reduction (CSR) subsidies. In many states, carriers attempted to recapture that lost revenue by increasing the premium of the silver plan relative to other metals. ‘Silver-loading’ gives subsidized non-CSR consumers the opportunity to purchase a relatively more affordable bronze or gold plan. Much has been made of this quirk in market pricing, which is truly beneficial to the subsidized population in a number of states.

Silver-loading affects consumers differently

However, enthusiasm about this feature should be tempered by the fact that the population to which it applies is relatively small. Many conversations about open enrollment limit themselves to the marketplace, but it is probably more useful to focus on the ACA-compliant individual market as a whole. A good estimate of the size of this market is about 17.5 million. The 40 percent of customers that are eligible for CSR plans are held harmless in 2018, as higher premiums result in higher subsidies. The roughly three million who are subsidized but not CSR eligible should at least break even, and may have an arbitrage opportunity in some states. But what about the roughly seven million who are unsubsidized?

For the unsubsidized, “silver-loading” creates categories of plans to avoid, and all else equal, we would expect the unsubsidized to do best in states with this pricing strategy.

Parsing premiums for the unsubsidized

The premium of the least expensive bronze plan on or off the exchange is a useful measure of affordability for the unsubsidized. Nationally, the average lowest-price bronze plan increased from about $250 in 2017 to about $300 in 2018, and the average percent increase was about 20 percent.

In some states, the unsubsidized face steep prices. The monthly premium for a 27-year old for the least expensive bronze plan in the most expensive 15 states exceeds $335, which is the threshold for an affordability exemption from the individual mandate for someone with an income of $50,000. In the five most expensive states the least expensive premium exceeds $403, the threshold for an exemption for those with an income of $60,000. Approximately 20 percent of the unsubsidized will face premiums for the lowest cost bronze that exceed $335. Given that premiums increase with age, this is clearly a lower bound estimate. Yet the outlook elsewhere is far better. In the cheapest nine states, the lowest price bronze plan costs less than $225. Ten states had an increase of less than 5 percent in their cheapest bronze plan. More than one-third of the unsubsidized will be able to buy a plan for less than $250 per month.

Implications for 2018 and beyond

The unsubsidized are unique among health care consumers in that they must confront the full retail price of health insurance. While many states took action to protect consumers from premium increases, others raised premiums on all products, a decision which most adversely affected their unsubsidized residents. Unsurprisingly, this segment of the market has the lowest take-up rate, and is most susceptible to diversion to limited coverage plans. Growth in the individual market depends in large part on improving affordability for the unsubsidized, and results thus far are decidedly mixed.