Philadelphia is a good example of a county with a mixed result. The premium of the benchmark plan declined by nearly $200 between 2018 to 2019, from $635 to $465 for a 40-year-old, but the premiums of the cheapest plans in each metal declined by far less, reducing the gap between these cheaper plans and the benchmark, and therefore the size of the subsidy. By way of illustration, a 40-year-old at 350 percent of the federal poverty limit, with an annual income of $36,420 per year, pays $101 a month for the cheapest bronze plan now. In 2019, the cheapest bronze will cost that enrollee $254. For an unsubsidized customer, the premium for the cheapest bronze plan will decline from $400 in 2018 to $370 in 2019.
It is easy to see why the losers lose more than the winners win. In Philadelphia, the subsidized lose more both individually and as a group. In Philadelphia, the average unsubsidized customer will spend $20 less per month in 2019, while the average subsidized customer will spend $107 more. Further, there are far more subsidized customers. In Philadelphia, subsidized consumers as a group would spend more than $5,000,000 per month more in 2019 to stay in the same plans they have now, while unsubsidized consumers would save only $50,000 per month. The change in the total spending per capita reflects both the relative magnitudes of the losses and gains as well as the relative sizes of the unsubsidized and subsidized populations. In the case of Philadelphia, the total increase in per capita spending for all marketplace enrollees to stay in their current plans is $100 per enrollee.
This scenario is, of course, a great simplification of reality. Subsidized consumers who lose purchasing power will not all stay in the same metal plan. Some will shift down to a cheaper metal, while others may drop coverage. Similarly, the reduction in premiums for the unsubsidized population in some markets may encourage enrollment by some who felt priced out of the market last year. Enrollment in the often cheaper off-exchange plans are not included in this exercise, so gains to the unsubsidized may be bigger than is reflected here. Another unrecognized “winner” is the federal government, if subsidies are reduced.
These are short term effects that reflect the somewhat volatile adjustments of a subsidized market that has experienced many changes. The silver-loading process in many states served to widen the interval between the benchmark premium and the cheaper plans, increasing the buying power of the subsidy. Competition in some markets is now whittling away at that gap, reducing subsidies as well as overall premium levels.
In the longer run, the competition that comes from increased carrier entry is almost certainly beneficial, and increased choices for consumers have a value that cannot be measured. Nevertheless, while in many markets unsubsidized consumers will see premium reductions, many subsidized consumers will lose purchasing power, and it remains to be seen how these changes will be reflected in overall enrollment.
With appreciation to Joanna Seirup of Vericred.