Silver Gapping in 2019

In Mayhew On Insurance by David Anderson

As I wrote earlier this week, Democrats should not expect significant political help from ACA rate increases this fall. Insurers seem to have overpriced their 2018 rates and that is eating a lot of the rate increases we would have expected from the new policy changes of no individual mandate, proliferation of 364 day underwritten short term plans and the new rules on association health plans.

We should also expect even larger Silver spreads which will provide better deals to subsidized buyers. Non-subsidized buyers will continue to be kicked hard by high premiums. I am using Kaiser Family Foundation initial rate filing data for the analysis. From the point of view of a forty year old non-smoking subsidized buyer, the thing that they care about is whether or not the dollar spread changes.

Kaiser is looking at a large city in thirteen states for their preliminary analysis. They are seeing either the Bronze to Silver Spread or the Gold to Silver Spread increase in twelve of the thirteen target markets. Detroit buyers will see no better deals for the least expensive Gold and Bronze plans. Five markets are showing better deals are available for both Bronze and Gold plans. The rest have one metal plan offering a better deal:

A deal is better if the price change for a metal band is less than the price change for the benchmark. Richmond, Virginia will have the biggest swing in the Gold deal. This year, a 40 year old non-smoker in that city would pay an extra $236 for the least expensive Gold plan compared to the Benchmark Silver plan. In 2019, the least expensive Gold plan decreased significantly while the Benchmark Silver increased in price. Now, the least expensive Gold plan costs an incremental $69 more than the Benchmark plan. It is not a great deal but it is far better deal than currently out there.

The ACA is complicated. The simplest story is that the unsubsidized who can’t pass underwriting will get kicked hard next year. After that, everything gets complicated.