Insurers — who might not be allowed the huge rate increases they need to stay solvent — are looking to save money by eliminating so-called Bronze-level plans.
Fierce Health Player reports on an Inside Health Policy (subscription only) warning from earlier this week:
One problem, according to the article, is risk adjustment–as CMS data indicate bronze is the only metal level for which insurers of all sizes in the individual and group markets had to pay into the program. Federal officials are considering some changes to the risk adjustment program, which some say unfairly penalizes smaller insurers.
Already, filings show a CareFirst BlueCross BlueShield subsidiary in Virginia will transform its bronze plans into silver-level plans for 2017, according to Inside Health Policy, and experts tell the publication this could set a troubling precedent for the industry.
(Hat tip, Art Fougner.)
That’s not too bad, right? Silver plans — the next step up — are already the most popular, so it shouldn’t be a big deal for consumers to opt up to increased coverage.
But it’s not that simple:
If insurers do drop their bronze plans, it would have the effect of further destabilizing the marketplace, according to Sean Mullin, a senior director at Leavitt Partners. That’s because such enrollees, which tend to be lower-risk and want the cheapest plans, will likely leave the marketplace altogether, further depleting the exchanges’ share of healthier enrollees.
In order to achieve solvency, the ObamaCare exchanges require 40% of their customers to be young and healthy enough to pay large sums over time into the markets without taking out much in benefits. That way there’s enough money in the coverage pool to pay for older and sicker customers. However, currently only about 28% of ObamaCare customers are young and healthy enough to keep the system afloat.
ASIDE: I use words like “customers” and “markets” for simplicity’s sake. But you should be aware that the ObamaCare exchanges are not free markets, but instead are state-based (but heavily federally regulated) insurance cartels. And many ObamaCare customers are there only because of the individual mandate, and not because they actually want to buy their coverage from a cartel member.
Comparatively inexpensive Bronze plans are one way to get younger and healthier people paying into the system — but for the Young & Healthy, those plans are too expensive to buy (even with subsidies) and too expensive to use (due to sky-high copays and deductibles). For many, already it’s cheaper just to pay the penalty-tax-thing for non-coverage and take their chances — which for the Y&H is usually a safe bet.
But if Bronze plans are eliminated, then the next-cheapest Silver plans are an even worse deal for the Y&H, making dodging the mandate and paying the penalty-tax-thing even more appealing.
Complicating matters, even older and sicker people are gaming ObamaCare, as Politico reported in January, “running up their bills and then jumping ship.”
All of this serves to drive up those “affordable” premiums, making ObamaCare’s problem with adverse selection even worse, as that 28% drops to 25%, and ever lower — until nobody can afford to buy on the exchanges anymore. Yogi Berra might see the fun in saying “Affordable Care is just too expensive!” But for taxpayers, a death spiral is no laughing matter.
If ObamaCare enters one, it will spiral down in slow motion, since insurers are only allowed to change their rates once annually. But without a massive infusion of your tax dollars, a death spiral is looking more certain after news like this about the possible elimination of Bronze plans.
We were promised “no more bailouts,” but ObamaCare could just require one of the biggest bailouts ever.
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