New Jersey’s Legislature, governor and Department of Banking and Insurance (DOBI)) have acted swiftly and decisively to protect the state’s individual market for health insurance from several rounds of Republican sabotage.
On May 30, Gov. Murphy signed into law two bills designed to hold down individual market premiums. The first created a state “individual mandate” — a requirement that those for whom affordable insurance is available obtain it or pay a tax penalty — to replace the federal mandate that the Republican Congress repealed as part of its tax bill last September. The second measure directed DOBI to seek federal funding for a reinsurance program that would restrain premium increases. DOBI submitted its proposal on July 2, designed to reduce premiums by 15 percent per year compared to what they would have been without the reinsurance.
Both of those measures benefit insurers as well as consumers — the mandate by keeping healthier enrollees in the risk pool, the reinsurance program by reducing insurers’ risk. Now it’s time for health insurers to do their part — by structuring their offerings to maximize federal subsidies and hold unsubsidized buyers harmless from a prior round of Trump administration sabotage.
The sabotage in question is Trump’s cut-off last October of federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are obligated to provide to low-income enrollees in the Affordable Care Act (ACA) marketplace. More than half of marketplace enrollees received these subsidies, which are available only with silver-level plans. From 2014 through 2017, they were not priced into premiums, since the government reimbursed them separately.
When Trump cut off the payments, just two weeks before 2018 premiums were finalized, insurers had to price CSR into 2018 plans. Most states, including New Jersey, allowed them to concentrate the cost in silver plans only, since CSR is available only with silver plans. Some states, also including New Jersey, allowed them to price CSR into on-exchange silver plans only, since no subsidies are available off-exchange (where unsubsidized enrollees can buy ACA-compliant plans).
Since ACA premium subsidies are based on a silver-plan benchmark, “silver loading” CSR costs increased subsidies, and in many states created large discounts in gold and bronze plans. Gold plan enrollment more than tripled in both Maryland and Pennsylvania, and free or nearly free bronze plans were available to a large percentage of subsidy-eligible enrollees. None of that happened in New Jersey. Gold plans remained prohibitively expensive, and relative discounts in bronze plans were slight.
In many states, too, unsubsidized enrollees could get cheaper silver plans off-exchange than on-exchange (silver plans, designed to cover 70 percent of the average enrollee’s costs, are the most popular level). That also didn't happen in New Jersey. In fact, none of the three insurers who sold plans on the exchange in 2018 — Horizon Blue Cross, AmeriHealth, and Oscar — offered different plans off-exchange, apart from one very expensive Horizon gold plan. Off-exchange plans sold by Cigna and Oxford were priced out of all but the most affluent buyers’ reach.
In Philadelphia, an unsubsidized 50-year-old could get the cheapest off-exchange silver plan for $153 per month less than the cheapest on-exchange silver plan (for more closely comparable plans, the spread was $94). In Baltimore, the cheapest silver plan offered off-exchange for a 50-year-old was $88 per month cheaper than the same plan on-exchange.
In New Jersey, unsubsidized buyers bore the full brunt of premium increases that averaged 22 percent. Plans offered by Horizon, which has over 60 percent market share, averaged 24 percent increases (more than half of which Horizon attributed to Trump administration sabotage). Again, there were no off-exchange discounts to speak of.
The consequences were severe. Nationally, enrollment in the ACA exchanges dropped 4 percent in 2018. In New Jersey, DOBI recently reported this year-over-year first quarter comparison:
The off-exchange losses should be a wake-up call — and in fact, for New Jersey public and elected officials, they have been. Not only have they passed the mandate and reinsurance bills, DOBI is actively encouraging insurers to make their offerings more attractive. Asked about discounted off-exchange silver plans, spokesperson Trish Graber provided the following statement:
“Carriers offering plans on the Marketplace are able to offer a similar plan off the Marketplace at a lower premium. For plan year 2019, the Department provided guidance to carriers to promote lower cost options for consumers.
“For 2019, the Department directed carriers offering individual plans through the Federally-Facilitated Marketplace (FFM) to submit rates that continue to follow the CSR loading they selected to use in 2018 — namely it directed carriers to account for the lack of CSR funding by loading that cost into the premiums for silver metal level plans only. In addition, the Department encouraged all carriers offering plans on the FFM to offer an off-exchange only silver plan that is comparable to a silver plan offered through the FFM."
It's time for insurers to step up. Taking advantage of “silver loading,” they should offer affordable gold plans. In many states, that step has increased the value of exchange offerings for subsidized buyers who earn too much to qualify for CSR. For the unsubsidized, they should sell discounted off-exchange silver plans, bringing that popular benefit level back into reach for many who reduced their coverage — or dropped coverage entirely — in 2018.
By taking action to reduce premium increases, New Jersey officials are aiming to get enrollment in ACA-compliant plans growing again. The state's health insurers should share that goal — and take effective action to further it.