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Lower Premiums but Higher Out-of-Pocket Costs? Consumers Will Take the Risk.

Analysis  |  By Alexandra Wilson Pecci  
   September 30, 2020

A new report shows an 11-percentage-point drop in the share of marketplace enrollees buying silver plans after the Trump Administration's stopped directly reimbursing insurers for cost-sharing subsidies for the lowest-income marketplace enrollees.

More consumers chose plans with higher out-of-pocket costs and lower premiums after a 2018 Affordable Care Act (ACA) administrative change made certain plan premiums more expensive, finds a new Urban Institute report.

The report, which had funding from the Robert Wood Johnson Foundation, examined the consequences of the Trump Administration's decision to stop directly reimbursing insurers for cost-sharing subsidies that are provided to the lowest-income marketplace enrollees.

In 2017, on average, the second-lowest priced silver premium was 21% higher than the lowest-priced bronze plan,. Bronze plans have lower premiums but higher out-of-pocket costs.

But in 2018, after federal reimbursement of cost-sharing subsidies ended, the silver plan premiums rose to an average of 38% above the lowest-premium bronze plan.

This price increase resulted in an 11-percentage-point drop in the share of marketplace enrollees buying silver plans.

"[S]ince the direct payments for cost-sharing subsidies have not been reinstated, their findings remain relevant to the 2020 plan year and beyond," the researchers noted.

The decision to end federal reimbursement of cost-sharing subsidies had a ripple effect that made its way into consumers' wallets. Here's why:

  • The ACA requires insurers to offer cost-sharing plans at a reduced price for people with incomes up to 250% of the Federal Poverty Level who are purchasing silver-level marketplace plans.
  • Previously, the government directly reimbursed insurers for this cost-sharing assistance.
  • Even though the government stopped providing that reimbursement, insurers still had to provide the help to consumers.
  • Since insurers had to come up with the money to keep those consumer subsidies going, most states told those insurers to add the costs into their silver-level plan premiums.

When the cost of the silver plan premiums increased, more consumers opted for the lower-premium bronze plans, despite their higher out-of-pocket costs.

The consumer shift to bronze plans was exacerbated by the fact that the Trump Administration also decreased funding for enrollment navigators, which left consumers with little guidance about the financial ramifications of their plan choice, the researchers said.

"One consequence of the Administration's elimination of cost-sharing subsidies in the ACA marketplace has been a shift toward greater enrollment in bronze plans," Katherine Hempstead, senior policy adviser of the Robert Wood Johnson Foundation, said in a statement. "Better enrollment assistance might help low income consumers choose a plan where high out-of-pocket costs do not reduce the value of the coverage."

Alexandra Wilson Pecci is an editor for HealthLeaders.

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