Silver-Loading, CSR Elimination Lowered Premiums For Some Rural Enrollees

Rural enrollees receiving subsidies on Affordable Care Act exchanges gained more from the Trump administration terminating cost-sharing reduction payments and subsequent state actions than their urban counterparts, according to a new study.

While urban areas had cheaper plans than rural exchanges for subsidized enrollees from 2014 to 2017, that flipped in 2018 and 2019 when the cost-sharing reduction payment cuts affected premiums, according to a Health Affairs study published Monday. For subsidized enrollees in majority rural markets, the average lowest premiums available after subsidies decreased from $288 in 2017 to $157 in 2018, down 45.5%, while comparable premiums in urban markets dropped from $275 to $180, down 34.5%.

Researchers from Duke University, the University of Minnesota and the University of Pittsburgh compared the cheapest plan after subsidies at various income levels in urban and rural regions before and after cost-sharing reduction payments were terminated in 2017.

The study authors found that states that used “silver-loading” or “silver-switching” strategies to compensate for the cost-sharing reduction payment cuts offered lower premiums for subsidized enrollees. Plans silver load by increasing premiums on all silver plans and silver switch by only increasing premiums of silver plans on Affordable Care Act exchanges and offering off-market plans without premium increases.

“States that decided to proactively load CSR subsidy costs via silver loading or switching increased plan affordability for subsidized enrollees relative to states that chose to do nothing or pursued broad loading,” the study authors wrote.

Silver-loading made premiums more affordable for subsidized enrollees because subsidies are tied to silver plan premiums, the study authors said. The effects were more dramatic for plans offered in majority rural markets in part because they are more likely to have more flexibility to set premiums in a monopoly environment.

“The size of the effect surprised us a bit, but there were no shocking directional surprises,” said David Anderson, study lead author and a research associate at the Duke Margolis Center for Health Policy.

States that expanded Medicaid mitigated the effect of cost-sharing reduction payment termination because expansion reduces the number of people eligible for the subsidies.

The Trump administration has solicited feedback on potentially banning silver-loading in 2021. Insurers have won a string of lawsuits to recover billions in unpaid cost-sharing reduction payments from the federal government, and silver-loading has proven extremely expensive for the federal government.

If silver-loading is banned, insurers could turn to a broad loading strategy where they raise premiums across all plans to compensate for the terminated payments. The Health Affairs study showed that states that used a broad loading approach had less affordable plan options than those that pursued silver-loading or silver-switching.

“If silver-loading is taken away and replaced with broad loading, it could lead to drops in enrollment for subsidized populations and premiums would go up for all buyers,” Anderson said.

While enrollees who receive subsidies benefited from lower premiums on exchanges in recent years, unsubsidized enrollees’ experience was the opposite. Majority urban and rural markets experienced increases in premiums for unsubsidized enrollees in 2017 through 2019. Enrollees in rural markets who did not receive subsidies had the least affordable premium options. But efforts to reinstitute cost-sharing reduction payments in Congress have fizzled, and many left-leaning policy analysts now support the status quo because it has increased premium subsidies.

“Silver-loading is not a panacea, and it does nothing for the unsubsidized population,” Anderson said.

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