Cost sharing reduction weeds: “Silver loading” and the “silver switcheroo” explained

Last week I alluded to ways that consumers could be protected from premium spikes resulting from the Trump Administration’s cessation of cost sharing reduction payments to Marketplace insurers — so called “silver loading” and the “silver switcheroo.” Margot Sanger-Katz wrote about these this week at the Upshot. Some additional details are provided in the following interview with Charles Gaba, who runs the website, which is the unofficial and widely cited tracker of Marketplace plan enrollment and related health coverage statistics and policy. Charles tweets at @charles_gaba.

Austin: A Trump Administration decision last week will cut cost sharing reduction (CSR) payments to Marketplace plans. Because those plans will have to pay CSRs anyway, they’ll need to raise premium revenue. But, you’ve been writing about one way they can do that that minimizes harm to some consumers — silver loading. What is silver loading?

Charles: That’s when an insurance carrier adds ALL of the CSR losses they expect to be hit with in 2018 onto the premiums of silver plans only (as opposed to spreading the cost out across all 4 metal levels).

Austin: That makes sense since CSRs are paid out for silver plans only. Let’s talk about how this affects consumers. There are two kinds of Marketplace consumers: subsidized consumers and unsubsidized consumers. Let’s take them separately. Can you explain how subsidized consumers are affected by the cessation of government CSR payments to insurers and how silver loading helps them, if at all?

Charles: When the CSR cost is loaded onto a Marketplace plan, it causes the premiums to go up substantially. However, since the amount of the subsidies enrollees receive is based on the cost of the 2nd least-expensive silver plan (the “benchmark plan”), that means if the benchmark premium increases, so does the subsidy. If the benchmark plan goes up 30%, the subsidies people receive generally goes up about 30% as well, matching the full-price premium increase.

If the CSR costs are spread out across ALL metal levels, then premiums might only go up, say, 20% across bronze, silver, gold and platinum. This means that subsidized enrollees won’t really do any worse or better as a result.

However, if ALL CSR costs are loaded onto silver plans only, they might go up 30% while bronze, gold and platinum plans only go up 10%. That means that a subsidized silver enrollee might suddenly find themselves able to get a gold plan for around the same or even less than the silver plan they’re on now. It should also mean enrollees on bronze, gold or platinum plans will see their rates drop slightly (or at worst only go up slightly).

Austin: Now, what about unsubsidized consumers? How could they be harmed by the Administration’s move and how does silver loading help them?

Charles: If a carrier loads any portion of the CSR cost onto the price of any plans, unsubsidized enrollees will have to pay the full cost of that increased premium, whether they’re on or off the Marketplace. Silver loading doesn’t really help them, although if the carrier loads all of the CSR cost onto silver plans, obviously that means bronze, gold & platinum enrollees won’t be hit with the extra CSR load. However, that also means unsubsidized silver enrollees will be hit with even more of the load.

There is, however, a more complex version of silver loading [about which more below].

Austin: Can just any insurer implement silver loading, or does it require some state action?

Charles: That seems to vary by state. Some state insurance commissioners have given very strict rules about how the carriers have to load the CSR cost; others required 2 sets of rate filings (one assuming CSRs are paid, one assuming they aren’t), but didn’t specify which route they had to take; and some didn’t give any guidance whatsoever, leaving it up to the carriers to figure it out.

Austin: Silver loading would seem to require some coordination. If only some insurers silver load and others don’t then the second cheapest plan might not be a silver loaded one. I wonder what will happen in states where the commissioner doesn’t coordinate how CSRs need to get loaded onto plans. Will insurers separately coordinate? Is it legal for them to do so?

Charles: I assume you’re talking about  whether the insurers doing so privately would be considered collusion/price fixing, etc? I’m afraid I have no idea what legal authority either insurance commissioners or the carriers themselves have in this regard. I presume that the commissioners authority on this sort of thing is solid or that it varies from state to state. To date at least 35 states have silver loaded or are “silver switcharooing”, the more complex version of it that I referred to earlier.

Austin: Let’s get back to unsubsidized consumers. If they want to purchase a silver plan for the lowest possible price. What’s the work around you alluded to above?

Charles: If you’re in a “standard” Silver load state and are unsubsidized, you’re pretty much stuck looking at Gold or Bronze plans, since all Silver plans would have some CSR surcharge tacked on.

However, if you’re in one of the 13 “Silver Switcharoo” states, there’s a way of keeping a Silver plan without paying the CSR surcharge.

In those states, all of the CSR cost is loaded not just onto silver plans, but specifically onto silver plans available on the exchange only.

Under the ACA, some plans are offered both on and off the exchange, while others are only offered off the exchange (there aren’t any plans available on-exchange only). This means that in a Switcharoo state, you could have two different Silver plans: One available both on and off exchange (Silver A), the other available off exchange only (Silver B).

Let’s say that these plans are very similar and each costs $500/month on average this year, and each has the same number of enrollees at the moment.

In a normal Silver Load state, both plans might go up by $100/month due to the CSR load, so if you’re unsubsidized, you take the hit either way.

In a Silver Switcharoo state, Silver A might go up by $200/month but Silver B wouldn’t go up at all. If you’re currently on Silver A (whether you enrolled on or off the exchange), you would switch to Silver B to avoid getting hit with any CSR load.

In theory, this should result in nearly 100% of exchange enrollees being subsidized (up from around 84% today), while many unsubsidized enrollees move to off-exchange silver plans instead.


Charles has provided some additional explanation and resources at the following links:


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