Who's buying into the ACA marketplace? The brokers' tale
An influx of higher-income enrollees, apparent in 2022, may have continued in 2023
ACA marketplace enrollment is up 13% nationally in 2023; 19% in the 33 states using the federal exchange, HealthCare.gov states; 23% in states that have not expanded Medicaid (all of which use HealthCare.gov), and 32% in Texas. Who’s buying in? In advance of the detailed enrollment data that CMS typically releases in spring, I spoke to health insurance brokers based in Texas and New Jersey.
High-income enrollees entering the marketplace
I touched base first with Dallas-area health insurance broker Jenny Hogue, president and CEO of KG Health Insurance, who had noted on Twitter in late 2021 that a number of higher-income people who had been priced out of the ACA marketplace before the American Rescue Plan Act removed the income cap on subsidy eligibility were buying in. Jenny’s perceptions were borne out by 2022 enrollment data, which showed enrollment at income over 400% FPL had more than doubled year-over-year in HealthCare.gov states, including Texas. I wanted to know if the surge was continuing this year.
Hogue said that it seemed to be. In particular, she has noted new clients continuing to transfer out of health sharing ministries — informal, barely regulated, usually religion-based private clubs that pool resources to cover medical expenses. “I had people who from the beginning had gone the ministry route but had given me permission to contact them” in an annual email, Hogue explained, and in the last two years, some have responded to that annual pitch. While people enrolled in ministry plans likely dwell in an information environment where changes to the ACA are not likely to penetrate (“Do you think Fox was broadcasting the ARPA subsidy boosts?”) word-of-mouth (or email-of-broker) has penetrated to at least some. The ministry migrants “are now paying less on the marketplace for better coverage — actual coverage,” Hogue said.
Cross-continent in New Jersey, enrollment is up 5.4% in 2023. That’s a better-than-average result among the 18 states that run their own exchanges, where enrollment this year is down about 2% collectively (for possible explanations, see this post and this post). Broker David Oscar of Livingston, NJ-based BenefitMall, who works mainly with business clients but serves some individuals as well (e.g., when a corporate client lays people off), also sees the increased subsidies since 2021 drawing in more higher-income enrollees.
New Jersey added supplemental state-based subsidies that went into effect in January 2021, just months before ARPA boosted federal subsidies, providing a double dose of subsidy enhancement. Unlike most of the eight states that provide such “wraparound” subsidies, New Jersey’s increase with income, topping out at $100/month for an individual and $200/month for a family in the 250-400% FPL bracket, then phasing down to a still substantial $50/month for an individual and $100/month for a family at 400-600% FPL.
Oscar sees the New Jersey subsidies “helping the individual market tremendously” and “helping to kill” the small group market - particularly very small groups with just a handful of employees. He says that the two markets have essentially the same products, with the same provider networks. He cites a restaurant owner whose employees now get a better deal in the individual market than he can offer in the small group. While he himself may be subsidy ineligible, paying his own premium and not paying for his employees is still cheaper for him, and better for the employees, than funding a small group plan. (The ACA penalty for not providing health insurance only kicks in for employers with at least 50 employees.)
The decline of New Jersey’s small group market is actually a long-term trend. Covered lives stood at 930,000 in 2000 and had trended down to 660,000 by 2013. In the ACA years the market has shrunk by more than half, to 286,000 in the second quarter of 2022.
Oscar notes that the heavily subsidized individual market now usually compares favorably to COBRA, and that COBRA letters now highlight the marketplace as an option, as does the Dept. of Labor website. Finally, Oscar says that he’s seen a number of younger clients he identifies as part of the so-called “mass resignation” — “young people who want to get their masters, want to get their Ph.D.”
The brokers’ experience should not to suggest that the bulk of marketplace enrollment growth in raw numbers is at high incomes. In Texas in 2022, two thirds of all enrollment was at incomes below 200% FPL; half was at income below 150% FPL. But the rate of growth was faster at high incomes, in Texas and nationally. That’s likely to have continued in the Open Enrollment Period (OEP) for 2023 — though perhaps not after April 1 of this year, when the Covid-triggered moratorium on Medicaid disenrollments that’s been in place since March 2020 ends.
New Jersey enrollment data also shows strong growth at high incomes. From OEP 2021 to 2023, enrollment overall has increased by 27%, from 269,560 to 341,901, while unsubsidized enrollment has dropped by 31%, from 54,435 to 36,185. From OEP 2021 to 2022, for which CMS offers enrollment breakouts by income, enrollment increased 10% for enrollees in the 100-200% FPL income — and 24% at 250-400% FPL. While gaps in the CMS public use files make it difficult to compare enrollment growth at higher incomes (subsidy ineligible in 2021), growth appears to have been higher yet at incomes over 400% FPL.
Texas and New Jersey have both taken state action to boost marketplace subsidization for higher-income enrollees in particular. In NJ, the state wraparound subsidies rise with income. Texas has passed legislation and taken the administrative action stipulated in that legislation to ensure that gold plans cost less than silver (since silver plans, enhanced by Cost Sharing Reduction, offer platinum-level coverage at incomes up to 200% FPL, and some 90% of silver plan enrollees in Texas have income below that threshold). Gold plans are available in Texas that cost less that the silver benchmark against which subsidies are set — that is, they cost less than the percentage of income deemed affordable by the ACA’s standards. That’s a boon to people who don’t qualify for high-CSR silver, i.e., people with income over 200% FPL.
Narrow networks continue to encroach
But ACA marketplaces are volatile, changing unpredictably year to year, and all is not roses in Texas and New Jersey marketplaces. In fact they share a problem in 2023: a brand name insurer newly entered the state and undersold the competition at different strategic price points with narrow-network plans. In New Jersey, Aetna now offers the lowest-cost and benchmark silver plans, as well as the three cheapest bronze plans. In all but the southern part of the state, major hospital systems are out of Aetna’s network. Aetna’s plans are only modestly cheaper than those of AmeriHealth, which has a robust network by ACA standards in most of the state, so the damage is relatively limited.
In many Texas counties, Cigna has wrought more severe network problems, which Jenny Hogue brought to my attention. In Tarrant County, home to Fort Worth, which had 104,933 marketplace enrollees in 2022, Cigna offers eight silver plans priced lower than any competition, as well as the seven cheapest bronze plans. The Cigna network in zip code 76101 in that county (rating areas sometimes cross county lines) includes 83 primary care physicians, by Hogue’s count, compared to 2,592 in the Blue Cross/Blue Shield Advantage network plans (the count excludes nurse practitioners and physician’s assistants). Cigna also undersells other insurers, including Oscar, UnitedHealth and Aetna, by large margins in Tarrant.
In Kaufman County outside Dallas, home to 13,727 marketplace enrollees in 2022, Cigna offers plans priced far below those of the only other two insurers in the county, BCBS and Aetna (also a new entrant, and also narrow-network, with just two in-network hospitals listed for plan holders under zip code 75142 in Kaufman County). Cigna’s lowest-cost silver plan in zip code 75142 is priced 15% lower than Aetna’s and 35% lower than BCBS’s. Its lowest-cost bronze plan is priced 19% below Aetna’s and 28% below BCBS’s. In the Cigna Connect network, there are no in-network emergency rooms within 30 miles, according to Hogue’s analysis, and no in-network hospitals nearer than 35 miles away, according to my check on the Cigna site.
In zip code 75159, partly in Dallas and partly in Kaufman Counties, Cigna’s only listed in-network obstetrical providers are two nurse practitioners working for Planned Parenthood. Other zip codes in the county do list a number of obstetricians as in-network (rating areas cross county lines), but none are closer than 27.5 miles away.
That kind of instability and market pressure toward narrow networks is endemic in ACA markets. It’s compounded by the insane proliferation of plans, illustrated by Cigna’s domination of the low price positions in the counties discussed above, which can make it challenging to find viable alternatives. CMS has recognized the latter problem, reintroducing standardized plans and proposing sharp reductions in the number of nonstandard plans each insurer can provide in each area in a not-yet-finalized rule for 2024, discussed in this post. The proposed rule for 2024 also would better enforce and also improve network adequacy standards.
Have to admit it’s getting better…
While massive subsidy increases have vastly extended the availability of affordable plans in the ACA marketplace, ten years of marketplace experience also make it pretty clear that the program’s design was shaped in large part by health economists’ ideas that have been largely discredited. First, that competition among insurers would hold down premiums and so costs to the federal government. It does — by generating crappy networks that make more robust networks financially untenable. Next, that competition would foster a beneficial variety of products — that each enrollee could find a plan ideally suited to her needs. In truth, no one except perhaps a commodities trader on a busman’s holiday relishes decoding a maze of variant copays, coinsurance, Swiss-cheese deductibles (some services subject to it, some not) and out-of-pocket maximums, or laboriously counting out how many orthopedists or obstetricians are in-network (Tier 1? Tier 2? Tier 3?) in their rating area. Third, the proposition that substantial out-of-pocket cost exposure will make smart shoppers of enrollees and induce them to forgo low-value or unnecessary care. Truth: Americans are hobbled by medical debt, and large pluralities forgo needed and high-value care (and drugs) because of cost.
Laboriously, intermittently, federal and state policy is moving to redress market distortions shaped by these misconceptions. Several states as well as CMS (which sets rules for 33 states using the federal exchange, HealthCare.gov) are moving to limit or even eliminate variations in plan design and quantity, or extend eligibility for low-cost standardized plans with low out-of-pocket costs (in Massachusetts, New York and Minnesota). At least a half-dozen states have implemented rules to ensure that gold plans are available below the cost of benchmark silver, providing a kind of back-door Cost Sharing Reduction for enrollees with income too high to qualify for the strong CSR that attaches to silver plans at incomes below 200% FPL.
The dysfunctions of U.S. politics led the Democrats who enacted the ACA to thrash their way, in Jonathan Cohn’s memorable phrase, to “second, third, and fourth-best solutions.” Among the second-best, class the ACA’s Medicaid expansion, currently providing more than 20 million low-income Americans with comprehensive coverage at minimal out-of-pocket costs (albeit often with sharply limited choice of providers), and substantially reducing medical debt among those eligible. Among the fourth best, classify the marketplace in its original composition, now perhaps inching its way backwards through that hierarchy.