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Monday, June 3, 2019

Silver Linings for Silver Loading

Stan Dorn

Director of the National Center for Coverage Innovation and Senior Fellow, Families USA



Stan Dorn, Silver Linings for Silver Loading, Health Affairs Blog, 6/3/2019,

One of the strangest chapters in the Affordable Care Act’s history began a few hours after midnight on October 13, 2017. At 2:36 am, a Presidential tweet announced the end of cost-sharing-reduction (CSR) payments to insurers: “The Democrats [sic] ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has [sic] stopped. Dems should call me to fix!” Later that morning, officials at the Department of Health and Human Services explained that the federal government would soon stop reimbursing insurers to cover the cost of giving low-income consumers legally-required reductions in out-of-pocket cost-sharing. These events quickly “sent shares of health insurers and hospitals plummeting” on Wall Street. The Washington Post exclaimed, “President Trump is throwing a bomb into the insurance marketplaces created under the Affordable Care Act,” and Democratic leaders in Congress denounced the move as “a spiteful act of vast, pointless sabotage.”

Paradoxically, this attempted sabotage wound up strengthening rather than undermining marketplace coverage offered to low- and moderate-income families, thanks to a clever response by most plans and states. Despite the Presidential decree, federal law still required carriers to furnish CSRs to people with incomes at or below 250 percent of the federal poverty level (FPL) who bought silver-tier plans on a health insurance marketplace. Under “silver loading” strategies that are now being implemented in nearly all states, the resulting claims costs were covered by raising premiums on precisely those silver plans.

Such “loading” of CSR costs onto silver premiums raises federal premium tax credit (PTC) amounts, which helps many low- and moderate-income PTC beneficiaries—at federal expense. PTCs are calculated by subtracting each consumer’s income-based premium share from the cost of the second-lowest silver-tier plan offered to the consumer. Higher silver premiums thus mean higher PTC amounts, giving more PTC beneficiaries access to zero-premium bronze coverage or to gold plans for little more than the cost of silver.

By 2019, 15 states had average gold premiums lower than average benchmark silver premiums, and in 15 other states gold premiums exceeded benchmark silver by less than 10 percent. The Congressional Budget Office (CBO) recently estimated that ending CSR payments increased the number of people receiving marketplace coverage by roughly 2 to 3 million per year, causing nearly $10 billion in annual net federal cost increases for insurance provided during 2019 through 2021.

Independent researchers have reached similar conclusions. One analysis found that the shift to silver-loading in 2018 increased enrollment by about 8 percent among PTC beneficiaries with incomes above 200 percent of FPL, largely offsetting the effects of other, simultaneous federal changes in policy and practice that depressed participation levels (a shortened open enrollment period, reduced funding for application assistance and public education, well-publicized statements calling for the ACA’s repeal, etc.).  A recent study found that zero-premium coverage was available to more than half of marketplace participants in 2018, with the exact proportion ranging from 25 percent in states that did not permit any silver-loading to 58 percent in states that focused silver-loading on plans offered in health insurance marketplaces. Responding to indications that the Centers for Medicare and Medicaid Services (CMS) were considering ending silver-loading and requiring CSR costs to be spread evenly among plans at all metal levels—so-called “broad loading”—another analysis, published on Health Affairs Blog, concluded that many individual-market enrollees would be worse off under that policy: “Detailed, actuarial simulations will be needed, but we anticipate significantly lower enrollment if states are required to spread the cost of CSRs to all plans instead of loading the costs only to silver plans.”

In its recently finalized Notice of Benefits and Payment Parameters for 2020, CMS noted the agency’s discomfort with silver loading and the resulting federal costs. The agency called on Congress to appropriate funding for CSR payment, but did not move to end silver loading for next year. The issue may assume increased salience now that several court decisions have ordered CMS to restore CSR payments, even though such payments combined with silver loading would overcompensate carriers and potentially force large rebates to consumers under the ACA’s medical-loss-ratio rules. Further highlighting the issue’s continuing relevance, health legislation just passed by the House expresses the sense of Congress that HHS should not limit the practice of silver-loading.

RAND analysis  

National estimates

Today the RAND Corporation released a study of silver-loading that breaks important new ground. Using RAND’s COMPARE microsimulation model, researchers estimated the effects of moving from the current practice of silver-loading to either broad-loading or a restoration of CSR payments for the year 2020. The report concluded that such changes would have major effects:

  • Either change would lower silver premiums, thereby reducing PTC amounts, while simultaneously increasing premiums for plans at other metal levels; the latter result would be particularly pronounced under broad loading.  With either broad loading or CSR-payment restoration, out-of-pocket premium costs paid by consumers to maintain the same coverage they have under silver loading would rise for people currently enrolled in non-silver plans. This group includes numerous PTC beneficiaries and the vast majority of market participants who lack PTCs. 
  • These higher premium costs would increase the number of uninsured. Net increases in the number of people without coverage would be twice as large under broad loading (1.6 million) as with a restoration of CSR payments (0.8 million).
  • Many consumers would stay insured by moving to less generous coverage with lower actuarial value. Under either broad loading or CSR-payment restoration, 2.6 million people would make this shift. Fewer would move in the opposite direction, to higher-value coverage—1.4 and 1.8 million people, under broad-loading and restoration of CSR payments, respectively. The latter shifts involve changing from bronze to silver plans.
  • Among PTC beneficiaries with incomes between 200 and 400 percent of FPL, the proportion with access to zero-premium bronze plans would drop precipitously—from 40 percent to 11 percent, under either broad-loading or CSR-payment restoration. (Bronze plans generally limit access to care by charging high deductibles, with a median of $6,400 in 2018. However, nearly 40 percent of bronze plans furnish some pre-deductible coverage of generic drugs or office visits; and some carriers report that consumers who initially seek coverage based on the prospect of “free” bronze insurance often wind up purchasing silver or gold coverage instead.)
  • The federal government would save $8.0 billion a year on PTCs under the shift from silver loading to broad loading. If the federal government restored CSR payments, PTCs would fall by $14.4 billion annually but CSR payments would total $8.3 billion, yielding $6.1 billion in net federal savings.

Some of the report’s most startling findings involve “rate shock,” the increased premium costs consumers would be charged to keep the coverage they have today. At every income level, but particularly among consumers with incomes above 200 percent of FPL (including both those with and those without PTCs), the vast majority of consumers would experience significant premium increases for their existing coverage (tables 1 and 2).

Table 1. Number of people charged more and less for their current coverage: change from status quo to broad loading, 2020

PTC Status Income People charged more People charged less
# (millions) Average
# (millions) Average
Beneficiary <200% FPL 2.1 $1,480 0.5 ($245)
200-400% FPL 4.5 $1,483 0.1 ($153)
Non-beneficiary >400% FPL 3.1 $2,410 0.2 ($514)
Total: 9.6 $1,800 0.8 ($325)

Source: Analysis by National Center for Coverage Innovation at Families USA (NCCI) of RAND study results, 2019. Totals may not add because of rounding.

Table 2. Number of people charged more and less for their current coverage: change from status quo to CSR payment, 2020

PTC Status Income People charged more People charged less
# (millions) Average
# (millions) Average
Beneficiary <200% FPL 3.2 $878 1.0 ($348)
200-400% FPL 4.7 $1,508 0.1 ($227)
Non-beneficiary >400% FPL 2.9 $2,033 0.4 ($146)
Total: 10.7 $1,475 1.6 ($270)

Source: NCCI analysis of RAND study results, 2019. Totals may not add because of rounding.

Put differently:

  • Out of an estimated 14.3 million people projected to receive individual-market coverage in 2020, 9.6 million, or 67 percent, would be charged more to maintain their existing insurance coverage under broad loading; and 10.7 million, or 75 percent, would be charged more if policymakers restored CSR payments to health insurers. Average cost increases would exceed $1,400, under either scenario.
  • A change from the current, silver-loaded policy to broad loading would raise consumer premium costs for more than 12 times as many people as would pay less; and the average cost increase would be more than 5 times the size of the average savings.
  • Restoring CSR payments, thereby ending silver loading, would increase out-of-pocket premiums for nearly 7 times as many people as would experience savings; and the average cost increase, per capita, would be more than 5 times the average savings experienced by the small group that saves money due to CSR-payment restoration.

On net, consumers’ premium charges for current coverage would rise by $17.0 billion under broad loading in 2020 and $15.4 billion under CSR-payment restoration, compared to costs with current silver-loading rules.

Following the major sea-change resulting from either broad loading or the restoration of CSR payments, many consumers could change plans to mitigate or avoid these cost increases. Some would not have any affordable alternatives and thus would become uninsured. Others may have difficulty navigating the changes that result from silver loading’s termination, ultimately paying needlessly high premiums or dropping coverage entirely despite the availability of viable alternatives. Under either policy change, the majority of marketplace consumers would likely be upset about the dramatic cost increases they find themselves charged for keeping their current coverage.

California estimates

With a large exchange that illustrates broader trends in states that have been proactive in maximizing coverage gains under the ACA, California deserves special attention. RAND’s projections thus include California estimates. They are similar to the national estimates described above, but several relatively minor differences are evident.

The first difference involves the balance between “winners” and “losers.” Hardly any Californians buying individual-market coverage would pay lower premiums for existing coverage if silver loading was replaced by broad loading or CSR payments to insurers. Why?

  • Nationally, some PTC beneficiaries who use tobacco would see their premium costs decline under broad loading or CSR-payment restoration. That is because most states let carriers raise premiums by up to 50 percent for tobacco users, and PTCs do not cover that extra cost. Lower premiums thus reduce the dollar cost of tobacco surcharges, which are set as a percentage of each enrollee’s gross premium. In California, however, carriers may not raise premiums based on tobacco use. Lower premiums would therefore not yield this category of savings for California’s PTC beneficiaries.
  • For 2018, California’s exchange encouraged its 65,000 unsubsidized enrollees in silver-tier coverage to shift to silver plans offered only off-exchange, which did not raise premiums under the state’s approach to silver loading. By December 2018, fewer than 31,000 people without PTCs —just 2.4 percent of the 1.3 million Californians who received marketplace coverage—were still buying silver plans in the exchange. By contrast, 8.3 percent of consumers covered through the federally-operated, web site in 2019 (700,000 out of 8.3 million people) purchased silver-tier, marketplace plans while paying full premiums.

Second, California’s individual market exhibits several different relationships between plan premiums than are present in the country as a whole. For example:

  • Many fewer PTC beneficiaries with incomes above 200 percent of FPL have access to zero-premium bronze plans: 23 percent in California, compared to 40 percent nationally. In part, this reflects California’s implementation of the ACA’s Medicaid expansion plus the state’s Medicaid coverage of low-income immigrants who would otherwise qualify for PTCs. These steps limit the silver-loading needed to cover CSR costs.
  • Both in California and nationally, broad loading and CSR-payment restoration increase consumer premium costs overall and raise the number of uninsured. However, in California, unlike the rest of the country, the number who move from lower to higher metal tiers of coverage is equal to or greater than the number who move from higher to lower tiers.


If national policymakers ended silver-loading by restoring CSR payments to insurers or by “broad-loading” CSR costs across the entire individual market, massive disruption would result. At least two-thirds of everyone now covered through that market would be charged more for their current coverage, with average increases that exceed $1,400 a year. For consumers as a whole, annual premium costs would rise by more than $15 billion, even after subtracting the modest savings that a small minority would enjoy. The number of uninsured would grow, and millions would move to plans with lower actuarial value that provide less access to care and reduced financial protection.  Although federal costs would decline, those savings would come at the expense of millions of people who rely on the individual market for coverage.

This post provides information about a RAND Corporation analysis produced on a contract with Families USA, funded through a grant from The California Endowment. The author thanks The California Endowment for supporting this research and is grateful to Dr. Sarah Nowak and Dr. Preethi Rao for their outstanding work on the project. Neither The California Endowment, the RAND Corporation, nor Drs. Nowak and Rao are responsible for the opinions expressed in this post, which are the author's.