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New Premium Subsidy Boost to Test ACA Exchange System: Covered California Chief

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What You Need to Know

  • Peter Lee says the ACA exchanges and insurers should court agents.
  • Colorado's exchange chief says advertising in the summer should be cheaper than in the fall.
  • Nevada's exchange chief says local management helps.

President Biden today signed a bill, H.R. 1319, that brings two big new American Rescue Plan Act (ARPA) health insurance premium subsidy increases to life.

Peter Lee, executive director of Covered California — California’s Affordable Care Act (ACA) public health insurance exchange — told health insurance company executives Wednesday that they could persuade Congress to make the temporary ARPA subsidy increases permanent, if they do a great job of using the subsidies to sell more people health insurance.

“If we sit on our hands and don’t enroll people, and show the value of the ACA, this is not going to be permanent,” Lee said, at an America’s Health Insurance Plans National Health Policy Conference that was presented live on the web. Lee appeared on a panel with Heather Korbulic, the executive director of Nevada’s Silver State Health Insurance Exchange; Kevin Patterson, the CEO of Health Connect for Colorado, and Kelley Schultz, AHIP’s executive director for commercial policy.

One key to enrolling enough people to impress Congress will be outreach, and one critical way to improve outreach is to talk to people who know how to sell insurance, Lee said.

“You gotta work with your agents,” Lee said. “For many of you, that’s how you get a lot of your business.”

The ARPA Premium Tax Credit Subsidy Changes

The Affordable Care Act public health insurance exchange system is supposed to be like Amazon for health insurance.

Many states and the District of Columbia have their own, locally run exchanges.

The U.S. Department of Health and Human Services runs a national exchange program, HealthCare.gov, for states that have been unwilling or unable to set up their own exchange programs.

Under the ordinary Affordable Care Act rules, consumers with income up to 400% of the federal poverty level can use premium tax credit subsidies to pay for coverage.

ARPA Title IX Section 7 will increase the generosity of the premium tax credit subsidies at every level and make subsidies available to anyone, at any income level, who would be paying more than 8.5% of income for health coverage, until the end of 2022.  That means that some people earning $200,000 or more per year could get some help with paying their premiums.

Here’s how the Title IX Section 7 would affect the maximum amount an ACA exchange expects an individual or family at a given income level to pay for exchange plan coverage, with income given in terms of household income as a percentage of the federal poverty level:

  • 100% to 133%: 0% (down from 2.07%)
  • 133% to 150%: 0% (down from 3.1% to 4.14%)
  • 150% to 200%: 0 to 2% (down from 4.14% to 6.52%)
  • 200% to 250%: 2% to 4% (down from 6.52% to 8.33%)
  • 250% to 300%: 4% to 6% (down from 8.33% to 9.83%)
  • 300% to 400%: 6% to 8.5% (down from 9.83%)
  • Over 400%: 8.5% (down from having no limit)

The Congressional Budget Office predicted in February that health insurers will use the Affordable Care Act public exchange programs to sell individual and family health coverage to only about 10% of the 15 million uninsured and underinsured people who will be eligible for the expanded subsidies.

“I think they’re wrong,” Peter Lee said. “If we do a decent job.”

Marketing the Exchange Plan Subsidy Increases

Health insurers have tried to prod young, healthy people into paying ACA exchange plan premiums when they feel fine by letting them buy individual coverage only during a limited open enrollment period, to raise the possibility that, if they try to go without coverage, they might get sick or hurt at a time when they have no way to get insured.

Covered California has been experimenting with offering longer and longer enrollment periods, and it will probably announce a long new open enrollment period soon, Lee said.

Covered California will support the new enrollment period with more marketing spending, and health insurers should be spending more on marketing, too, he added.

“If you as a health plan are not spending 0.6% of your premium in your local market on marketing, shame on you,” Lee said.

Kevin Patterson, the CEO of Connect for Health Colorado, Colorado’s ACA exchange, said that, during ordinary open enrollment periods, from Nov. 1 through Dec. 15, advertising on TV and radio is difficult.

“When we’re in the throes of enrollment, it’s normally holiday spending and political ads that we’re up against,” Patterson said. “We get bumped every time.”

Now, “I am considering spending more than we have on TV,” Patterson said.

In most markets, Lee said, TV and radio advertising will be much cheaper in the spring and summer than in the fall and winter.

Lee said exchanges and insurers have to focus on how much lower the premium tax credit subsidy expansion will make out-of-pocket coverage costs for most enrollees.

“We need to be out there, and you health plans need to be out there, saying, ‘These subsidies under the American Rescue Plan are big and, if you shopped before, shop again,’” Lee said.

The Long Run

In the long run, Lee told health insurance company executives, health insurers that want the private individual and family health insurance market to continue to exist have to get involved with making the delivery of health care better and cheaper.

“Sadly, health plans have not been drivers of better lower cost health plans,” Lee said. “They have too often said, ‘We aren’t going to muck around with care delivery. That’s hard. That’s someone else’s job.’ Well, if you don’t, be ready for single-payer taking over the world, folks. So, look at what you can do as a health plan to get payment changes, to have care be delivered better at the right time. If you don’t, you are all toast. We’ll be fine. We’ll be marketing something new. But it won’t be you.”

Clockwise from top left: Kelley Schultz, Kevin Patterson, Peter Lee, Heather Korbulic. (Image: America’s Health Insurance Plans)

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