What does this Workaround Mean for Enrollees?

This plan ensured that most people buying insurance on the exchanges could be the same or better off. 84 percent of exchange enrollees receive premium subsidies.⁸ Their subsidy increased in 2018 in step with the increase in the benchmark plan premium. People in silver-load states who bought a silver-level plan would be held harmless, since the subsidy increase would cover the increase in their premium. Yet, they could be better off if they took the higher premium subsidy to buy a better plan, at no additional cost to them. In many states, gold-level plans, which compensate a higher share of medical care costs than silver-level plans, were cheaper than the loaded silver ones. Alternately, for someone who bought a bronze-level plan, the increased subsidy covered more, perhaps all, of her premium (early enrollment data suggests increased overall enrollment in Bronze plans, in fact).

The only category of people worse off were those who buy exchange plans without subsidies. In the 40 silver-load states, unsubsidized silver-plan buyers might pay more (bronze and gold plan buyers were unaffected). Half of these states worked around this problem by loading the increase onto only on-exchange plans, so that people with unsubsidized silver plans could switch to a similar plan off the exchange and avoid paying more, a strategy the experts call the “silver switcharoo.”

The bottom line is that the lion's share of consumers could be as well or better off, if they navigate the new landscape. This, however, is a big if, as discussed below, as it demands more knowledge and health insurance fluency than most people have.

What does it Mean for Insurers?

Insurers faced instability in 2018 as the new strategy sorts out. Some had already dropped out of the exchanges in response in part to policy uncertainty.^{Reference Khazan9} But this new, no-CSR equilibrium is better for them. It makes uncertainty around CSR appropriations moot. In the short run, they may enjoy a windfall. They can sue the Department of Health and Human Services (DHHS) in the Court of Federal Claims for payment of CSRs owed them. If successful, an insurer could recover for CSRs owed in 2018 and also have received higher premiums intended to make up for unpaid CSRs. Ironically, President Trump lambasted the CSRs as a gift to bloated insurers, but his failure to pay them might be the true gift — one from the federal purse

What does it Mean for the Federal Government?

The CBO estimated increased spending of almost $200B over 10 years if the CSRs are not paid.¹⁰ In other words, the money the Administration saved by not making CSR payments will be more than made up by increased federal payments of premiums subsidies.

What does it Mean for the Future of Health Policy and Reform?

This CSR scuttle shows states' adaptability to the Trump Administration's efforts to undermine the ACA. States managed in short order to find a solution where nearly all insured and all insurers could be held harmless from a strong blow. What is tragic is that, with all of its brilliance, this adaptation consumed massive regulatory energy and, in the end, consumers will struggle to navigate it successfully.

It offers yet another example of the shortcomings of the modern era of market-driven health policy solutions, which I describe in more detail in a longer Article forthcoming in the UCLA Law Review. They are malleable, time-intensive, and indecipherable. The ACA was offered as a political compromise — a market-based approach — but the price of that compromise continues to be paid.

First, health care markets require constant technocratic tinkering to work. As noted above, six million people get CSRs¹¹ — 2 percent of the U.S. population.¹² 2017 marketplace enrollment was 10M¹³—just 3 percent of the population. This drama that has consumed the attention of the White House, Congress, the DHHS, state regulators, the Courts, the media, and academics is happening at the margins of health insurance coverage. It distracts from efforts with greater potential impact.

Furthermore, markets that require tinkering are vulnerable to sabotage. The Trump Administration has repeatedly acted to destabilize the exchanges. Its latest efforts threaten to undermine risk pooling, which will likely make insurance more expensive for people. One set of efforts has allowed the sales of more bare-bones plans on the exchanges, in the form of “Association Health Plans” and so-called short-term plans. If younger, healthier people choose these plans, premiums for more comprehensive plans will increase for others (of course, if these others receive premium subsidies, sticker price increases might not matter). Another example is the recent, rash decision to halt risk-adjustment payments to insurers, which compensate insurers who enroll less-healthy-than-average populations. This decision — made prematurely in response to a single trial court ruling against the payments in New Mexico, would have made it harder for some insurers to stay afloat and created the incentive for insurers to cherry pick healthy enrollees. The administration has already changed its position and agreed to make these payments, at least for now. These efforts create uncertainty will erode the quality and affordability of ACA coverage.

The average American is unlikely to take notice of this “routine” regulatory tinkering, which, in turn, dampens the kind of collective resistance that helped squelch Congress's bolder repeal and replace attempts.

Second, the past year shows the vulnerability of creating policies that require deep industry cooperation to work. None of the Administration's actions described above necessarily sinks the exchanges, unless the insurers decide to abandon ship rather than to adapt to a continuously changing environment.

Third, the idea that consumers can make good choices in health care markets, even if regulators work excruciatingly hard to create such options, is naive. This truth is magnified as exchanges become increasingly complex.

Reams of studies show that people lack sufficient numeracy, health literacy, and financial literacy skills to make good health care decisions.^{Reference Nelson15} People especially lack health insurance literacy. The average person does not understand the technical terms that describe her health insurance policy, how much it costs, and what benefits are covered.^{Reference Marquis16} In a survey of insured adults, only 14 percent correctly answered four simple multiple choice questions to elicit basic understanding of cost-sharing features, such as a deductible.^{Reference Loewenstein17} Most people do not understand whether they are in a plan where they can see any doctor or in a managed care plan that restricts whom they can see.^{Reference Nelson18}

Even the most astute consumers have difficulty navigating the exchanges, often choosing plans that are not cost-minimizing or in line with their own stated preferences.^{Reference Bhargava, Loewenstein and Benartzi14} In 2018, the savviest of consumers will struggle to understand the sharp premium increases for some or all plans and to take advantage of the chess moves, like the silver switcharoo, that enable them to be as well or better off.

The CSR scuttle reaffirms why market-based health policies are time consuming to keep afloat, vulnerable to sabotage, and difficult for people to navigate. This past year makes it perfectly clear that we can and should do better going forward.