Analysis: 'Silver loading' led to exodus to bronze-tier plans in majority of states

The practice of "silver loading" on the Affordable Care Act’s (ACA's) insurance exchanges has led more consumers to migrate from silver plans toward bronze-tier plans that have lower premiums but higher out-of-pocket costs, a new analysis finds.

The analysis, released Wednesday from the Robert Wood Johnson Foundation, explores the impact of President Donald Trump’s late 2017 decision to halt reimbursements to insurers for cost-sharing assistance. The analysis stressed that more funding is needed for enrollment assistance to help customers learn more about the issues with selecting a bronze-tier plan.

“One consequence of the administration’s elimination of cost-sharing subsidies in the ACA marketplace has been a shift toward greater enrollment in bronze plans,” said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, in a statement.

Insurers are required to lower the out-of-pocket costs for low-income ACA customers, but the Obama administration reimbursed the insurers. Trump halted the reimbursements, but insurers were still required to offer this cost-sharing assistance.

RELATED: Mandate against 'silver loading' likely during next ACA open enrollment

In response, most states allowed insurers to add the cost for this assistance onto the second-cheapest silver plan, a method called "silver loading." The law ties premium tax credits to the cost of that silver plan, so the move increased the tax credits.

“This approach increased silver premiums relative to other levels of coverage, increasing the federal cost of providing premium subsidies and making silver plans more expensive relative to other tiers of insurance offered,” the analysis said.

Researchers looked at data released by the Centers for Medicare & Medicaid Services (CMS) in late 2019 on the enrollment trends in the 39 states that rely on to sign up residents for ACA coverage.

They found that, in 2018, the average silver plan premium rose by 38% above the cheapest bronze-tier plan. This major shift sparked an 11 percentage point drop in the enrollees getting silver plans.

Most of those customers decided to go for a bronze plan, which may have lower premiums but offer much higher out-of-pocket costs, the analysis found.

Silver remained the most popular tier of plans on the exchanges in 2018 in the states studied, with 64% of enrollees in a plan in the tier. Bronze tier plans enrolled 28% and gold 7%.

Another problem has been that customers may not know about the higher costs in bronze plans because the Trump administration dramatically decreased funding to the ACA’s navigators that offer enrollment assistance. People who are eligible for tax credits if their income is below 250% of the federal poverty level are also eligible for out-of-pocket cost subsidies, but only if they enroll in a silver plan.

Researchers presumed that many consumers could be unaware of the financial implications of getting a bronze plan instead of silver.

“Better enrollment assistance might help low-income customers choose a plan where high out-of-pocket costs do not reduce the value of the coverage,” Hempstead said.

The foundation noted that the price and enrollment issues are likely to continue this year and beyond, “highlighting the need for additional support for consumers navigating the trade-offs between premiums and out-of-pocket costs.”

It also remains unclear whether CMS will make changes to silver loading. The agency toyed with outlawing the practice in early 2019 but decided against it after major pushback from insurers and providers.