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Strange Math: More means Less, ACA-syle

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So, another day, another TwitterSpiration©:

ACA Marketplace Plan Affordability Is Likely To Decrease For Subsidized Enrollees In 2020

Okay, I’ll bite: what gives?

Well, it seems that, across the board, 2020 ObamaPlan premiums have decreased a bit from last year.

Okay, Henry, that seems to be good news for folks stuck with them, why the glum face?

Well, it’s because premiums have declined, so insureds are having to pay more.


I know, it’s weird, but bear with me here. First, let’s take a look at how Exchange-based ObamaPlans are priced:

One goes to the site, set up an account, and determines subsidy eligibility. It’s important to note that there are actually two very different kinds of subsidy: the one everyone know about, which is the Advance Premium Tax Credit (APTC), and the one that seems to always be under everyone’s radar: Cost Sharing Reductions (CSR). We’re going to focus on the former, because that’s where the TwitterSpiraton© comes in.

Once one has determined subsidy-eligibility, the next step is to click through to the quoting engine, which provides a “menu” of various carriers and plans, complete with two prices for each plan: “retail” (no premium credit, so full cost) and “subsidized” (where the APTC is applied and you see how much the plan will cost you each month). There’s a bit more to it, but this pretty much sets the stage.

The (online) dictionary defines ‘counter-intuitive’ as: “counter to what intuition would lead one to expect.”

And so?

So the “glitch in the subsidy matrix” is that, contrary to what one might expect, when premiums decrease, the insured’s monthly contribution increases.

Say what?

It turns out that “lower premium levels reduced premium spreads for subsidy-eligible individuals. Lower premium spreads mean that subsidy-eligible individuals will face higher premiums.


(If you’re interested in the mechanics of how that works, do click on through to the linked article)

Heading further down the rabbit hole, I pondered just how many folks that might actually affect. Our friend Charles Gaba came through for us:

About 84% of folks with ACA plans receive the Premium Tax Credit (APTC). That’s 9.59 million out of 11.41 million nationally

So more than 8 out of every 10 ObamaPlan enrollees receive premium subsidies. Wow, that’s a lot of folks who may well be feeling additional pain this year (at least in terms of premiums).

So here’s the $64,000 question:

How will this affect all those folks with plans now receiving premium reductions due to CV-19?

Original content copyright © InsureBlog


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