Wakely was retained by the Association for Community Affiliated Plans (ACAP) to analyze the impact of a potential change to the benchmark plan, in the Affordable Care Act (ACA) Individual
market, from a silver to a gold plan. This paper analyzes the potential policy and illustrates some of the effects it could have on premium subsidies and enrollee costs, with a particular focus on the distributional implications as to which groups of enrollees may benefit more from the policy and which groups of enrollees may benefit less from the policy.
One of the key provisions of the ACA included subsidized premium coverage in the Individual market. The amount of subsidies an individual (or family) could receive is based on household income and cost of the qualified health plans (QHPs) available to an individual in a specific area. In particular, the amount of premium subsidy an individual is eligible for is the difference between the maximum contribution amount (which is based on income) and second-lowest cost silver plan offered in the region an individual is purchasing a plan; the second-lowest cost silver plan, which the premium subsidy calculation is based on, is called the benchmark plan. President Biden has proposed changing the benchmark plan from a silver plan to a gold plan, with a goal of increasing affordability. However, given a number of factors and varying market dynamics, the exact impact will depend on the individual situation.
The key findings of shifting from a silver to gold benchmark include:
- In a majority of areas, enrollees would see increases in the amount of premium subsidies available. Individuals that are at lower income levels (i.e.,FPLs) and/or are older would see comparatively larger increases relative to those that are younger or have higher incomes.
- Generally areas that have higher premium amounts will also see higher increases in premium subsidies.
- The caveat to the above findings is that there are a number of areas where silver premiums are higher than gold premiums. In those areas where gold plans are cheaper than silver plans, the shift from a silver to gold benchmark could actually reduce the amount of premium subsidies available to an individual, all else equal.
One crucial policy decision surrounding a shift from a silver to gold benchmark is understanding what changes will be proposed (or lack there-of) to cost-sharing reductions (CSRs). Key questions as to the treatment of CSR variants and how issuers will price for them are important to understand in order to determine the exact impact of shifting from silver to gold benchmarks.
Changes to these issues are still uncertain.