It didn’t get much notice at the time, given its release just prior to the massive, 2,232-page omnibus appropriations measure, but the Urban Institute issued a study designed largely, if not solely, for Democrats to engage in political scaremongering prior to the midterm elections this fall. Like other studies before it, the Urban paper omitted inconvenient truths that have made this year’s premium increases less drastic for consumers than they appear at first blush.
In fact, the Urban Institute authors ignored their own prior research while doing so, an explanation one can only chalk up to raw politics—i.e., the desire to show the greatest possible premium increases in political ads this fall, even though few (if any) individuals will pay them.
The study discussed the implications of the Trump administration’s decision last October to stop paying cost-sharing reductions (CSRs) to health insurers, due to the lack of a valid congressional appropriation. The study noted that states decided for themselves how insurers should adjust premiums to account for the withdrawal of the CSR payments, and that most states had instructed insurers to increase only silver plan premiums, or only silver plan exchange premiums, to account for the loss of CSR funding.
But nowhere in the recent Urban study did the researchers explicitly state the major implication of this selective loading of premiums. In most states, individuals who do not qualify for subsidies can avoid the “CSR surcharge” (i.e., the premium costs associated with the withdrawal of CSR funding) by either buying a non-silver plan, or buying a silver plan off the exchange.
As I previously noted, only in six states must unsubsidized individuals pay the costs associated with the withdrawal of CSRs. In the remaining 44 states and the District of Columbia, unsubsidized individuals can choose other plans to avoid the surcharge—and all fully informed, rational consumers would do so.
Given this unusual dynamic, the increase in silver, on-exchange premiums between 2017 and 2018 does reflect an increase in federal spending. Obamacare links premium subsidies to the cost of the second-lowest silver plan on the exchanges, meaning that federal spending on subsidies rose from the “CSR surcharge.” But it does not reflect what people paid out-of-pocket. In most cases, unsubsidized individuals could avoid the surcharge, and most presumably did just that.
The Urban Institute researchers know that most unsubsidized individuals can (and did) avoid the “CSR surcharge”—because they encouraged states to come up with this strategy in the first place. Their January 2016 paper about the withdrawal of CSR payments noted that, if those payments disappeared, unsubsidized individuals would be “strongly disincentivized” to purchase coverage from the exchanges, and would instead “enroll in silver plan coverage” outside the exchanges, where “plan premiums…would be significantly lower.”
Linda Blumberg, one of the authors of the prior study, also co-authored the paper released last month. She did not forget her prior work. In fact, she cited the January 2016 study in footnote six of the March 2018 paper. So why did the March 2018 work nowhere mention that most unsubsidized individuals could, and likely did, obtain cheaper coverage by buying other types of plans?
The obvious answer comes in the lead paragraph of a Politico story about the study: “Premiums for the most popular Obamacare plans skyrocketed by nearly a third this year…” Neither the study nor the Politico story mentioned that in most states, only subsidized individuals—for whom the federal government pays most of their premiums—purchased these plans, and that unsubsidized individuals could avoid these “skyrocketing” premiums by purchasing other coverage.
In other words, the Urban Institute “study” amounted to a political hit piece on Republicans. By coming up with the largest possible premium increases, even though few (if any) individuals actually paid these increases out-of-pocket, the Urban Institute gave Democrats fodder to use in campaign attack ads this fall. Given the lack of attention and consideration the Urban researchers paid to their own prior work, that seems the prime objective for the paper.