A report produced by Covered California, the Massachusetts Health Connector and the Washington Health Benefit Exchange was released on March 6. It examined the impact that federal and state actions have had on state-based marketplaces (SBMs) versus federally facilitated marketplaces (FFMs). The data includes enrollment information from plan year 2019, which was the first year in which was the individual coverage mandate penalty was terminated by federal action and the third year in which the federal government dramatically reduced marketing and outreach on behalf of FFMs.
The report is noteworthy in showcasing how much better the SBMs fared over the FFMs in gaining new enrollment and muting premium costs. Massachusetts performed the best in most arenas over California and Washington; its policies, such as continuing a state-based penalty and certain tailored marketing, could have been factors in its leadership.
- The three states have restrained growth in the average benchmark premium to less 6.8 percent since the marketplaces opened in 2014. (CA = 7.7%; WA = 6.0%; MA = 4.4%) FFM average benchmark premiums have grown at an average rate of 13.1% over the same time period.
- Average benchmark premiums in the FFM are now 85% higher than they were in 2014. The weighted average of the three states was 39%. (CA = 45%; WA = 34%; MA = 24%)
- From 2016 to 2018, FFMs’ level of new enrollments dropped by 40%, whereas the three states had a drop of 6%. (CA = dropped 9%; WA = increased 5%; MA = increased 5%)
- In 2019, FFM’s level of new enrollment dropped 16%; this was on top of a 40% cumulative decline from 2016 to 2018. California’s dropped 24%; Washington’s dropped 50%; Massachusetts’s increased 31%.
All three states conducted strong marketing outreach, which appears to have been a key driver in their new enrollment. FFMs, on the other hand, experienced their third year of cuts to marketing and outreach and perhaps not coincidentally saw decreased enrollment. Massachusetts used data to identify uninsured populations and then tailored outreach to these groups through simple, clear messaging during the enrollment period, unlike having to explain last year’s complex Silver-tier loading dynamics. This was also Massachusetts’s third year working with a marketing and communications firm to create a “culture of coverage” in underinsured communities, so the consistency in messaging could also have been a factor.
Similarly, Washington partnered with community organizations ranging from foreign language radio and TV spots to the Salvation Army to enroll targeted groups. California spent $107 million out of its $340 million budget towards outreach and marketing investments, which included evidence-based activities and funding a community navigator program.
Massachusetts’ level of new enrollment, however, still surpassed Washington’s from 2016 to 2018 and far surpassed both California and Washington in 2019. Its unique penalty could have played a role in its leadership. Massachusetts’ 2006 Health Care Reform Law implemented a monthly penalty for failure to have coverage meeting the standard of minimum creditable coverage, so Massachusetts residents are still beholden to a penalty despite Congress having set the individual mandate penalty to zero in 2017.
Of the penalty, Louis Gutierrez, executive director of the Massachusetts Health Connector, said, “Our experience shows that a mandate that provides incentive to participate, while also delivering important protections and benefits to consumers, plays a vital role not only in people getting covered, but also staying covered.”
Massachusetts’s #StayCovered campaign could also have bolstered the effect of its penalty. The state launched the campaign to educate people about its continuing individual mandate and the importance of “shopping smart” for comprehensive health coverage that meets state standards.
The three states’ strong marketing and outreach could have also at least partially muted its premium increases compared to the FFMs. Pat MacEwan, Chief Executive Officer of the Washington Health Benefit Exchange said, “Enrolling more people means a healthier risk pool, which lowers premiums and saves money for everyone in the individual market.” FFMs, on the other hand, faced decreased marketing and outreach, and this could be part of the reason why premiums rose so high in these states.
To provide a scope of how much the federal marketplace is losing by failing to implement the states’ policies, had the FFM experienced the lower premium growth seen by the three states, the estimated savings to the federal government from lower premium payments for those receiving Advanced Premium Tax Credits (APTCs) could have led to a cumulative savings of $35 billion.
Of the report Covered California Executive Director Peter V. Lee said, “The lesson is striking: Consumers are the big winners when marketplaces use all the tools of the Affordable Care Act. The policies underway in these three states are easily transferable, and if applied to the federal marketplace, taxpayers would save billions of dollars in subsidies, and middle-class Americans would benefit from much lower premiums.”
FFMs and other SBMs should use this report to compare their own performance and policies. Perhaps more states should consider adding individual mandate penalties or should conduct more market research to make their outreach more effective. Or perhaps more states would even like to join the ranks of New Mexico to switch their platform type from FFMs or SBMs on the federal platform (SBM-FPs) and become an SBM.
Look out for an upcoming Softheon whitepaper, which will do a deeper investigation on the three states’ successes from a policy standpoint.
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