Availability of Off-Marketplace Plans With Lower Premiums for Higher-Income Families

ABSTRACT

Objectives: Families with incomes above 400% of the federal poverty level were ineligible for marketplace premium tax credits before 2021 and may again be after 2025. Current laws temporarily removed this income cap, but because credits cap out-of-pocket premiums for a reference plan as a share of income, some higher-income families still receive zero tax credits. We quantified (1) premium differences between on- and off-marketplace plans and (2) the association between these premium differences and state decisions to finance cost-sharing reductions (CSRs) for lower-income families.

Study Design: We created a comprehensive database of on- and off-marketplace plans in each county (including both federal and state-based marketplaces).

Methods: By county and metal level, we compared on- and off-marketplace (1) plan premiums in 2020 and (2) growth rates in the numbers of plans. We contrasted outcomes for states by how insurers were instructed to finance CSRs.

Results: In 2020, 89% of the US population lived in counties where some plans were offered exclusively off-marketplace. In these counties, for a 45-year-old choosing among silver plans in 2020 and who did not qualify for premium subsidies, premiums for the lowest-cost off-marketplace plans averaged 11.3% less than premiums for the lowest-cost on-marketplace plans. In contrast, for bronze and gold plans, the lowest-cost off-marketplace plans were, on average, more expensive. Silver plan premiums were 6.1% higher off-marketplace than on-marketplace in states that loaded CSRs on all silver plans, and 13.5% lower in states that loaded CSRs only on on-marketplace silver plans.

Conclusions: Higher-income individuals and families may consider purchasing Affordable Care Act–compliant silver plans off-marketplace and thereby reduce their premiums. State and federal policy makers should consider the impact of their decisions on the choice between on- and off-marketplace plans.

Am J Manag Care. 2023;29(7):371-376. https://doi.org/10.37765/ajmc.2023.89397

Takeaway Points

Off-marketplace plans have grown in number and are offered in more states. The following results may be useful for insurers offering off-marketplace plans:

• For an individual choosing among silver plans in 2020, premiums for the lowest-cost off-marketplace plans averaged 11.3% less per year than premiums for the lowest-cost on-marketplace plans.
• In states that loaded cost-sharing reductions (CSRs) on on-marketplace silver plans only, the mean premium of the lowest-cost off-marketplace silver plan was 13.5% lower than the mean premium of the lowest-cost on-marketplace silver plan.
• In states that loaded CSRs on all silver plans, premiums for the lowest-cost silver plans averaged 6.1% more off-marketplace than on-marketplace.

In 2020, approximately 1.5 million people purchased individual insurance that complied with the Affordable Care Act (ACA) directly from insurers or through insurance brokers instead of through the state or federal web-based marketplaces, such as HealthCare.gov. They constitute approximately 12% of all individuals who purchased ACA-compliant plans in 2020 (see eAppendix A [eAppendices available at ajmc.com]), but they are not eligible for premium tax credits because they purchased off-marketplace.

Depending on the time period, 2 groups of higher-income families have not qualified for tax credits on the marketplace, making them likely purchasers of off-marketplace plans. The first are families with incomes above 400% of the federal poverty line (FPL) who, before 2021, were not eligible for premium subsidies on the marketplace. These were the majority of individuals in ACA-compliant off-marketplace plans in 2019.¹ The American Rescue Plan Act (ARPA) of 2021 and the Inflation Reduction Act (IRA) of 2022 removed the income cap on eligibility for tax credits for 2021 through 2025. If the income cap is reinstated, all families with incomes above 400% FPL will again be ineligible for subsidies after 2025 and may benefit from seeking lower premiums off-marketplace. The second group of families is those with incomes high enough that they are currently not qualified for premium tax credits under the ARPA and IRA. Under these laws, the tax credit for a family with income above 400% of FPL is set so that the premium of the second-lowest-cost silver plan would not exceed 8.5% of income. Thus, families with incomes above approximately 12 times that premium—roughly $152,000 for a single person in 2021—do not qualify for tax credits and may currently benefit from seeking lower premiums off-marketplace. This group may be large: If ARPA had been in effect in 2017, Fung and colleagues estimated that at least half of the Californian policyholders of off-marketplace plans with incomes above 400% FPL would not have received premium tax credits to purchase an on-marketplace plan.²

Our article is the first to quantify the relationship between state policies and differences between on- and off-marketplace premiums within counties. One such state policy is how cost-sharing reductions (CSRs) for silver plans are financed. The ACA requires insurers to reduce cost sharing for families with incomes below 250% FPL when they are enrolled in on-marketplace silver plans. The federal government initially reimbursed insurers for the costs of those CSRs. In 2017, the federal government ceased reimbursing insurers for CSRs.³ Because insurers were required to provide CSRs even though federal financing was not available, state insurance commissioners instructed insurers to incorporate (“load”) the additional costs into premiums, either for all plans; all silver plans, both on- and off-marketplace; or on-marketplace silver plans only, as 45 states eventually did. CMS subsequently encouraged states to allow insurers to offer silver plans off-marketplace that did not include the loading.⁴ Colorado went further and required that insurers offer off-marketplace silver plans substantially similar to those offered on-marketplace.⁵ Massachusetts does not require insurers to actively market to all, but plans must accept all applicants.⁶ Our article addresses whether states loading CSR costs only onto on-marketplace silver plans experience larger premium differences between on- and off-marketplace plans than other states.

A second state policy affecting premium differences concerns states’ decisions about whether to expand Medicaid eligibility under the ACA. Adults with incomes between 100% and 138% FPL have access to Medicaid in states that expanded coverage, but in nonexpansion states they are eligible for CSRs that greatly increase the generosity of silver plans. Holding other factors constant, premiums in nonexpansion states must be higher than in expansion states to pay for proportionately more individuals with the most generous CSRs.

METHODS

On- and Off-Marketplace Plan Data

We constructed a novel and comprehensive database of on- and off-marketplace bronze, silver, and gold plans (inclusive of federal and state-based marketplaces) in 2020 from several CMS sources, including Marketplace Public Use Files (PUFs), Plan Finder files, Rate Filing Justifications for Single Risk Pool Plans, and, from the Robert Wood Johnson Foundation, the HIX Compare data set. Additional details were collected from insurer websites. Estimates comparing 2020 and 2022 plans use more limited data from the CMS PUFs for Single Risk Pool Plans. Details about data sources are in eAppendix B.

Analytic Approach

We present descriptive comparisons from observational data. Our estimates were weighted using US Census Bureau total population estimates for each county. Statistical tests accounted for within-state correlation across counties arising from state-specific policies and other characteristics.

Premiums and Benefits

For bronze, silver, and gold plans in each county, we determined the lowest monthly premiums on- and off-marketplace. Because premiums are set using a standardized age curve, in several tables we focus on premiums for 45-year-olds but also highlight the variability in premium differences by age for 30-, 45-, and 60-year-olds.

We used each plan’s actuarial value to compare the benefit generosity of the lowest-premium plans. Specifically, a plan’s actuarial value is the share of total allowable expenditures for a standardized population that the plan would expect to pay, with higher numbers indicating more generous plans.

To compare how cost sharing and premiums differ for on- and off-marketplace plans, we summed annual premiums and deductibles (ie, the amount the enrollee must pay out of pocket for care before the insurer begins paying) and determined the plans on- and off-marketplace with the lowest total premium and deductible.

How States Instructed Insurers to Load CSRs

We cross-referenced multiple sources, including rate filings and state documents, to determine how states directed issuers to cover the loss of federal subsidies for CSRs through higher premiums. Details are in eAppendix C.

We compared within-county differences between the lowest on- and off-marketplace premiums across 3 main groups of states based on how they financed CSRs: (1) through higher premiums for all plans, (2) through higher premiums for all silver plans (both on- and off-marketplace), and (3) through higher premiums for all on-marketplace silver plans only. For the last group, we compared differences in premiums between states that did and did not expand Medicaid eligibility under the ACA.

RESULTS

Number of On- and Off-Marketplace Plans

We identified 5930 ACA-compliant bronze, silver, and gold individual plans offered in 2020, of which 63% were offered both on- and off-marketplace, 31% were offered off-marketplace only, and 6% were on-marketplace only (eAppendix D).

Corresponding to our plan-level results, insurers themselves generally offered both on- and off-marketplace plans. The exceptions were in 18 states that had 1 or 2 insurers that offered only off-marketplace plans (no state had more than 2 insurers that offered only off-marketplace plans; data not shown).

Growth of On- and Off-Marketplace Plans

From 2020 to 2022, the number of exclusively off-marketplace bronze, silver, and gold plans increased 29%, 53%, and 21%, respectively (Figure). Growth rates were higher on-marketplace for bronze (70%) and gold (66%) plans.

Availability of Off-Marketplace Plans

Off-marketplace plans were widespread but not available everywhere. In 2020, 46 states had at least 1 plan offered only off-marketplace; in the other states (Iowa, Indiana, Kentucky, and North Carolina), all plans were offered both on- and off-marketplace. By 2022, only Kentucky lacked any ACA-compliant plans offered exclusively off-marketplace. The District of Columbia has not permitted off-marketplace plans since the marketplace became operational.

In 2020, 89% of the US population lived in counties where plans offered exclusively off-marketplace were available (Table 1). Among plans offered exclusively off-marketplace, silver plans were more widely available than bronze and gold plans. One or more exclusively off-marketplace silver plans were available to 91% of individuals in urban counties and 76% of individuals in rural counties. Whereas 79% of individuals in urban counties had access to an exclusively off-marketplace bronze plan, only 57% of individuals in rural counties had access to one. Similarly, 66% of individuals in urban counties had access to an exclusively off-marketplace gold plan, compared with 37% of individuals in rural counties.

Premiums for On- and Off-Marketplace Plans

In the counties with plans offered exclusively off-marketplace, premiums for the lowest-cost plans differed on- and off-marketplace (Table 2). For silver plans for a 45-year-old, annual premiums for the lowest-cost off-marketplace plans averaged $663 (11.3%) less than the premiums of the lowest-cost on-marketplace plans. In contrast, in the counties with at least 1 bronze or gold plan offered exclusively off-marketplace, the lowest-cost plans offered only off-marketplace were, on average, more expensive than the lowest-cost plan available on-marketplace. Because premiums are age-rated, dollar differences between on- and off-marketplace premiums increase with age. The higher premiums for off-marketplace bronze and gold plans were not due to differences in plan generosity in terms of actuarial values (eAppendix E).

Most consumers who did not qualify for marketplace premium tax credits likely lived in counties where they could reduce their silver plan premiums by selecting an off-, rather than an on-, marketplace plan (Table 1). Sixty-nine percent of the total urban population lived in counties with at least 1 off-marketplace silver plan with a lower premium, whereas 57% of rural residents lived in counties with lower-cost off-marketplace silver plans, and this difference was marginally significant (P = .08). The difference is primarily because off-marketplace plans were not as widely available in rural counties. Off-marketplace bronze and gold plans with lower premiums were relatively uncommon.

Premiums and Benefits for On- and Off-Marketplace Silver Plans

In counties with plans offered exclusively off-marketplace, benefits were similar for on- and off-marketplace plans with the lowest premiums (Table 3). In each county, we also determined the on- and off-marketplace plans with the lowest sum of premium and deductible. On average, annual silver premiums plus deductibles were $1143 lower off-marketplace for 60-year-olds. For the younger ages, the differences were not statistically significant, because the higher deductibles for off-marketplace plans offset a greater proportion of their mean lower premiums.

How States Instructed Insurers to Load CSRs

In 42 of the 46 states with plans offered exclusively off-marketplace in 2020, the additional expenditures to pay for CSRs for silver plans were loaded on the premiums of on-marketplace silver plans. The exceptions were New York and Oregon, which loaded the costs onto both on- and off-marketplace silver plans, and Mississippi and West Virginia, which loaded the costs onto all on- and off-marketplace plans.

Table 4 shows the on- vs off-marketplace differences in the lowest silver premiums for 45-year-olds across states with different CSR and Medicaid expansion policies. In states that loaded CSR reductions on all plans, off-marketplace premiums were, on average, higher than on-marketplace premiums, but the difference was not statistically different from zero. In states that loaded CSRs on all silver plans, off-marketplace silver plans were, on average, $420 higher than on-marketplace premiums (6.1% of the mean on-marketplace premium). In states that loaded CSRs only on on-marketplace silver plans, the annual on- vs off-marketplace premium difference averaged $777 (13.5% of the mean on-marketplace premium). Among these states, on-marketplace silver premiums were, on average, $800 higher in nonexpansion states than in expansion states (P < .01), which is consistent with higher expected CSR costs due to a broader population eligible for CSRs. As a result, the mean on- vs off-marketplace premium difference was $474 in expansion states and $1334 in nonexpansion states, and the on- vs off-marketplace premium difference in nonexpansion states was marginally significantly different from the on- vs off-marketplace premium difference in expansion states (P = .06).

Sensitivity Analysis

Minnesota and New York have Basic Health Programs covering adults with incomes up to 200% of the FPL. In those states there is relatively little need for CSR funding. eAppendix F replicates the analysis of premiums by how states instructed insurers to load CSRs but excluding these 2 states. In these results, the difference between the lowest on- and off-marketplace silver plan premiums was similar for states with broad loading and the state (Oregon) with loading on all silver plans.

DISCUSSION

Our analysis of the availability and costs for off-marketplace plans is the most comprehensive study yet undertaken. Off-marketplace plans were available in most of the country in 2020, and 7 in 10 individuals lived in a county where there was at least 1 off-marketplace silver plan with a lower premium than on-marketplace silver plans. In these areas, individuals who were not eligible for premium tax credits could find less expensive silver plans and reduce their out-of-pocket costs by shopping off-marketplace. However, some of the premium savings were offset by higher deductibles among lower-cost off-marketplace plans. This contrasts somewhat with previous study findings that both the premiums and deductibles of the off-marketplace silver plans with the lowest premium in the state were lower than those of on-marketplace plans in 2018.⁷

Although most insurers appeared to choose to sell off-marketplace the same plans that they designed to be sold on-marketplace, some insurers tailored plans specifically for off-marketplace consumers and a few participated only off-marketplace. Marketplace insurers’ flexibility to develop lower-cost off-marketplace offerings may be constrained by rate-setting regulations that limit the potential for attracting healthier enrollees. An insurer must use the same set of claims data to develop rates for all its individual insurance plans, and it may vary rates based on benefits (using a standardized actuarial value calculator) and network but not differences in health status on- and off-marketplace.

Fewer off-marketplace plans were offered in rural counties compared with urban counties, resulting in an urban-rural disparity in plan choices for individuals not eligible for premium tax credits or who prefer to obtain coverage outside the marketplaces. This confirms the findings of an earlier study based on limited geographic data.⁸

State policies affect the difference between on- and off-marketplace silver plans with the lowest premiums. In states that loaded CSRs onto silver on-marketplace plans, off-marketplace premiums were 13.5% lower. In states that did not expand Medicaid under the ACA, higher expected CSR costs due to a broader population eligible for CSRs likely caused higher on-marketplace silver premiums. As a result, there was a greater mean difference between on- and off-marketplace silver plan premiums in nonexpansion states compared with expansion states (although the comparison was marginally significant). Previous studies examined the effect of CSR financing on marketplace plans,⁹ but the relationship with on- vs off-marketplace premiums has not been previously quantified.

Marketplace coverage became more affordable for 2021 through 2025 because the ARPA and IRA eliminated the cap on income eligibility for premium tax credits for those years. As a result, the number of individuals who could save money by selecting off-marketplace plans fell.¹⁰ However, the sum of enrollment in ACA-compliant off-marketplace plans and noncompliant plans fell by only 0.3 million from 2020 to 2022,⁸ with off-marketplace plans compliant with ACA mandates enrolling at least 1.2 million individuals in 2022. There are still incentives for individuals with the highest incomes to purchase off-marketplace plans, because marketplace tax credits cap the premium of the second-lowest-cost silver plan at 8.5% of income, which does not help families with incomes larger than roughly 12 times that premium. Because enhanced premium tax credits since 2021 reduced the number of families who could lower their silver plan premiums by seeking an off-marketplace plan, one might expect the number of off-marketplace plans to have fallen from 2020 to 2022. Instead, we found that offerings outside the marketplace have grown. And consistent with the increased generosity of tax credits after 2021, we also found faster growth in the number of bronze and gold plan offerings on-marketplace than off-marketplace. Our results update those of a study that found decreasing choices from 2015 to 2019.⁸

If Congress does not extend the ARPA/IRA tax credits beyond 2025, then incentives for off-marketplace enrollment will revert to those present before ARPA. Most families with incomes above 400% of FPL may be able to obtain less expensive silver plans off-, rather than on-, marketplace. More broadly, state and federal policy makers should consider the impact of their decisions for the choice between on- and off-marketplace plans, and especially the possibility that premium differentials between the markets can steer enrollment. Although off-marketplace plans may provide a wider range of choices for consumers in some areas, this segment of the individual market also comes at the risk that some families eligible for tax credits inadvertently choose off-marketplace plans.

Limitations

There are 3 limitations to this study. First, the results are weighted to reflect total county population, not the population that could enroll in the marketplace, nor the population ineligible for tax credits, which are not available. Second, differences between on- and off-marketplace premiums may be larger for tobacco users, and the differences in 48 states vary with the individual’s age. Third, the data for this analysis were limited to comparisons of premiums, deductibles, and actuarial values, but consumers also value other factors related to their health plans, including access to providers and the overall quality of both their providers and insurers.

CONCLUSIONS

Off-marketplace plans have grown in number and are offered in more states, even since the ARPA was enacted. If the tax credits in the ARPA and IRA are not extended beyond 2025, higher-income individuals and families who lose their tax credits through the marketplace may instead consider purchasing ACA-compliant plans off-marketplace. These individuals may be able to reduce their premiums for silver plans by purchasing off-marketplace coverage, but access to off-marketplace bronze and gold plans with lower premiums has been generally limited. Insurers offering their plans off-marketplace may want to consider how the state-specific policies that we assessed affect their pricing and marketing strategies and the possibility that, at least until 2025, they may be marketing toward higher-income consumers than they were before the ARPA and the IRA.

Acknowledgments

Luke Patterson and Joel Cohen of the American Institutes for Research provided programming expertise in assembling the data.

Author Affiliations: Center for Financing, Access and Cost Trends, Agency for Healthcare Research and Quality (SCH, PDJ), Rockville, MD; Department of Health Services, Policy, and Practice, Brown University (CAJ), Providence, RI; Department of Economics, Temple University (LLM), Philadelphia, PA.

Source of Funding: Agency for Healthcare Research and Quality.

Author Disclosures: The authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (SCH); acquisition of data (SCH, CAJ, LLM); analysis and interpretation of data (SCH, PDJ, CAJ, LLM); drafting of the manuscript (SCH, PDJ); critical revision of the manuscript for important intellectual content (SCH, PDJ, CAJ); and statistical analysis (SCH, LLM).

Address Correspondence to: Steven C. Hill, PhD, Center for Financing, Access and Cost Trends, Agency for Healthcare Research and Quality, 5600 Fishers Ln, Mail Stop 07W41A, Rockville, MD 20857. Email: Steven.Hill@AHRQ.hhs.gov.

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