Sunday, October 19, 2014

The ACA marketplace and the toilet paper aisle

My last post was in protest to a New York Times front-page article that highlighted the very real plight of ACA private plan buyers who were forgoing needed medical care because they'd bought high-deductible, mostly bronze-level plans. My beef was that the article omitted important context, e.g., that only 20% of ACA shoppers selected bronze and that the vast majority of low-income buyers who were eligible for Cost Sharing Reduction (CSR) bought silver plans that allowed them to access those important secondary subsidies.

I also suggested that the four individual narratives in the piece should not be taken at face value -- in particular, the plight of one woman who had selected a bronze plan with a $6,000 deductible but was plainly eligible for CSR that would have brought the deductible down to $500 at worst and as low as $25, depending on what plan she chose. This woman plainly made the wrong plan choice -- in itself a significant problem, but not one that the Times article addressed.

I want to focus here on a second brief narrative in the Times story, in which the woman in question was somewhat higher-income and so faced a tougher choice, with less obviously attractive options. Here's the tale:

Saturday, October 18, 2014

NYT spotlights plight of ACA bronze plan buyers, leaves out vital context

The Times has a front-page story today, by Abby Goodnough and Robert Pear, that highlights the plight of ACA private plan buyers who bought plans with such high deductibles that they are foregoing needed treatment.  This is a real problem -- bronze plans in particular have terribly high deductibles, averaging $5,000 per individual -- but vital context is missing. Here's the framing:
About 7.3 million Americans are enrolled in private coverage through the Affordable Care Act marketplaces, and more than 80 percent qualified for federal subsidies to help with the cost of their monthly premiums. But many are still on the hook for deductibles that can top $5,000 for individuals and $10,000 for families — the trade-off, insurers say, for keeping premiums for the marketplace plans relatively low. The result is that some people — no firm data exists on how many — say they hesitate to use their new insurance because of the high out-of-pocket costs.
The first thing to note is that low-income ACA shoppers were generally not subject to these high deductibles. Low-income marketplace shoppers should generally not be buying bronze plans  -- not only because the deductibles are higher than those of silver-level plans, but because the silver plans alone come with Cost Sharing Reduction (CSR) subsidies. These reduce deductibles and maximum out-of-pocket costs for buyers with household income below 250% of the Federal Poverty Level (FPL). CSR subsidies are really large for buyers under 200% FPL, giving silver plans actuarial values comparable to those of the most generous employer-sponsored plans for those in that income range. The Goodnough-Pear story does explain CSR, but deep in the story, following four hard-case individual narratives.

Bronze plans had relatively low takeup in the ACA's first open season. According to HHS statistics, just 20% of users in all marketplaces (state-run as well as healthcare.gov) bought bronze plans. Since 33% of buyers who earned too much to qualify for subsidies bought bronze, less than 20% of the subsidy-eligible must have done so.

Thursday, October 16, 2014

CMS warns current ACA enrollees to shop anew.

I am glad to note that CMS, in its outreach to current enrollees in ACA plans, is shifting its emphasis away from auto-enroll and toward encouragement to shop for the best deal.

When current enrollees log onto healthcare.gov  after the 2015 marketplace opens on November 15, their new applications  will be pre-filled with their latest information from 2014. That's good. CMS also provides a good deal of information in fairly simple terms in this 5-step instruction sheet. Also good. It begins with a useful warning:
REVIEW - PLANS CHANGE, PEOPLE CHANGE. Every year, insurance companies can make changes to premiums, cost-sharing, or the benefits and services they provide. Review your plan’s 2015 coverage to make sure it still meets your needs and you’re getting the best plan for you. 
What the outreach does not do is explain that a person's current plan may lose "benchmark" status if new (or revamped) entries undersell it -- and if so, the subsidized enrollee will be on the hook for the whole difference between the cost of the benchmark plan and her current plan. That's because subsidy levels are tied to the  price of the benchmark -- the second cheapest silver plan in a given area. If you buy that plan, your share of the premium will be a fixed percentage of your income. If your plan costs more than the benchmark, you pay the difference. That difference may be especially large for older buyers, for whom the unsubsidized premium can be up to three times as large as the premium for a younger buyer.

I can see why CMS might calculate that a "benchmark gap" is too complex a concept to explain in written materials. Encourage people to compare, and they should see the difference between the cost of their current plan and cheaper options.  I'll leave it to online "product scientists" or market psychologists or others with data and experience to judge whether that's the right call. 

Monday, October 13, 2014

Grazing in the gaffeteria

Kevin Drum meditates on "the usual preoccupation that political reporters have with process over substance":
For example, Steve Benen notes today that Kentucky Democrat Alison Lundergan Grimes recently dodged "a straightforward question about whom she voted for in the 2012 presidential election" and got hammered for it. But in Iowa, when Ernst refused to say if she wants to shut down the Environmental Protection Agency or what she'd do for those who’d lose health care coverage if Obamacare is repealed, the reaction was mostly crickets.

Saturday, October 11, 2014

News from New York: Most low-income ACA private plan buyers chose wisely

Recent readers know that I've been trying to get a bead on how many lower-income buyers of private health insurance plans on ACA exchanges bought bronze plans and so forfeited Cost Sharing Reduction (CSR) subsidies that reduce deductibles and out-of-pocket costs. CSR, on offer to those with household incomes below 250% of the Federal Poverty Level (FPL), is available only with silver plans.

Nationally, 76% of ACA private plan enrollees who qualified for premium subsidies bought silver plans. Not all of them also qualified for CSR, and so it seems likely that a higher percentage of those who did so qualify bought silver. In the federal exchange, which accounted for about two thirds of all plans sold, just 15% of subsidy-eligible buyers chose bronze plans, which carry the highest deductibles and out-of-pocket (OOP) costs.

Only two states, Washington and New York, have published data breaking out buyers' metal-level selections according to income. New York is the only state to report specifically, albeit indirectly, on the choices of buyers with household incomes under 200% of the Federal Poverty Level (FPL), the cutoff for really substantial CSR.   And the news out of New York is quite good on this front, though a bit tricky to tease out.

Friday, October 10, 2014

Tax code progressivity isn't everything. But the top line matters

"Don't soak the rich," Edward D. Kleinbard admonishes U.S. policymakers in today's Times. Countries with less progressive tax systems than the U.S., which tax everyone more and spend more on social services and other public goods, do a better job of reducing inequality (and fostering citizens' welfare) than the U.S. does. Lower income citizens get disproportionately more value from government spending, and an adequate tax base must be broad-based.

I take the point -- made with equal force two days ago by Vox's Cathie Jo Martin and Alexander Hertel-Fernandez [update: Mike Konczal and Matt Bruenig both demonstrate the alleged US progressivity is an illusion -- see below]. But there's a counterpoint. The U.S. may have a more progressive tax system and skimpier social welfare than the wealthy countries of Europe -- that's a longstanding reality. But all these countries have moved in the same direction over the past thirty years, and all have suffered widening income inequality. Here's Thomas Piketty's explanation:

Thursday, October 09, 2014

Footnote to a Kliff note

Walmart announced earlier this week that it would stop offering health insurance to 30,000 employees who work less than 30 hours per week. Sarah Kliff points out that many of them will be better off on ACA plans:
Think of the 36-year-old Walmart employee here in Washington, D.C. who works 29 hours per week at the company's average wage of $12.73 per hour. She earns just about $19,000 annually if she works every week of the year.

If Walmart doesn't offer her insurance, the Kaiser Family Foundation's subsidy calculator shows that she qualifies for a $1,751 subsidy from the federal government to help buy coverage on the exchange. With that financial help, she can buy insurance for as little as an $7 per month. As a low-wage worker, she gets some of the most generous financial help.

But if Walmart does offer her coverage, it becomes her only option. She doesn't qualify for federal help and the $7 plan disappears. Walmart's plan, meanwhile, is way more expensive. The average premium there works out to $111 per month.
For many Walmart part-timers, the ACA offers an even better deal than this snapshot shows.  In addition to a premium subsidy that covers three quarters of the monthly premium, this person (if single) is eligible for generous Cost Sharing Reduction (CSR) that dramatically reduces her deductible and maximum out-of-pocket (OOP) costs. DC is not on healthcare.gov, so I checked what would be on offer if she lived in Fairfax, Virginia. There, she could choose a silver plan that costs $64 a month, with a $600 deductible and a $2250 OOP max -- or a plan that costs $74 per month but has no deductible and a $2250 OOP max.

Paul Krugman agrees with me

Back when  Paul "the stimulus was too small!" Krugman was in full Cassandra mode, just after the November 2010 shellacking, I took issue with one of his numerous whacks at Obama:

...take this sideswipe at the stimulus in Krugman's latest crie de coeur about the Fed's refusal to raise its inflation target:
...fearing opposition in Congress, the Obama administration offered an inadequate plan, only to see the plan weakened further in the Senate. In the end, the small rise in federal spending was effectively offset by cuts at the state and local level, so that there was no real stimulus to the economy.
Wasn't one of the core purposes of the stimulus to offset spending cuts by state and local governments? That's what stimulus does -- offset drops in demand. Of course, Krugman believes that there was too little state aid, along with too little of everything, in the Recovery Act, and naturally a stimulus should do more than offset other government spending cuts. But still, offsetting those cuts is a "real stimulus to the economy." The Recovery Act unquestionably preserved hundreds of thousands of state and local government jobs, and GDP would have been lower if this hadn't been done.

This may seem a semantic quibble. But it's a symptom, I think, of an oversimplified narrative. Krugman has implied elsewhere that the right-sized stimulus would have set the economy roaring back to life (as has Martin Wolf). To what degree is that credible? If Obama had asked for $1.2 trillion and got $950 billion, what's the math on the counterfactual? Unemployment at 8.3%?  And the effect of such a drop on the electorate? I confess it could be substantial. But there's an awful lot of what-ifs there, beginning with the premise that a substantially larger stimulus could have got through the Senate. And the narrative leaves out some externalities, such as the Euro sovereign debt crisis, which seemed to stop a decent-looking recovery in its tracks. Not to mention the credible possibility, forecast now by a growing number of economists and business leaders (e.g., here and here), that a substantial recovery may be on the horizon now. 

Some time in 2012, Krugman had a change of heart about Obama, and now he is out with a defense of Obama's record just as a host of ex-cabinet members and in-office Democrats is piling on (he himself notes the irony in this). Now behold his retrospective view of the (still too-small) stimulus: