Tuesday, March 04, 2014

Is the ACA reducing underinsurance?

About 16 percent of the U.S. population has no health insurance. Reducing that percentage by more than half is a primary purpose of the Affordable Care Act. As subsidized coverage in a reformed individual market has become available for the first time in 2014, news coverage has understandably focused mainly on how many previously uninsured people are gaining coverage.

But the ACA also rewrote the rules governing what kinds of coverage health insurance policies had to offer. The revamp was designed to address a problem nearly as pressing as reducing the ranks of the uninsured: tens of millions of Americans were also underinsured, or unreliably insured.  Coverage was subject to annual or lifetime caps and to arbitrary rescission.  Essential benefits such as hospitalization, mental healthcare, rehabilitative care and childbirth were excluded from many policies.

Many ACA provisions designed to end underinsurance have been in effect for some time  -- the ban on lifetime coverage limits has been in place since September 23, 2010, as has mandatory free coverage for a long list of preventive services, including birth control  I would like to examine the extent to which serious uninderinsurance has already been reduced.  What follows is a kind of scope-of-question outline -- a few questions, a few premises, a few observations.

The worst policies and abuses were more prevalent in the individual market --the market for people buying insurance on their own --  than in employer-sponsored plans (ESI).  ESI remains superior on average to coverage available in the individual market, on or off the healthcare exchanges established by the ACA. The average ESI plan is equivalent to somewhere between a gold and platinum exchange plan, covering between 80 and 90 percent of the average patient's yearly costs*, versus just 70% for the benchmark ACA silver plans that most buyers are selecting.  But millions of people also accessed subpar coverage through their employers -- most notably through so-called "mini-med" plans that offered limited coverage for a low premium.

Such plans are often a kind of opposite of catastrophic coverage: they offer immediate coverage in various categories that cuts off when a low cap is reached -- say, $300 worth of doctor visits, or a total of up to $2,000 in benefits. According to the Wall Street Journal's Theo Francis, at one point about four million Americans accessed them.  Through a loophole in the ACA employers can still offer them in modified form, though only if they also offer an ACA-compliant plan.  The still-allowed variants, fixed indemnity plans, comply with the ACA prohibition on absolute annual dollar caps on coverage -- but impose restrictions like a limited number doctor's visits per year.They also don't satisfy the ACA's individual coverage requirement and so leave the worker exposed to a tax penalty.

In our expensive healthcare system, reducing underinsurance can involve some tough tradeoffs.  A mini-med plan might, at an affordable price, defray a couple of thousand dollars of healthcare costs for a low-income worker in a given year. If that worker or a family member suffers a serious illness of accident, however, holding only such limited coverage could bankrupt them. ACA regulations may drive many such workers into high deductible plans that will cover less of their costs in an ordinary year -- but also cap their costs if they incur serious expenses.

One thing I don't know is how many employer-sponsored plans outside the mini-meds had and still have substantial coverage gaps. Large employers are not required to cover the ACA's minimum essential benefits, but they are prohibited from imposing lifetime coverage caps and, as of Jan. 1, 2104, annual caps as well. They are also subject to ACA annual out-of-pocket maximums of $6350 per person and $12,700 per family. 

Questions, then: to what extent is the ACA accelerating the shift of out-of-pocket costs onto patients, but also improving catastrophic coverage?  In the ESI market, which covers over 150 million Americans, the changes may be relatively modest, as most ESI has offered and continues to offer relatively good coverage.

The ACA's coverage rules are impact a large percentage of the population, according to a Health Reform Monitoring Survey conducted this past January by Lisa Clemans-Cope, Bowen Garrett, Katherine Hempstead, and Nathaniel Anderson.  The authors analyzed data from a survey conducted in September 2013 that asked nonelderly adults whether they or their families had been affected by any of seven changes related to the health care reform law -- some relatively minor, like a rebate from plans that failed to spend the minimum 80 or 85 percent of premiums on health benefits, and some major, such as benefiting from the ban on annual or lifetime coverage caps.  Over 40 percent of those surveyed said they had been affected by at least one of these ACA-mandated changes, and 18 percent by at least two of them.  13 percent benefited from the requirement that health plans cover plan-holders' children up to age 26; 9 percent received free birth control coverage; and 3 percent benefited from the absence of coverage caps.  That last number strikes me as significant, as it is likely to grow over time. Over the course of decades, many of us will have a year in which ourselves or a family member will require are that would have exceeded a typical coverage cap. 21 percent received a free checkup or preventive care, such as a colonoscopy, or blood pressure or HIV or depression screening.

To step back, regarding the ACA's effect on the insured, the following questions seem relevant:
  • How prevalent were serious coverage gaps in employer-sponsored insurance pre-ACA?
  • To what extent has the ACA reduced those gaps?
  • At what cost has the ACA reduced those gaps, e.g., by inducing employers to shift costs to employees or stop offering it altogether?
  • Are there a significant number of smaller employers who are pushing formerly-covered employees onto the ACA exchanges, and if so, are most getting better or worse coverage more or less affordably  on the exchanges?
  • What are the cost-benefit tradeoffs for those in the individual market who do not suffer from pre-existing conditions and do not qualify for subsidies? What percentage of the individual market do these people represent?
If you've read this far, and you have any answers, or suggested sources for answers, please let me know. Email address is available in the "About me" on the sidebar.  Thanks.
* According to Towers-Watson, as of 2010, about 65 percent of ESI plans had an actuarial value of 80 percent or higher; about 80 percent were above 75 percent actuarial value.

1 comment:

  1. Thanks for a thoughtful post.

    Here are a few quick comments. I will be back for moe.

    a. Mini-med plans have gotten a bad press. They offer first-dollar coverage, and get people in to see a doctor.

    We should have let them stay around, and then made Medicare Part A the payor of last resort for expensive hospital stays.

    Besides, if you are making a low wage, then skimping on insurance premiums makes sense. If 1-2 per cent of the persons on a mini-med plan have to declare bankruptcy later, one can argue that the group as a whole is better off. Bankruptcy is not so awful, I did it myself.
    An American who gets good care and declares bankruptcy is probably better off than a Brit who never goes bankrupt but might die on a waiting list.

    The coverage cap issue is somewhat overstated I think. Even the 'substandard' plans used to have caps around $250,000.
    Well under 1% of policyholders ever came near that kind of cap.....it took a premature infant or late stage cancer.

    My solution would have been to impose the caps on providers! Tell the oncologists that they have $250,000 max to cure someone, and they will do the job. This would also require price controls on cancer drugs.

    The ACA rules on insurance quality remind me of building codes. In the long run such codes do improve the safety and appearance of the housing stock. In the short run, more persons become broke and/or homeless, because 'substandard' rooming houses or SRO hotels with shared bathrooms were keeping them off the street.

    American society works best when goods are available in all price ranges. Our grocery stores and drug stores and big box appliance stores are really quite spectacular when compared to 99.9% of world history.

    Health care is a problem because of the Cadillac effect.....there are no used drugs or cheap brain surgeries. I do not make light of this problem. The ACA has seemed to just ignore the problem though. Each compliant insurance policy will be of high quality, but without a generous employer or more generous subsidies these compliant policies will make many Americans poorer.