Friday, June 20, 2014

Can an ACA marketplace offer too much choice? (cont.)

When it was announced last week that the Illinois ACA exchange will have 306 plans on offer next year, I wondered how much choice was too much. A couple of takeaways: 1) extrapolating from this year, the county with the most plans, Cook, will probably have about 150 plans total, and 50 silver plans, in 2015; and 2) in practice, most people probably choose from the two or three cheapest plan in a given metal level, or in two metal levels. That is, price probably simplifies the choice to a manageable pool for most buyers.

The final 2014 statistics released by HHS on Wednesday for the federal exchange states shed a bit of light on both inferences.  First, there's a mention of the highest number of silver plans available in any county this year: 67. That's even more than the most populous county in Illinois' robust market will have in 2015. Some ACA shoppers have already been confronted with a ton of choice (and others with far too little).

Second, among those who chose silver plans, 65 percent chose either the cheapest or the second-cheapest plan at that level -- the latter being the benchmark to which premium subsidies are keyed. 60 percent of those who chose bronze plans chose one of the two cheapest.  So I was right that most people narrowed their range of choices dramatically (though a substantial portion did not not).

In many states and counties, in each metal tier there's a pretty steep price jump after the lowest-priced 2-4 plans -- and anyone who qualifies for a subsidy will pay the whole difference between the unsubsidized cost of the second cheapest silver plan and any more expensive plan. The more choice, you would the think, the more likely that many plans will be close to the lowest price.  That may be -- but at the same time, HHS reports, the more choice, the more variation there is in price, along with more variation in plan type (HMO, PPO, co-op). 

In 2014, the average federally-run market offered a total of 47 plans from 5 insurers, including 16 silver plans,14 bronze, 13 gold and 5 platinum. Cook County Illinois will have approximately three times that average next year. The chief benefit of that level of choice is that it should drive down, or at least hold down, prices, and perhaps at the same time create competitive pressure to widen networks.

According to HHS, in 2014, for every added insurer in a given area, the price of the benchmark plan was an average 4% lower (for a 27 year-old). More competition seems to push down the benchmark price, though not the overall average price -- that is, more competition means more variety in price as well as plan design.

What bears some study -- and has been studied in other marketplaces, e.g., Medicare Advantage and Medicare Part D -- is how much choice consumers can constructively process.

No comments:

Post a Comment

Share