Sunday, November 02, 2014

Rational choice in the ACA marketplace

Here's another piece of the puzzle in my quest to figure out why ACA private plan buyers bought low-premium, high-deductible bronze plans in much higher proportions in some states than in others (8% of Mississippi plan buyers selected bronze; 41% of Hawaiian shoppers did). A good predictor is each state's public health profile. (Thanks to Brad G. for putting me on the trail.)

Bronze plans, in which deductibles average over $5,000 per person, are bad deals for people who are likely to make heavy use of medical services. They're also bad deals for low-income buyers, who can access generous Cost Sharing Reduction subsidies that reduce deductibles and co-pays (radically for those with incomes under 200% of the Federal Poverty Level) -- but only if the buyer chooses a silver plan. Low income buyers are often in poor health, and know it. Most ACA buyers have been uninsured and so may have pent-up healthcare needs.

I have previously noted that a very high percentage of buyers eligible for CSR did in fact choose silver plans, and that lower income states did have lower percentages of bronze buyers -- though there are notable exceptions up and down the scale. The same is true for measures of public health in each state. Wealthier states tend to have healthier residents -- though wealth disparities within states can complicate the picture.

In the chart below, I have tabulated three public health measures drawn from the Kaiser Family Foundation's State Health Facts: life expectancy, incidence of  Diabetes, and obesity -- for the ten states with the lowest and highest takeup of bronze plans. The average bronze takeup states in the former group is 14.25% of all plan buyers, and in the latter group, 31.1%.  In all three health measures, the low-bronze-takeup states as a group significantly underperform the high-bronze-takeup group. The income disparity between the two groups is also stark.*


States with lowest bronze takeup

State                       % bronze              life expect            Diabetes %*             obesity**          median HH
                                                                                                            
US entire
20%
78.9
10.2%
63.4%
51.9k
MS
 8
75.0
12.5
68.9
40.8k
PA
 8
78.5
10.2
64.9
53.9k
AL
 9
75.4
12.3
67.7
41.4k
GA
11
77.2
  9.9
64.6
48.1k
AZ
12
79.6
10.6
62.0
50.6k
FL
13
79.4
11.4
62.1
47.9k
MI
13
78.2
10.5
65.6
48.8k
KY
13
76.0
10.7
66.9
42.1k
SD
14
79.5
  7.8
66.1
54.4k
WV
14
75.4
13.0
68.3
40.2k
AVG group
14.25%
77.4
10.9
65.7
46.8k

States with highest bronze takeup

State                       % bronze              life expect            Diabetes %               obesity            median HH $
                                                                                                           
US entire
20%
78.9
10.2%
63.4%
51.9k
HI
41
81.3
  7.8
56.1
61.4k
CO
40
80.0
  7.4
55.7
63.4k
WA
38
79.9
  8.8
62.3
60.1k
DC
29
76.5
  8.2
51.9
60.7k
IL
29
79.0
  9.4
64.0
57.2k
IN
28
77.6
10.9
65.5
50.6k
MT
27
78.5
  7.2
61.3
44.1k
AK
27
78.3
  7.0
64.8
61.1k
IA
26
79.7
  9.7
64.7
54.8k
NH
26
80.3
  9.1
62.1
71.3k
AVG group
31.1%
79.1
  8.5
60.8
58.5k

* "Diabetes" = percentage who have ever been told by a doctor that they have Diabetes.

** "obesity" = percentage who are overweight or obese.

Austin Frakt has highlighted (1, 2) the complexity of the choice facing shoppers on the ACA exchanges. A truly analytic buyer would need to factor in not only the basic premium-vs.-deductible tradeoff but the half-dozen-or-more separate co-insurance formulas plans deploy for different kinds of services, the quality of the physician and hospital network, and the buyer's likely medical usage in the upcoming year. All true. And studies have indicated that the uninsured don't understand basic terms like "deductible" and "coinsurance." That's doubtless also true, when they're confronted with those terms cold.

HHS data on the 8.1 million buyers on the ACA exchanges indicates, however, that most buyers found their way to the right choice on the most basic level.  Among those who were eligible for "strong" CSR - the cost-sharing reductions offered to those below 200% FPL -- the vast majority chose silver plans that allowed them to access those subsidies.

In fact, looking cumulatively at the various data points I've examined in prior posts, I am struck by what appears to me a high degree of rational choice in ACA buyers' selections. In New York, the only state that breaks out metal level selection by multiple income brackets, 89% of buyers under 200% FPL chose silver.  In Mississippi, one of the nation's poorest states and one where buyers had little in-person help, just 7% of subsidy-eligible buyers chose bronze, despite what many might have regarded as dauntingly higher premiums for silver (a single 35 year-old earning $19.000 per year would pay about $20 per month for bronze, $70 for silver.)  Conversely, Mississippi had the highest overall silver plan takeup rate in the nation -- 79% of all buyers, and 83% of subsidized buyers (the latter topped only by Alabama's 85%). In the federal exchange, just 15% of buyers eligible for any kind of subsidy chose bronze. The number is doubtless lower for those who qualified for CSR.

The state health and income data cited above indicates more broadly that those with lower incomes and, on average, poorer health found their way to plans that would minimize their costs if they made heavy use of medical services. Those who chose bronze were heavily weighted toward the wealthier and healthier.  The broadest measure provided by CMS also supports this: Nationally, 33% of subsidy-ineligible buyers chose bronze, versus 20% of buyers overall (86% of whom qualified for subsidies).

That's good news. Arguably, no one who's not truly affluent should have a health plan with a $5,000 deductible -- including, say, a pair of 45 year-olds with a combined income of $60,000.  News accounts have highlighted the plights of people stuck with such plans, either because they qualified for small subsidies or no subsidies at all and found silver premiums prohibitive, or because they qualified for CSR and mistakenly chose bronze.

The state-by-state figures for metal level selection are full of nuances and apparent anomalies. In wealthy Connecticut, only 16% chose bronze, while 18%, twice the national average, chose gold, and no one chose platinum. In low-income New Mexico, 23% chose bronze. Median state income doesn't show variations like high wealth inequality. Other variables include the amount of in-person help available in the state, whether the state expanded Medicaid (if not, a poorer subset, between 100% and 138% FPL, is eligible to buy private plans on the exchanges), and, perhaps most importantly, the particular configuration of plan choices available at each metal level.

All that said, I believe it's still apparent that a large majority of low income buyers, and buyers likely to need a fair amount of medical care, chose silver plans that will minimize their out-of-pocket costs.

For those interested, the posts below look at metal level selection from various angles.

Maybe we should call blue states bronze states
In Mississippi ACA rollout, one large disaster, one small success
News from New York: Most low-income ACA plan buyers chose wisely
Why is bronze more popular in blue states?
Buying a health plan: Don't try this at home?
Did too many low income ACA shoppers buy bronze plans?

---

* Per my prior post, the relationship between state median household income and bronze choice selection breaks down somewhat in the middle-income range.

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