Wednesday, December 31, 2014

Tapped out in Kentucky: Back story to an ACA hardship case

It's not quite an iron rule, but it's a fair bet: When a newspaper reports an Obamacare hardship tale, involving someone who's bought a private plan that leaves coverage unaffordable, that person bought the wrong plan.

In two front-page stories separated by nine months, one running today, The New York Times' Abby Goodnough has reported the saga of a very sick 60 year-old gentleman, David Elson, who struggles to continue his work installing security systems while suffering from advanced diabetes. In February 2014 Mr. Elson, who says he earns $28,000 "in a good year," somehow ended up enrolling in a health plan with a monthly premium of $350 (after subsidy) and a deductible of $2,600.

There is nothing wrong with the reporting here (in fact it's excellent reporting, nuanced and empathetic). Mr. Elson made the choices described, for the reasons described below. Newspaper space is not infinite. Nonetheless, anyone familiar with the ACA subsidy scale could tell at a glance that he was paying more than he should -- and, as one of his caregivers noted back in March, more than he could afford.
Mr. Elson quickly dropped his plan and did without essential medicine for most of the year until he suffered kidney failure in the fall. He has been undergoing dialysis, offered via charity care, and because of that condition now qualifies for Medicare, effective Jan. 1, 2015. That will cost him $100 per month but leave him on the hook for 20% of costs.

The price of keeping your doctor: paying nearly double the premium

For a single person of any age earning $28,000 per year, whatever his or her age or location in the United States, the benchmark second-cheapest silver plan on an ACA exchange should cost $181 per month.  How did Mr. Elson end up with a premium of $350? Maintaining access to one doctor seems to have loomed large:
With the help of a Family Health Centers counselor, Mr. Elson had chosen a midlevel silver plan from Anthem Blue Cross and Blue Shield, one of the few his kidney specialist would accept. He qualified for a subsidy of $250 a month, but still owed $350 a month toward the premium. He also qualified for a reduced deductible, but it was still $2,600, which nagged at him after he signed up.
Access to other providers, as well as some cost calculations, also seems to have figured in. Here's the narrative from Goodnough's prior article, dated March 30, 2014:
But later that week, Mr. Elson did return to Family Health Centers and, with the help of a counselor, chose a plan, one of the few that all of his doctors would accept. With the subsidy, he would owe $350 a month toward the premium. The midlevel plan, offered by Anthem Blue Cross and Blue Shield, had a deductible of $2,600. But his income, about $28,000 last year, was low enough to qualify for additional help paying out-of-pocket costs for health care and medications up to that amount. 
A choice of doctors is important -- perhaps vitally important for a person as sick as Mr. Elson. And Abby Goodnough tells me that Mr. Elson had in-depth navigator help, including a long phone session with an Anthem rep about out-of-pocket costs,  Goodnough writes, "I think they also made the calculation that even though the premiums and deductible were more expensive, he would have lower total out-of-pocket costs if he was hospitalized (a likely scenario for him) and some lower drug co-pays." *

But you can't see your doctors if you can't pay your premium. And Mr. Elson had a choice, not only of cheaper silver plans (which include Cost Sharing Reduction subsidies, as Goodnough notes -- though they're weak at his income level), but cheaper gold and platinum plans. Perhaps that detailed cost comparison was only within the Anthem universe.

Here are quotes for 2014 from Kynect, Kentucky's ACA exchange, for a 60 year-old in Louisville earning $28k. I have selected plans with lower premiums and lower out-of-pocket costs than Mr. Elson paid. Here, first, are gold and platinum options:

Monthly Premium Premium With APTC Applied Insurance Company Plan Details Annual Deductible Out Of Pocket Cost
492.20 USD
253.56 USD
kentuckyhealthcooperativeinc
0 Star Rating
1,500.00 USD
 / Person
4,500.00 USD
 / Family
3,000.00 USD
 / Person
9,000.00 USD
 / Family

487.69 USD
249.05 USD
humanainsurancecompany
0 Star Rating
1,000.00 USD
 / Person
2,000.00 USD
 / Family
1,500.00 USD
 / Person
3,000.00 USD
 / Family

544.50 USD
305.86 USD
humanainsurancecompany
0 Star Rating
1,000.00 USD
 / Person
2,000.00 USD
 / Family
1,500.00 USD
 / Person
3,000.00 USD
 / Family

And here is one viable silver plan (other cheap silver choices have too-high deductibles):

434.61 USD
195.97 USD
kentuckyhealthcooperativeinc
0 Star Rating
2,000.00 USD
 / Person
6,000.00 USD
 / Family
6,350.00 USD
 / Person
12,700.00 USD
 / Family
Enrolling in a plan that cost $350 per month on an income barely over $2,000 per month is something like making car payments on a BMW rather than a Corolla.

And what about that income estimate?

One more factor worsened Mr. Elson's choices. He is quoted to the effect that he earns $28,000 in a good year. When Goodnough first recounted his story in March, she reported his income as $22,000. When I pointed out to her via email that that reported subsidy amount did not match his reported income, she checked, and corrected his income. When she originally sat with Mr. Elson, she told me, he listed his income at $22k, then later switched it to the higher figure.

Mr. Elson was probably anxious about lowballing his income and then owing money at tax time. Had he reported an income below $23,340, however, not only would he have paid lower premiums, he would have been eligible for much stronger Cost Sharing Reduction (CSR) subsidies, which lower deductibles, copays and maximum out-of-pocket costs. CSR below that income threshold would raise the actuarial value of a silver plan -- the percentage of the average user's yearly medical costs paid by the insurer -- to 87%, versus just 73% at the $28k income level. And those CSR subsidies, unlike premium subsidies, could not be clawed back if Mr. Elson proved at tax time to have underestimated his income. (Which he almost certainly didn't, given that he was at death's door by fall, though he has apparently continued to work through it all.)

Undeniably, the ACA confronts those eligible for subsidized private plans with complicated choices, and sometimes with less-than-ideal choices. Back in March, Goodnough reported of Mr. Elson, "He went to Family Health Centers last fall to see about signing up for coverage and learned he was eligible for a substantial subsidy, $252 a month. But he found the choices so overwhelming that he put off a decision, losing the paperwork amid the clutter of his shotgun home."

That's all too understandable.  It's also quite likely that switching doctors would have been disruptive and distressing. It's possible, too, that Mr. Elson would have stopped paying the premium on a plan that cost him, say, $200 per month, or even $120 if he had reported an income of $22k.  But it's also likely, if not certain, that he had more viable choices than the one he went with.

--
* Plan quotes in the shop-around feature on Kynect,  the Kentucky health insurance exchange, do not reflect the effect of Cost Sharing Reduction on deductibles, copays, and maximum out-of-pocket costs. At Mr. Elson's income level, that effect is relatively minimal overall.  We do know that the deductible on Mr. Elson's Anthem Silver Direct Access Plan CBAA was $2,600. The KY Health Cooperative Silver plan quote above also does not reflect CSR adjustments.

UPDATE: Another key factor in that $350 premium, as commenter Bob Hertz points out below, is age-rating, which hugely widens the spread for older buyers between the benchmark 2nd-cheapest silver plan and more expensive plans. See the next post for how that works, as well as other odd crannies of the market available to Mr. Elson.

Related: NYT on ACA
NYT highlights plight of ACA bronze plan buyers
When a heavily subsidized private health plan doesn't quite suffice
A correction in NYT ACA coverage

2 comments:

  1. Left unsaid in your excellent piece is the viciousness of age rating. I know it used to be worse before the ACA, but even a 3 to 1 ratio can be very cruel to persons over 55 years old.
    It would have been much better to expand Medicare downwards in age, versus forcing insurers to accept sick people they cannot price for and do not really want to cover.

    ReplyDelete
    Replies
    1. Hey Bob: you caught me by surprise on the age rating. I was going to respond, "it creates a nasty subsidy cliff, and it's tough if you're not subsidy-eligible, but it's not in play here." But of course it is. A 60 year-old pays the same as a 27 year-old for the benchmark silver plan, but pays a much larger spread if he selects a plan that costs more than the benchmark. I may run the numbers and do a followup on what Mr. Elstrom's plan would cost him if he were 27. Thanks.

      For me the takeaway is that people with chronic conditions shouldn't be faced with these choices. It's not only bad for the patient but not cost effective for the government, as this story illustrates. Elstrom should have been on Medicaid or Medicare long ago.

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