Friday, December 05, 2014

What I wanted to ask Kevin Counihan

At a press briefing held yesterday, ACA marketplace CEO Kevin Counihan urged current ACA private plan holders to shop for a new plan, as "more than seven in ten of our customers can find lower prices by shopping."  Good -- the marketplace has gone all-in recently to try to convince existing customers not to renew their current plans without price-checking.

The next part of his message, however, betrays a skewed focus in my view. It's this: “Roughly eight in ten of our customers can get coverage for less than $100 a month after tax credits." That puts the focus unduly on premium, which is tantamount to dangling high-deductible bronze plans in front of low-income buyers.

The fact is, if you have access to a plan with a subsidized premium under $100, you are likely to be eligible for Cost Sharing Reduction (CSR) subsidies that will reduce deductibles and copays. CSR will cut out-of-pocket costs dramatically if your income is under $23,340 for a single person (200% of the Federal Poverty Level), and more modestly if your income is above that but below $29,175 (250% FPL).* But those secondary subsidies are available only with silver level plans, which have higher premiums than bronze.

Using's shop-around feature, I spot-checked the highest income that would enable a 44 year-old solo buyer to get the cheapest bronze plan in her zip code for under $100, give or take a dollar or two. In Chicago, it's $25,500. In Miami, it's $26,000. In Dallas, $27,500. In Biloxi, MS, $28,800; in Missoula, Montana, $25,500; in Newark, NJ, $27,700.  All of them are under the CSR threshold.

Older buyers with somewhat higher incomes can get bronze plans for under $100, since  the price spread between bronze silver increases with age.** In the six towns mentioned above, a 64 year-old could slip under the mark with an income ranging from $29,000 (barely CSR-eligible) to $33,500. Still, it's fair to say that the vast majority of buyers who can get a plan for under $100 are CSR-eligible.

Not quite a silver bullet, but...

What percentage of those CSR-eligible buyers have incomes under 200% FPL and are therefore eligible for the really strong CSR? For most states, we don't know. HHS does not provide those figures for the 36 states that used the federal exchange last year. Some state reports break out plan buyers by income level, however. In New York, 69% of CSR-eligible buyers were under 200% FPL; in Washington State, 71%; and in Colorado, 69%. I think it's fair to say that most of the prospective customers that Counihan was (indirectly) addressing should not be buying bronze (though many will pay under $100 for silver).

When I say that most buyers under 200% FPL should not be buying bronze plans, which carry average deductibles of over $5,000 per person, some caveats are in order. First of all, the premium for the cheapest (CSR-enhanced) silver plan can seem out of reach to some low-income buyers -- especially older ones, since (as mentioned above) the price spread between bronze silver increases with age. When a 63 year-old woman with a $22,000 income says she can't afford $100 a month for a silver plan (vs. $1 a month for the cheapest bronze), we should believe her -- even if that $1200 in premiums is likely to save her two or three or four thousand dollars in out-of-pocket medical costs.

Second, some bronze plans in some regions have significant benefits, such as low copays for doctor visits or generic drugs, that kick in before the deductible is reached. Third, for people with some financial backstop, the lower bronze premium may be worth the gamble, especially if they are over 200% FPL. A healthy 30 year-old with $20,000 in the bank, or with parents who won't be broken by $5,000 in medical costs if he has a serious accident or illness, may think in worthwhile to save $50 a month on bronze.

All that said, let's look at the bronze-silver choice, for a 44 year-old earning just under 200% FPL, $23,000, in the areas mentioned above. All ACA plans include a menu of free preventive services, such as birth control, a yearly checkup, and a variety of screenings, such as cholesterol tests and colonoscopies When I say "no benefits before deductible" below, those free services are excepted. In one case, I contrast the second-cheapest silver plan with the bronze, since it's just $3 per month more than the cheapest and offers a better benefit contrast.

Chicago (Cook County, Illinois - The cheapest bronze plan will cost our 44 year-old $68 a month. It has a $6,000 deductible, a $6,000 yearly out-of-pocket (OOP) maximum, and essentially no benefits that kick in before the deductible is reached.  The cheapest silver plan costs $115 per month, with a $100 deductible and a $2,250 OOP maximum. Before the deductible kicks in, primary care doctor's visits are $10, specialist visits are $50, an ER visit is $400, and generic drugs are free.

Miami, Florida - The cheapest bronze is $63 per month, with a $6,500 deductible and $6,500 OOP max.  Generic drugs are free before the deductible; no other benefits kick in before it's reached. The cheapest silver is $115 per month, with a $1,500 deductible and $1,500 OOP max. Primary care visits are $1, specialist visits $5, and generic drugs $1. ER visits are not covered until the deductible is reached, at which point there is no additional charge.

Dallas, Texas - The cheapest bronze is $45 per month, with deductible and OOP max both at $6,000. No benefits kick in before the deductible. The cheapest silver is $117, with deductible and OOP max of $1,500.  Primary care visits are $30, specialists $50, ER visits $500, and generic drugs free.

Biloxi, Mississippi: Premium for cheapest bronze: $26. Deductible and OOP max: $6500. Generic drugs: $20 before deductible is reached. No other benefits before deductible. Premium for the cheapest silver: $112. Deductible $500, OOP max $2,250. Primary care visit $10, specialist $20, ER $100 after deductible, generic drugs $10.

Missoula, Montana: Cheapest bronze: $72/month. Deductible and OOP max: $6250. Diddly squat before deductible.  Second-cheapest silver (within $3 of cheapest): $118/month. Deductible, $250; OOP max, $1750. Primary visits $15, specialist $40, ER, $150 after the (low) deductible, generic drugs $10.

Again, I don't want to minimize the difficulty of paying $1,200-1,400 a year in premiums on an income of $23,000. But that's the amount deemed affordable by ACA formulas. It's the right choice for most people under 200% FPL. In fact, it's the choice that most ACA buyers made in the the first open season. Only 15% of subsidy-eligible buyers in the federal exchange chose bronze; a still lower percentage of CSR-eligibles must have done so.

In yesterday's press conference, USA Today's Jayne O'Donnell asked whether official should worry that too many buyers might unwittingly buy high deductible plans. That was a good opportunity to mention CSR, and perhaps to note that if a CSR-eligible shopper on moves to buy a bronze plan, a pop-up note appears warning that the buyer is eligible for CSR and that the plan in question does not include it.

Instead, Counihan merely noted that the ACA caps maximum allowable out of pocket costs (at $6,600 per person!) and that there was no such legal cap prior to ACA implementation. He went on to make the "broader point" that "it's important to pay attention, important to shop, important to really asess what you're buying and what you're paying for." In other words, buyer beware.

That's disappointing. The marketplace has gotten religion about auto-enroll: Counihan and team are going all-out to warn existing customers to shop anew, so that they're not banged by the benchmark. They should do the same with CSR.

Prior to taking the helm at the federal marketplace this fall, Counihan was CEO of Connecticut's highly successful ACA exchange. One of Access Health Connecticut's admirable features is in the shop-around. If a shopper enters an income that indicates CSR eligibility, an explanation of CSR is the first thing she sees -- and the search results default to silver plans. In yesterday's call, I wanted to ask Counihan whether he has considered porting that valuable feature over to But I wasn't called on.

I harp on CSR because I think that high deductibles are the marketplace's Achilles heel. You can recognize that that a given person with an income of $22,000 may rationally choose a bronze plan with a $6,000 deductible. But stepping back, who would claim that a person living on less than $2,000 per month should have an insurance plan with a $6,000 deductible?

That weakness is a function of the ACA's pre-existing condition: the sky-high prices that private payers, including for-profit insurers, cough up for medical care in the US. CSR significantly cushions those costs for probably a bit more than half of private plan buyers on ACA exchanges. But CSR is an awkward mechanism, half-buried or hiding in plain sight on the exchanges, and unaffordable to some.  The least the marketplaces could do, given current funding levels and prices, is blazon this key benefit.

* For buyers under 150% FPL, CSR raises the actuarial value (AV) -- that is, the percentage of the average user's out-of-pocket costs that the insurer will pay - to 94%, comparable to the very best employer-sponsored plans. For buyers between 150 and 200% FPL, CSR raises the AV to a still-excellent 87%. From 200 to 250% FPL, AV falls off to 73%, only marginally above the unsubsidized 70% AV mandated for silver plans.

** Bronze plans are cheaper for older buyers because premium subsidies are keyed to a benchmark silver plan (the second-cheapest silver) and leave a buyer of any age paying a fixed percentage of income for that benchmark. Since the base price of a plan can be as much as three times higher for the oldest buyer as for the youngest, older buyers get much larger subsidies. The subsidy, keyed to the silver plan, can swallow much or even all of the price difference between bronze and silver. Thus, 64 year-olds in the six towns cited above will pay $100 for the cheapest bronze with incomes ranging from $29k (just under the CSR threshold) to $33.5k,

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