Wednesday, January 07, 2015

The ACA's invisible deductible discounts

The healthcare Twittersphere was riveted yesterday by Robert Pear's spotlight on Harvard professors up in arms about comparatively modest deductibles and copays added to their excellent health plan.

The main underlying story, as Adrianna McIntyre pointed out, is that cost-shifting to employees is accelerating in employer-sponsored insurance, driven in part by the ACA's Cadillac tax on the most generous plans.

There's a second story, however, in Pear's use of the ACA exchanges as a foil to highlight Harvard employees' relative privilege. Pear contrasted the Harvard plan's 91% actuarial value with that of a silver ACA plan, which he said "typically" covers just 70% of the average user's medical costs. As I pointed out yesterday, only about 20% of silver plan buyers get plans with an AV of 70%. For the rest, income-based Cost Sharing Reduction (CSR) raises the AV -- to 94%, 87% or 73%, depending on the buyer's household income. Available stats indicate that over 60% of silver plan buyers are at the AV 87% or 94% levels.

The broader point here is that the apparent prevalence of high deductibles on the ACA exchanges is somewhat misleading. As has been widely reported, bronze plans single-person deductibles average over $5,000, and silver plans (unenhanced by CSR) close to $3,000. Moreover,if you take a spin on the shop-arounds offered by Healthcare.gov and most state exchanges, the first price quotes you'll see are for bronze plans with deductibles in the $5,000-6,600 range, since available plans are most often displayed sorted by premium, lowest first.


For the most part, though, the means-testing built into ACA pricing formulas is shielding low income buyers from those high out-of-pocket costs. On Healthcare.gov, 76% of subsidy-eligible buyers bought silver plans. That suggests, as I tried to demonstrate yesterday, that about 90% of buyers with income under 200% of the Federal Poverty Level selected silver and so ended up with coverage at AV 87% or 94% (the percentage in somewhat lower in the state exchanges, most of which are inferior in design to hc.gov).  Below them on the income scale are about 8 million direct beneficiaries of the Medicaid expansion, which provides coverage with little-to-no out-of-pocket costs.

These facts don't mean that too many ACA private plan buyers don't end up with skimpy coverage. 20% bought bronze plans, which in most cases offer little more than catastrophic coverage.  In states that broke out buyers' metal level selection by income level, silver plan takeup falls off a cliff at 200% FPL, because CSR is very weak between 200 and 250% FPL.  Probably another 20-25% bought silver plans with AV 70% or 73%, which is also pretty skimpy (in New York, which I suggested yesterday is a decent proxy for the nation, 20% of all buyers obtained silver plans at those levels).

Personally, I think per-person deductibles and OOP maximums in the $5,000-6,600 range are a travesty for any household with less than, say, $150,000 in income. I also think that the exchanges should do an even better job keeping most low income buyers out of such plans, which are a malign result of the extent which we in the U.S. overpay healthcare providers and generate wasteful administrative costs.

But given the ACA's starting point, it's doing a decent job shielding lower income beneficiaries from truly crushing out-of-pocket costs.

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