Thursday, November 19, 2015

Ambetter's donut hole coverage: high deductibles alloy ACA silver

In pre-ACA times, many low income workers were enrolled in "mini-med" health plans that provided first-dollar coverage up to very low limits, and no insurance after those limits were reached. Such plans still exist, though they don't satisfy the ACA's "personal responsibility" requirement.

Also long available: "catastrophic" insurance that provides no coverage at all (or, post-ACA, preventive care only) until a high deductible is met. That's basically a stop-loss policy for people with enough assets not to be deeply indebted by by the time they reach the deductible. Many if not most bronze plans offered in the ACA marketplace are in this category: deductibles are usually north of $6,000 per person.

Yesterday, CMS touted an under-recognized fact: lots of marketplace plans offer some benefits before the deductible is met. Put this in the category of consolation prize:

According to an analysis of 2015 plan selections, more than 8 in 10 consumers in 2015 selected a plan that covered some popular health services (beyond preventive care) before meeting the deductible.[1] That includes 53 percent of bronze plan consumers*, 88 percent of silver plan consumers, 93 percent of gold consumers, and 99 percent of those who selected a platinum plan.
When the deductible is high, such plans may be a kind of hybrid of mini-med and catastrophic, with a huge donut hole. You may go to a specialist and get the visit covered -- then be on the hook for thousands of dollars of tests and treatment before a deductible of, say $4,500 -- $6,800 is hit.

One insurer, Ambetter, is pushing such donut hole coverage, and grabbing the key benchmark silver and cheapest silver positions in many markets. In those markets, Ambetter offers a half dozen silver plans that are all cheaper -- often way cheaper -- than the nearest competition, in many cases pricing competitors out for price-sensitive buyers. And price-sensitive buyers have been the majority on the exchanges, where the cheapest silver plans are the best sellers.

Ambetter combines appallingly high silver deductibles with an unusually large set of services discounted before the deductible.  In Chicago, for example, Ambetter's cheapest silver plan has a $6,500 deductible and out-of-pocket (OOP) max for a single buyer who earns too much to qualify for Cost Sharing Reduction (CSR). For a buyer who qualifies for the weakest level of Cost Sharing Reduction, the deductible and OOP max are $4,500.

How can these bronze-levels deductibles be offered with a silver plan? By providing these benefits beneath the deductible. Here's the below-the-deductible menu for the $29k earner (getting weak CSR):

Most of those services require prior approval. And if you need tests or imaging, ER care, inpatient mental health care, or to get that baby delivered after the covered prenatal care, it's full freight till the large deductibles are reached. There is no out-of-network coverage except for ER and ambulance (after deductible).

For many buyers, Ambetter's half dozen cheap silver plans in Chicago effectively price out the competition. The cheapest plan is priced so low that a 40 year-old earning $29,000, who qualifies for the lowest level of CSR subsidy, doesn't get a premium subsidy -- she pays the same $195 per month as someone earning $50,000 (or $200,000). The benchmark silver plan, which determines the premium subsidy, is only a few dollars more.  To obtain the cheapest non-Ambetter silver plan, a Blue Cross plan with a $2,000 deductible, the 40 year old earning $29.000 would have to pay an extra $50 per month.

A 27 year-old Chicagoan, Jamal,  described to me how the Ambetter invasion has played out for him:
I'm a Chicago resident who last year purchased an extremely attractive CSR-supported silver plan from Land of Lincoln, Illinois's coöp. Upon previewing next year's plans on, however, I noted something rather troubling: a new insurer, Ambetter, has drastically undercut my old plan.

This in itself would hardly be a bad thing if they'd only done it once. But Ambetter appears to have undertaken a deliberate strategy of spamming the Chicago insurance market with nearly identically-priced plans specifically to drive down the premium subsidies available to customers, presumably in order to drive price-conscious customers into their shitty plans.

The pre-subsidy price spread between the two cheapest silver plans is $2 per month for me. The pre-subsidy price spread between the second cheapest silver plan and the cheapest silver plan offered by a company other than Ambetter is $42 per month. That's $504 out of my pocket this year no matter which plan I buy - and I'm only 27! For older individuals this could run well over $1000.

All told, Ambetter has all of the six cheapest silver plans on the marketplace, none of which differ much from each other. The reason premium support is pegged to the second-cheapest silver plan rather than the cheapest is presumably to prevent this sort of market manipulation, but Ambetter appears to have found and exploited to the hilt a gaping loophole. Other companies will follow. I haven't been able to find any health policy wonk talking about this issue, though.
The Ambetter benefit structure could work out for some buyers. But anyone who runs into any substantial medical problem -- a bone break, a lump discovered, an elusive digestive disorder -- is likely to hit those high out-of-pocket maximums fast. And for those who don't want to roll the dice, Ambetter has made the price of an alternative benefit structure (offered by a different insurer) prohibitive.

Update: There's an interesting alternative in Chicago offered by Harken Health, a UnitedHealth subsidiary, written up this week in Modern Healthcare. It has a high premium ($279/mo for an unsubsidized 40 year-old, compared to $195 for Ambetter's cheapest) and a high deductible for silver ($3750), but with no charge for primary care, an array of benefits before the deductible similar to Ambetter's, and access to a national hospital network. Like Ambetter's plans it offers "donut hole" coverage, but with an added emphasis on free "relationship-based" primary care. Meanwhile, UnitedHealth announced today that it may exit the exchanges in 2017.

Update 2 11/21: The Ambetter donut hole benefit design seems to be the trend. HHS's proposed new rule for 2017 includes a voluntary standard benefit design that includes an array of services beneath a high deductible. Here's Timothy Jost's summary in Health Affairs:
The proposed rule would create six standard option plans—a bronze, a gold, a standard silver, and three silver plan options — at the 73 percent, 87 percent, and 94 percent actuarial-value levels — available for individuals eligible for cost sharing reduction payments. The plans would have
  • standard deductibles (ranging from $6,650 for the bronze plan to $3,500 for the standard silver to $250 for the 94 percent silver cost-sharing variation),
  • four-tier drug formularies,
  • only one in-network provider tier,
  • deductible-free services (for the silver level plan including urgent care, primary care visits, specialist visits, generic drugs, and some preferred brand drugs),
  • and a preference for copayments over coinsurance.
Insurers would not be required to offer standardized plans and could offer non-standardized plans (as long as they met meaningful difference standards), but standardized plans would be displayed in a manner that would make them easy for consumers to find.

* It's interesting that 53% of bronze plan enrollees are in plans that offer some benefits before the deductible is reached. I suspect that the percentage of bronze plans on the market that offer such benefits is significantly lower than that (just based on my browsing the exchanges) -- indicating that bronze plans are much more attractive to shoppers if they offer, say, generic drug and primary care visit coverage before the deductible.

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