Wednesday, November 18, 2015

In ACA exchanges, the key word is "exchange"

The Kaiser Family Foundation has published an in-depth analysis of rate hikes and their actual likely effects on users in the 2016 federal ACA marketplace (healthcare.gov).

Crunching the data for all of the counties in 36 states* in which last year's cheapest silver plan can be compared to this year's, Kaiser highlights the savings that many if not most current enrollees can realize by switching plans. The study focuses on the lowest-cost silver plan in each county, because those are the most popular plans.  Among the key findings:
  • The average unsubsidized premium for the lowest-cost silver plan for a 40 year-old in 2016 is 7% higher than for the cheapest silver plan in 2015.

  • In 73% of counties examined, last year's cheapest silver plan is not this year's.

  • The premium for last year's cheapest silver plan will rise an average of 10% for a 40 year-old earning $30,000, and 28% for a 40 year-old earning $20,000.
The 7% average hike bespeaks some pain for the federal treasury, and the volatility in plan price and rank spells trouble for many who auto-renew without comparison shopping. However: 

  • In the 73% of counties in which last year's cheapest silver plan is not this year's cheapest, those who switch to this year's cheapest will pay essentially the same premium: 
In these counties [where the cheapest silver plan is different this year from last], a single 40-year-old making $20,000 per year paid an average of $75 per month for the 2015 lowest cost silver plan. If he automatically renewed in coverage for 2016, his premium would increase to an average of $103 per month, which is 37% higher. If he was willing to switch to the new lowest-cost silver plan, however, he would pay an average of $76 for his monthly premium, or just 1% more than he paid in 2015.
What does this mean?

1. In the three quarters of counties where the cheapest silver plan is different this year from last, the average spread between the benchmark second-cheapest silver plan (which determines subsidy) and the cheapest silver plan is all but unchanged. (CMS recently reported that the average benchmark silver plan is up 7.5% this year, close to the 7% average hike Kaiser found for the average cheapest silver plan).

2. For a 40 year-old earning $20,000, that spread is about $10: the benchmark silver plan will cost $85 per month, give or take a dollar.

3. For those willing to buy the cheapest silver plan, the premium is essentially unchanged (not that surprising, as the benchmark is calculated to take a fixed percentage of a subsidized buyer's income).

4. Since Cost Sharing Reduction (CSR) subsidies come only with silver plans, the average "CSR discount" is essentially the same this year as last (though it varies widely county by county).

4. For the subsidized buyer, the spread between the benchmark and any other plan is the only price point that matters (assuming that the benchmark is not the plan desired).

A couple of other reflections:

1. While the actuarial value of plans at each metal level  -- that is, the percentage of the average user's  medical costs covered by the plan -- is fixed by law, and unchanged from year to year, an increase in the cost of care per patient means higher deductibles and copays.  If the average member of a given risk pool uses $4,400 worth of care this year compared to $4,000 last year, the insurer will (theoretically) adjust copays etc. so that users' out-of-pocket costs go up 10%.

2. You can see these increases in this year's deductibles and copays. Some silver plans unenhanced by CSR have pretty shocking deductibles -- especially in markets where Ambetter has way underpriced the competition and posted a half-dozen plans at prices lower than the nearest competition ("spamming" the exchange, as Richard Mayhew puts it).

3. Given those rising out-of-pocket costs, CSR looms all the more important as the ACA's chief shield against mass underinsurance in the marketplace.

4. Given that the cheapest silver plans available are generally the most popular, the average rate increase in 2016, weighted according to what plans customers actually buy, will probably be lower than the average increase weighted by what plans buyers are currently enrolled in (which Charles Gaba pegs at 12-13% nationally).

--

* Excluding New Mexico, where data was missing.

1 comment:

  1. As someone who works in an insurance agency, let me offer an observation. The ACA's main method for controlling insurance costs on the to
    encourage participants to shop the insurance companies every year. This is a more evolved version of what the earlier Clinton plan called "managed competition." Now it is an insurance version of Priceline.com.

    It is not nirvana though. There is a cost to participants in changing networks every year. There is an ugly pattern in many states when a new insurance company barrels in with low rates, and then in year 2 they have huge claims losses and so depart the exchanges. Some of these companies will need bailouts if they have inadequate reserves.

    Eventually there might be no insurance companies even wanting to be on the exchanges. I have no love for the private insurers, but still that will be a big problem.

    I fear that this kind of business climate may lead to a situation where no major insurance companies even want to be in the exchanges.

    ReplyDelete

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