Sunday, March 13, 2016

Learning by buying in the ACA marketplace

An analysis of data from the Urban Institute's quarterly Health Reform Monitoring Survey by Rice University researchers, focusing specifically on Texas, finds widespread ignorance of basic insurance terms like premium, deductible and copay.  About a quarter of all Texas respondents reported a lack of confidence in those most basic terms, with higher percentages for terms like co-insurance and max out-of-pocket.

Not surprisingly, percentages reporting lack of confidence in their understanding of these terms was much higher among the uninsured, the poor or near-poor (under 139% FPL), and Hispanics. The uninsured "no confidence" rates were more than double those of the insured, as were rates for those with incomes under 139% FPL compared to those above that level. Hispanic "no confidence" rates ranged from double to triple those of whites.

While the rates are disturbing  the Rice scholars* provide an interesting hypothesis about the knowledge gap between the insured and uninsured:
It is possible that people who do not understand health insurance terminology are less likely to obtain insurance. A more likely explanation is that people who are able to obtain insurance have the opportunity and need to become familiar with the terms.
Survey after survey has indicated that more than half of the still-uninsured who report cost as the reason they have not obtained insurance and who are eligible for ACA subsidies are unaware of their eligibility for those subsidies. Among the poorer uninsured, and among Hispanics in particular, it seems likely that the veil is unlikely to be pierced without in-person help. And as the researchers suggest here, while the complexity of health insurance plans coupled with the widespread ignorance on the part of the uninsured in particular is troubling, once people engage, much of that ignorance dissipates. That may be particularly likely to be true with lower income marketplace shoppers, in that if they engage and buy, it's likelier to be with in-person help.

One indirect bit of evidence that low income marketplace customers do pick up the most essential knowledge in the shopping process, or at least get steered in the right direction, is the high level of silver plan selection among low income enrollees. Those with incomes under 250% of the Federal Poverty Level (FPL) qualify for Cost Sharing Reduction (CSR) subsidies that reduce deductibles, co-pays, and out-of-pocket maximums. CSR is available only with silver plans, which have considerably higher premiums than cheaper bronze.  Overall, about three quarters of CSR-eligible buyers select silver plans. But the benefit weakens as income rises (while subsidized premiums also rise), and higher percentages of those eligible for "strong" CSR select silver.  Nationally, the CSR takeup rate is over 80% for those with incomes under 200% FPL, and probably over 85% for those with incomes under 150% FPL.

While it's disturbing that close to 20% of low income buyers end up in bronze plans with sky-high deductibles, most CSR-eligible buyers do make a choice that indicates understanding of the basics. Those basics, for a shopper eligible for "strong" CSR who gets as far as comparing silver and bronze plans, are not that hard to grasp -- at least, once you get "deductible" down. The lower the income, the starker the benefit contrast between bronze and silver. Here, for example, is the cheapest available bronze plan versus the cheapest available silver plan for a 40 year-old solo buyer in Houston:

If you grasp what a deductible is, you see what you're getting for your $50 per month (which may nonetheless be a daunting expense). If you don't, that large "$4,000" may prompt you to mouse over the question icon next to "Dedutible," bringing this pop-up definition:  "The amount you have to pay out of pocket each year before the plan pays anything." More likely (that question icon is pretty tiny), a shopper earning $17k per year will have a navigator or volunteer counselor by her side, who -- if adequately trained -- will highlight the difference in likely out-of-pocket expense between bronze and silver plans.

There are many other important factors, of course. Molina, vendor of that cheapest silver plan, fields very narrow networks. Different plans within a given metal may slice the copays very differently. But the lower the income level, the more slanted the choice is toward silver. Below 150% FPL, silver plans have a mandated actuarial value of 94%, so there's not much room to slip in high-copay booby traps.

In many ACA markets, there's way too much choice among plans that slice benefits a zillion different ways. Gratuitous complexity is layered onto an already complex product. For buyers under 200% FPL, however, for whom CSR is strong, getting the metal level right is the most consequential decision. And most do.

* Elena Marks, JD, MPH, Shao-Chee Sim, PhD, Vivian Ho, PhD, and Philomene Balihe, MPH

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