Thursday, July 21, 2016

In Covered California, deductibles get steeper and narrower

As deductibles have risen steadily in health plans sold in the ACA marketplace, plans are offering more services that are not subject to the deductible. HHS has embraced this trend and incorporated it in the standardized benefit designs launching in the 2017 (which are optional for insurers).

California, which has had mandatory standard plan designs since the launch of the marketplace in 2014, has always included benefits not subject to the deductible in those designs -- and they have expanded outside-the-deductible services periodically, as deductibles and copays have also risen steadily.

In 2014, bronze plans offered on Covered California had a $5,000 deductible, with no separate deductible for drugs. Three primary care doctor visits were not subject to the deductible, as were three urgent care, outpatient mental health or substance abuse visits. In 2016, when the medical deductible was raised to $6,000, a $500 pharmacy deductible was added, and laboratory tests were put outside the deductible.

Silver plans in California have from the beginning placed lab tests and imaging, generic drugs, surgeon fees and professional fees for pregnancy (not hospital fees) outside the deductible, as well as the same doctor visit categories as bronze plans do. This year, Covered California is placing ER visits outside the deductible. Medical deductibles for silver plans unenhanced by Cost Sharing Reduction, meanwhile, have risen from $2000 in 2014 to $2500 in the coming year for a single adult.

Here is the 2017 Covered California standard benefit design summary:

Since the actuarial value of ACA-compliant plans at each level is set by statute, the tradeoff between deductible size and scope is ultimately a zero-sum game, as Larry Levitt pointed out to me -- at least, from the insurer's point of view. From the individual customer's point of view, however, less comprehensive deductibles make the bet with the insurer more complex. If you don't expect to need inpatient hospital care or other expensive services subject to the deductible, and if several thousand dollars in unanticipated medical expenses won't upend your life, a higher/less comprehensive deductible could work well for you. If you're one of the near-half of Americans who allegedly can't meet a $400 unexpected expense without borrowing, a deductible in thousands is quite a risk -- but is also probably unavoidable in the marketplace unless your household income is below 200% of the Federal Poverty Level, the cutoff for strong Cost Sharing Reduction subsidies.

In effect, the standard silver plan introduced by HHS for states, with a $3,500 deductible and an array of doctor visits and generic drugs not subject to the deductible, is donut hole coverage. It covers moderate and catastrophic expenses. Perhaps in time, if the American political system doesn't go totally off the rails, the donut hole will be plugged -- as Hillary Clinton is proposing, and as happened with Medicare drug coverage.

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