Saturday, February 15, 2014

Buying unsubsidized insurance in the ACA universe: A preview

A few days ago, I noted that less than 20% of those who had completed applications on ACA exchanges and been found ineligible for subsidies had actually enrolled in plans through the exchanges.  I added an invitation to people who were shopping for insurance without a subsidy to share their experience with me.

I have since spoken to several people who have bought insurance off-exchange. I will report on their fascinating experiences in a few days: first, I want also to speak to brokers and perhaps others who can overview the off-exchange individual market (if you can help, please let me know). Here, I'd just like to overview a few patterns and general observations. Some are obvious but perhaps still not widely recognized. Here goes:

1) If you are subsidy-ineligible, there is no reason to complete the transaction through or a state ACA exchange.  Why add an extra layer of bureaucracy and send you application through the shaky "834" tunnel? (An 834 transmission is a reporting tool that brokers, and now the exchanges, sue to send completed applications to insurers.) Also, why not get a sense of how responsive competing insurers are? [Update, 2/17: a reader provides a reason to buy on the exchange: "future income is never guaranteed and if I end up unemployed or with a lower than expected income in 2014, I can get the subsidies later when I file my taxes if I’m eligible. "]

2) Price aside, the individual market is much easier to navigate than it used to be -- first, because the ACA exchanges offer a quick lay of the land and price benchmark, and second, because medical history is no longer relevant.  Two people told me that all you need is a credit card -- the insurers don't even ask for a driver's license.  And if you come to a broker quoting an exchange plan in your price range and asking if they can beat it, you are shopping with the benefit of solid price discovery.

3) In many cases, there are better options available off-exchange than on-exchange. All off-exchange plans have to be ACA-compliant, but rules for the off-exchange market vary from state to state.  One reason I'm not yet writing up the interviews is that I want a better sense of how state rules and state officials may shape the off-exchange market.  In red states, I suspect that ACA-hostile officials may even act to foster adverse selection on the exchanges.

4) A lot of people have pre-existing conditions. Back in June of last year, when Avik Roy first started alleging that young buyers on the ACA exchanges would suffer severe "rate shock," Ezra Klein did some checking on Roy's baseline average $109/month for the cheapest plans available to young adults via online broker, and reported, that "According to [sic: I think he meant], 14 percent of people who try to buy that plan are turned away outright. Another 12 percent are told they’ll have to pay more than $109." But note that those 26% were among single young people.  The people I've spoken to are in households ranging from 2-5 people, and all had a family member with a preexisting condition. While my sample is doubtless skewed by my blog's liberal bias, it seems reasonable to assume that the percentage of people either shut out entirely of the pre-ACA individual market or forced to pay much more because of preexisting conditions was way higher than 26%. The percentages would climb both according to household size and age.

5) The pre-ACA market was not very rational.  It seems that in some market niches, some policyholders may have slipped into the equivalent of rent-controlled apartments -- rates that started low and did not climb dramatically. We know that there was a ton of churn and instability, but it didn't affect everyone. I hope to learn more about this.

What if the (Republican) dog catches the Obamacar(e)?

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