Monday, November 24, 2014

Can the ACA exchanges steer customers away from bad choices?

An important feature on -- improved for the new open season, I believe -- could steer significant numbers of users toward plans best suited to their needs -- and perhaps point a way towards solving the "auto-renewal" problem, whereby existing plan holders may face steep price hikes if they fail to comparison -shop.

The feature in question is addressed to those buyers who are eligible for Cost Sharing Reduction subsidies, which lower plan deductibles and out-of-pockets costs for lower-income buyers -- but only if they buy silver-level plans, which will cost them significantly more per month in premiums than bronze-level plans.

Lower income buyers who choose bronze plans, which have lower premiums, can forfeit thousands of dollars' worth of CSR benefits. Fortunately, the vast majority of CSR-eligible buyers do seem to have found their way to silver, notwithstanding premiums that can be tens of dollars per month higher for individuals and over $100 per month more for families.

Dave Chandra, a Senior Policy Analyst at the Center on Budget and Policy Priorities and a Certified Application Counselor, tells me that this year, if an applicant who qualifies for CSR takes steps toward buying a bronze plan (or, less probably, gold or platinum), a prominent pop-up message will warn her that she is eligible for CSR and will forfeit it if she proceeds. Here it is:

I must note a rather egregious omission in this warning: it does not explain that to access the cost-sharing reduction you will have to buy a silver plan. Nor is the user defaulted to a silver plan menu if he clicks "No, I'll select a new plan." That seems a real lost opportunity. Still, the popup is hard to ignore.*

CMS tells me that there was a warning in this vein last year. But one navigator told me weeks ago that if there was, it was easy to miss (she had helped hundreds of clients, but couldn't recall).Perhaps it's been made more prominent; I am seeking clarification on this point and will update when I can. [Update, 11/25: CMS spox Aaron Albright writes that "it's the same notification as last year." So there seems to be a bit of a perception mystery -- possibly because a navigator-assisted low-income customer is unlikely to get near the buy button on a bronze plan.]

Steering people away from bad choices may be something the exchanges need to learn over time. Today, at The Incidental Economist, Adrianna McIntyre sounds the alarm about auto-renewal by people who bought ACA plans in the first open season.  The problem is that many of last year's cheapest and second-cheapest plans have been undersold by new entries, and buyers' income-based subsidies are keyed to the second-cheapest plan. If the prior year's benchmark plan is undersold, the subsidy will drop, and buyers of that plan will see their subsidies shrink even as the plan's price rises. The Upshot and the Kaiser Family Foundation have great maps illustrating the extent of these benchmark price swings across the country, while Gallup has found that only 7% of plan holders intend to shop anew, as they should. The problem is compounded by the fact that auto-renewers' subsidies won't be recalibrated to adjust for income changes until tax time, unless they take positive action. Further, if a lower benchmark has dropped the overall subsidy rate, the extra amount renewers owe also won't be reconciled until tax time.

As Adrianna suggests, there's no easy solution.  HHS has a proposed a new rule whereby plan buyers would choose in advance whether to be auto-renewed in their current plan or defaulted to a lower cost plan. Some state-run exchanges require existing customers to re-enroll, which provides an opportunity to encourage comparison shopping but also runs the risk of inducing passive customers to drop coverage.

It seem to me there ought to be a way to require current plan holders to undergo a brief, simplified online re-enrollment checkoff, in the course of which they could be strongly encouraged to comparison shop and see exactly how much they'll pay for their existing plan as well as cheaper alternatives.  It should be easy, in the course of that process, to alert the customer if her plan has lost benchmark (or sub-benchmark) status -- a warning structured like the you're-forfeiting-CSR popup.

Almost certainly**, over half of private plan buyers in the ACA marketplaces were CSR-eligible -- and most did take advantage of that status by buying silver. Existing plan holders seem to be on track to make a suboptimal choice (renewing a plan that costs them considerably more than a comparable option) at a considerably higher rate.

* Aaron Albright also emailed a screenshot of the filter below, which appears in the left margin of search results after a user has completed the data input on an application (it's not in the shop-around feature). The box at bottom

The question mark pulls up the box below, which instructs, "if you are eligible for plans with a cost-sharing reduction, select the box below to see only those plans with these savings." The world "silver" seems to be almost taboo, but perhaps the core message gets across.

** Just two states that I know of break out buyers' metal-level choice by their income bracket (HHS does not do it for the 36 states on In New York, 57% of buyers were CSR-eligible; in Washington, 56% were eligible. The percentages are likely to be higher in poorer states, as the higher takeup of silver plans in poorer states indicates.


  1. My question goes back to the founding of the ACA, I guess.
    The lowest premium -- which appeals to the poorest buyers-- should have the MOST protection against out of pocket costs.
    How did we wind up with the regressive rules that you cite?

    1. I have also found myself wondering in recent days why CSR doesn't attach to bronze plans. SOP to insurers, maybe, and doing so would be more expensive for gov, which covers difference between plan's base actuarial value and the AV created by CSR.