Wednesday, January 21, 2015

Bronze ACA plans are skimpy, but compared to what?

As a relative newbie to the wonderful world of U.S. health insurance, I have been troubled by the skimpy coverage of the lowest-tier bronze plans offered on the ACA exchanges. Mandated to cover 60% of the average user's yearly medical expenses (that is, to maintain an actuarial value of 60%), bronze plans carry an average individual deductible of over $5,000.*

On the plus side, only 20% of ACA private plan buyers in 2014 selected bronze plans, most of them probably in higher income brackets. By my estimate, over half of ACA buyers obtained plans with an actuarial value of 80% or higher, including about 90% of buyers with incomes under 200% of the Federal Poverty Level, who accessed Cost Sharing Reduction subsidies by buying silver plans. And while ACA coverage can have troubling limitations, from high deductibles to narrow networks, I just stumbled on information that indicates what an improvement the actuarial mandates constitute.

This 2012 study found that more than half of the health plans sold in the individual market in 2010 had actuarial values of less than 60%, and that 60% was the average AV of all plans sold on the individual market in that year.  Many of the "rate-shocked" holders of canceled individual market plans who hit the news in fall 2013 probably had plans that were skimpier than ACA bronze -- though a fair number may have been happy with plans that had coverage exclusions that did not affect them.

There are probably about as many off-exchange as on-exchange buyers in the post-ACA individual market. According to a survey of its own customers conducted last February by online health insurance broker eHealth, bronze plans were most popular among that group, and average deductibles among eHealth buyers were about midway between averages for bronze and silver exchange plans for individuals and a bit closer to silver plan averages for families. Those numbers suggest an average AV among eHealth customers in the 65-67% range. How representative they are of the off-exchange individual market as a whole I can't say.


* While all must offer the ACA's mandated free preventive services, many bronze plans provide no other benefits until the deductible is reached, offering essentially catastrophic coverage only.


  1. It's the nearly old who don't qualify for subsidies who are buying high deductible bronze plans (HDPs). In my state, a HDP ($5,000) for the nearly old costs about $7,000 per year. That's $12,000 in out of pocket expenses. I'm nearly old so I'm very much aware of the trend to HDPs. Of course, the trend to HDPs started before Obamacare, it's only been accelerated by Obamacare. In my view, this phenomenon (costly HDPs for the nearly old) is a political liability for Democrats; the nearly old vote at very high rates (as compared to younger voters) and will be a drag on Democrats for some time. This could have been avoided if Congress (i.e., the Democrats) and Obama had not adopted modified community rating. Sure, it reduced the economic cost of Obamacare, but at a very high political cost.

  2. I agree that near old voters are a liability for Democrats. If my wife and I were both on the individual market, and we are over 60, our cost for two policies would be about $1200 a month, Our income is $5100 a month pretax, $4000 a month after tax. We would get no subsidies, so our cost for crap ass insurance would be over 25 per cent of after tax income.

    But the solution has nothing to do with community rating. The solution is to extend subsidies past 400 per cent of poverty. The Dems have been terrified of taking the ACA back to Congress, so this kind of fix has not happened,

    One has the strong impression that most senior democrats are like J Gruber,with great employer coverage from Harvard or MIT or the government, So they do not contest the Repugnicans at all.

    The issue of the pre 2010 cheap plans is a very interesting, The person who bought them took a clear gamble. Their premium would be
    lower, but if they had a serious illness they could be devastated financially.

    A lot of older people would win that gamble and hang on unitl age 65. I do not love gambling as an acceptable form of social insurance. But this kind of gambling makes me sympathetic

    1. Bob, $5100/month would put a couple just under 400% FPL, which is $62,920 for a 2-person household. And I'd assume that AGI would be lower than the full pretax income. That doesn't really negate your point: a couple with a MAGI of $63k would be almost equally screwed, though I imagine actual income is usually higher (I don't know how much higher for the not-self-employed). The subsidy cliff is definitely a problem, and a disproportionate one for older buyers, but a) Dems get a lot of heat for reducing the age banding to 3-to-1 rather than, say 5-to-1, and b) Democrats passed as expensive a bill as their most conservative members would allow -- they all had to be on board since Republicans stonewalled.