Saturday, January 31, 2015

When employers drop coverage: Two brokers' perspectives on the individual market in the ACA era

I am shopping an article (update - it's up on that looks at how small businesses that provide employees with health insurance are coping with the steady rise in costs -- slower since 2010 than in the five years preceding the passage of the ACA (coincidentally or not), but still relentless.

Below is an outtake. Two brokers spoke to me about their experiences helping individuals navigate the ACA exchanges or the off-exchange individual market after their employers stopped offering coverage . I decided that this topic didn't fit the scope of the main article, so here it is.

Roger Howell, president of Howell Benefit Services in Wilkes-Barre, PA, says that while most of his small group clients have renewed, a steady trickle drops coverage every year. When clients do drop coverage, they often hire his brokerage to help employees navigate the ACA exchange or the off-exchange individual market. He is troubled by the complexity of choices facing employees who are often accustomed to simply enrolling in their employer's plan.

"Picture an employee who's had employer coverage his whole working life," Howell says, "who's all of a sudden told, here's an increase in pay, now go to the exchange. Many go strictly on premium -- they're looking at a plan that looks like it fits their budget, but they're not looking at out-of-pocket costs, and they don't check the network" -- that is, what local doctors or hospitals are included in coverage. Insurers in the exchanges have notoriously held down prices by offering plans with "narrow networks," limiting coverage to providers that accept their pay scale (and supposedly meet their quality standards). A lot of buyers, Howell says, find out after the fact that they're in a "compressed network."

Working with many exchange shoppers, say, Howell, "it's almost like you give a five-minute explanation of how to play chess, then put a chess board in front of them and say 'let's play."

Jay Norris, co-owner with his wife Louise (also a writer for of Wellington, Co.-based Colorado Health Insurance, also finds that most customers focus mainly on premium -- and he's okay with that. The market he serves, in the Fort Collins region, is one of the most expensive in the country, and he and Louise have long favored high deductible plans paired with HSAs.

For a family earning just too much to qualify for ACA subsidies -- say, a family of four with an income of $100,000 -- Norris says that choosing the cheapest bronze plan on the exchange may cost the family $200 less per month in premiums than a silver plan with a significantly lower deductible (bronze plans are likely to carry the ACA's maximum allowable $6,600 per-person deductible or close to it).

That's true for a couple in their mid-fifties living in Fort Collins. The cheapest bronze plan, offered by Colorado HealthOp (the state's co-op insurer) , is a High Deductible Health Plan (HDHP) with a per-person deductible of $6,250 and a family deductible of $12,500 (the yearly out-of-pocket maximums are the same as the deductibles). The unsubsidized premium is $801 per month. The cheapest silver plan, offered by the same carrier, is $988 per month, with a per-person deductible of 3,900 and OOP max of  $6,600, and a family deductible of $7,800/OOP max $13,200

Norris says that high deductible plans offered by Colorado HealthOP provide two free primary care office visits before the deductible is reached, and  people who go to the doctor only once in a while are comfortable with that. If you're healthy, Norris says, you'll come out ahead in most years by going with the higher deductible -- "maybe every third year" you'll have to meet it."   Some of his customers buy supplemental accident insurance, which may cover $5,000 in hospital expenses with a very low deductible for an extra $25 per month for an individual and $50 per month per family. That's worked for Norris himself, an avid mountain biker and unicycler who's had more than his share of accidents.  It won't help with a hospitalization for illness, though.

That limited extra coverage raises an interesting issue. In some European countries, everyone must carry basic health insurance provided by nonprofit insurers, and there's a robust for-profit market in supplemental insurance, which employers often provide. In no country does the basic insurance leave citizens on the hook for the horrific out-of-pocket costs that many Americans are exposed to -- in the individual market and increasingly in employer-sponsored insurance as well.  It would seem that conditions here might be ripe for a more robust and comprehensive supplemental insurance market. But that's a topic for another post.

1 comment:

  1. On the bronze plans described above for $801 a month, the family pays $9600 a year in premiums and another $6250 in deductibles before the insurer pays a nickel (other than for preventive exams).
    So the first $16,000 in expenses is borne by the insurers.

    If the insurer gets 20 people with no big claims and one person with a $320,000 claim, they break even (ignoring admin costs, reserves, and profits).

    With the ACA reinsurence, the insurer pays only about $35,000 of a $320,000 claim (I think)

    So this is wildly profitable for the nect 2 years.

    What would I do?

    a. Make the federal reinsurance a permanent thing

    b force insurers to keep premiums down to $100 a month per person for this high deductible crap. If they do not like that, create a high deductible version of Medicare for those under 65.