Tuesday, November 28, 2017

The marketplace isn't all roses for the subsidized, either

Sam Baker has an insightful take on the bifurcation of the individual market between the subsidized and the unsubsidized, exacerbated by Trump. I want to offer a caveat, though.

Of the fallout from Trump's cutoff of Cost Sharing Reduction (CSR) reimbursement -- premium spikes for the unsubsidized, bronze and gold bargains for some subsidized -- Baker writes:
All of this has compressed the ACA's benefits. The law was initially designed to move a lot of people into the same system, in which even the people who didn't get a subsidy would benefit from a competitive marketplace to shop for coverage.

Instead, we're ending up in a place where the poorest consumers can get even cheaper coverage than the ACA intended, especially if they choose less comprehensive care, while wealthier consumers increasingly don't have much incentive to get covered at all. Those trends will only grow more pronounced if Republicans successfully repeal the individual mandate in their tax bill, leaving the law with only its carrot, and no stick.
There's nothing inaccurate here. But in general discourse if not here, the perceived bonanza for the subsidized stemming from inflated subsidies may be somewhat overstated.

The prevalence of free bronze plans for enrollees with incomes under 200% FPL (and for a fair number of older buyers over that threshold) is head-turning.  But for those who know they need healthcare and have little or no savings or spare income, a bronze plan -- free or otherwise -- can be close to useless. Meanwhile, the fixed actuarial values of marketplace plans make actual healthcare more unaffordable every year, particularly for low income people.  13 percent of, say, $5,000 in medical costs is more than 13 percent of, say, $4,000. The dearth of competition in many ACA markets, moreover, enables some monopoly or near-monopoly insurers to slice and dice actuarial value to their benefit more than to enrollees'.

Take the case of a family of four, parents aged 46 and 44, with an income of $49,000, just under 200% FPL in Durham, NC (zip 27702), where the state BCBS has a monopoly. The kids are in CHIP, and that's good. Strong CSR raises the actuarial value of a silver plan -- the percentage of the average enrollee's costs the plan is designed to provide -- to 87%, and that's pretty good by current standards -- better than the average employer sponsored plan, in fact. It's also better than Medicare.

Here's the choice between the cheapest bronze  plan (free!) and the cheapest silver plan*:

The bronze plan is free -- but if the family has no assets or surplus cash flow, it's largely worth what they pay for it, or may feel that way. No benefits except the mandated free preventive kick in before the enormous deductible. In many markets, bronze plans that do not subject doctor visits or generic drugs to the deductible are available. That's helpful, but not does mitigate the risk inherent in enormous bronze out-of-pocket maximums.

The silver plan offers more attractive coverage. But $242 per month is a big bite on $49k for a family of four. That much hasn't changed. And the $800 per-person deductible, while now average for CSR at this level, is only comparatively low -- it can sound prohibitive to someone with an income in the 200% FPL range.  Put $500 for an ER visit on top of that deductible, and even this "good" insurance does not feel so great. Recall that 44% of Americans lack savings to cover an unexpected $400 expense, according to the Federal Reserve. An income of 200% FPL puts this family in about the 33rd percentile nationally

While subsidized enrollees are largely insulated from premium increases -- and can benefit this year from the CSR-driven increases concentrated in silver plans (creating bronze and gold discounts) -- they are subject to the lesser but still-substantial rise in out-of-pocket costs.

Here are 2015 out-of-pocket cost averages for CSR-enhanced silver plans, as reported by the Kaiser Family Foundation. (I could not find 2014 averages). The CSR plans are designated by their actuarial values at different income levels (highest AV for lowest income).
  • Deductible:  $2,078 for CSR73 plans, $737 for CSR87 plans, and $229 for CSR94 plans.
  • Primary care office visits:  $23 for CSR73 plans, $17 for CSR87 plans, and $14 for CSR94 plans.
  • Out-of-pocket maximum: $4,622 for CSR73 plans, $1,691 for CSR87 plans, and $879 for CSR94 plans.
Here are the averages according to Kaiser in 2017 (no info for office visits):
  • Deductible: $2904 for CSR73 plans, $809 for CSR87 plans, $255 for CSR94 plans
  • Out of pocket maximum: $5,233 for CSR73 plans, $1,875 for CSR87 plans, $941 for CSR94 plans
The contrast would be considerably sharper, no doubt, between 2014 and 2018.

Those OOP increases are incremental but substantial.  Silver plans, designed to be practically the default for enrollees with incomes under 200% FPL, put more of a financial strain on eligible enrollees than they did in 2014. In a way, free bronze only makes them seem more out of reach.

For enrollees in the 138-200% FPL range in particular, a truly valuable discount is available when the cheapest silver plan significantly undersells the benchmark (second cheapest) silver plan, against which the premium subsidy is set. Instead of $120 per month for a silver AV 87% plan, a shopper might find one for, say, $80. But such deals are haphazard, relatively rare, and likelier (I think) where competition is robust.

* The benchmark (second cheapest) plan in this market is $15 per month more, and almost indistinguishable.

1 comment:

  1. I cannot agree with your statement that $242 a month is a big bite for a family with $49,000 annual income. At that income, the family's after tax income will be about $2,858 and maybe a little higher in some states. At that income, $242 to get a CSR-enhanced health plan for the whole family is a very decent price. My insurance agency administers group plans, and I can find you hundreds of employers in ten minutes where a good health plan costs a family much more than $242 a month.