Saturday, December 05, 2020

Insured Americans' MOOP exposure rises relentlessly

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After premium increases exceeding 20% roiled the ACA marketplace in 2017 and 2018, premiums have been essentially flat for three years. That's good news for unsubsidized enrollees, who left the market in droves in 2017-18. The flat premiums reflect a stable market, to which insurers have been returning.

Premiums are only half of the affordability equation, however. For those who require substantial medical care, out-of-pocket costs can loom even larger. And these costs have been rising relentlessly, reflecting the degree to which medical inflation continues to outpace overall inflation, particularly in private insurance.

While deductibles are the most familiar proxy for out-of-pocket costs, the ACA's statutory annual out-of-pocket maximum (MOOP) is an at least equally important measure. The MOOP represents an enrollee's total exposure in a healthcare system in which a short hospital stay will likely hit the cap. The MOOP, moreover, applies to employer-sponsored insurance as well. Every year, the Center for Medicare and Medicaid Services (CMS) resets the highest allowable MOOP.

The MOOP cap has been rising relentlessly since the inception of the ACA marketplace, from $6,300 for an individual in 2014 to a proposed $9,100 in 2022 - a 44% increase over 9 years. (MOOP for a couple or family is double the individual amount.). The yearly increase is calculated to reflect the average increase in commercial market premiums, which in turn presumably reflects the cost of care paid for by commercial plans. For comparison, median household income increased 16% from 2014 to 2020; the maximum allowable MOOP increased 29% in that span.

In 2019, CMS under Trump-appointed administrator Seema Verma gave an extra jolt to the climb in MOOP by including individual market premiums in the 2013 (pre-ACA) baseline against which yearly premium increases are measured (see pdf pg. 85 here). The ACA's restructuring of the individual market as of 2014 raised average premiums substantially, by requiring insurers to cover all prospective enrollees without regard to their medical condition and mandating coverage of the ACA's 10 Essential Health Benefits. Pre-ACA, medically underwritten individual market premiums were lower on average than premiums in employer-sponsored plans. Thus, putting the pre-ACA individual market premiums into the baseline against which premiums are measured boosted the increase since 2013, adding 2.5% to the 2020 MOOP.

The ACA's requirement that health plans qualifying as Minimal Essential Coverage (e.g., plans that  fulfill the ACA's employer mandate) cap enrollees' annual out-of-pocket costs provided a vital new protection to insured Americans. But the allowable MOOP cap is grotesquely high by international standards, and its steep increase reflects a major weakness in the ACA's attempt to provide "affordable" coverage. 

While the ACA imposed significant new price controls on Medicare, it does nothing to reduce the cost of care in commercial insurance, which continues to outpace inflation. Marketplace plans are designed to cover a fixed percentage of the average enrollee's medical costs (the "actuarial value") -- 60% for bronze, 70% for silver  80% for gold. (For low income enrollees, silver plan AV is boosted via Cost Sharing Reduction (CSR) subsidies to 94%, 87% or 73% AV according to income level). As costs rise, so does the dollar value of enrollees' share of costs -- an increase reflected in the MOOP, as well as in deductibles.

Not everyone is subject to the maximum allowable MOOP. Most employer plans have lower caps: the average in 2020 was $4,039, according to the KFF's annual Employer Health Benefits Survey (p. 130). For ACA marketplace enrollees with incomes up to 200% of the Federal Poverty Level, CSR reduces the highest allowable silver plan MOOP to $3,000 (it's usually far lower at incomes up to 150% FPL, averaging $1,187 in 2020). But many marketplace plans, including silver and gold plans, impose the highest allowable MOOP.  In 2020, the average MOOP in silver plans without CSR was $7,735.

The plague of punitive hospital bill collection that afflicts many U.S. markets largely reflects the exposure of many insured Americans to medical costs beyond what they can afford. To a single person earning $25,000 per year (just under 200% FPL), a $3,000 MOOP is a huge vulnerability; likewise for a family of four with an income of $66,000 (just over 250% FPL), insured with a family MOOP of $18,000. 

The cost of care in public health insurance programs -- Medicare and Medicaid -- rises far more slowly* than in commercially insured plans. Medicaid enrollees have zero OOP exposure, or close to it, if they can get the care they need within often narrow provider networks. The federal government could subsidize coverage more affordably in a public program for those now subsidized in the marketplace , with much slower annual increases in enrollees' costs. We don't do that because we are slaves to market ideology and corporate interests -- in this case the medical industry's.


* In 2018, for example, according to CMS, per-enrollee spending increased 6.7% over 2017 in private health insurance, 3.7% in Medicare, and 2.0% in Medicaid. Increases in 2017 were 4.9% in private insurance, 1.6% in Medicare, and 1.2% in Medicaid.

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  1. Thanks for the focus on maximum possible copays(MOOP), which is an important part of the equation.

    As I constantly point out (in my comments wherever I think they might be read), this is part of my finding the current ACA still very faulty.

    Some people need to allow 40% of pre-tax income for premium plus MOOP. (E.g. a couple, 62 years old, just over the 400% of Fed. Pov. Lvl. "subsidy cliff", in a state like IL that allows the maximum 3:1 premium ratio old to young.)

    Compare us to Ontario, Canada, where total personal expenditures on health care are limited to about 4% of post-tax income by their system.

    (The Ontario cap comes about because the main plan has virtually no copays, but omits out-of-hospital Rx's. A separate "Trillium" program caps those at about 4% of post-tax income.

    Here are references on the Ontario system, and that 4% of post-tax income cap:

    Main system (everything virtually free, covering in-hospital Rx's, but missing out-of-hospital Rx's):

    and, the "Trillium" program, capping expenses for out-of-hospital Rx's at about 4% of after-tax income. (It has a deductible of about 4% of after-tax income, but then pays everything except copays of about $2.): )


    Biden has proposed some fixes on affordability for the ACA, notably capping premiums after-subsidy at 8.5% of pre-tax income (doing away with the "subsidy cliff"), and also to reduces typical MOOPs just a bit. But, he's obviously dead in the water without 60 votes in the Senate.

    The rough numbers that I get on affordability are these (a little old--from 2019--for a couple just over the subsidy cliff, age 62,in Chicago:

    Income (MAGI): $84, 731

    Premiums: $18,513

    Max OOP: $14,100

    (Based on second-lowest cost Bronze plan, since I knew Silver might be artificially high with Silver loading.)


    Numbers like this will come off this year for 2021 from, and should be similar, except may have worse MOOPs.

    (I pulled my numbers from my old "Problems" section that I wrote for the Wikipedia ACA article in 2019. It had 5 Problems with the ACA coverage, including the affordabiiity ones.

    This is it:

    As I must have reported before, though no mistakes were ever found, a single other "editor" used veto power over any calculations, (even if as simple as adding a premium to a MOOP and then dividing by income!) to get those 40% of income numbers out quickly.

    4 months before the recent election, another editor joined in to vote against me, to have the whole section pulled. Which is why I present it from archive.

    I can't be sure, but they may have been political operatives, or other people bent on distortion of truth for ideological reasons. The social world, as it interacts with policy, is very complicated!)

  2. Oh, one other thing to insert.

    I'm not sure about the exact numbers on this, but there is an aspect to consider, with the lower Medicaid and Medicare price increases, that those programs, particularly Medicaid, pay lower reimbursements than private insurers, being especially low for Medicaid--I think like 50% of what private insurers pay.

    Thus, Medicaid prices are held down artificially, and physicians generally have to avoid having too many Medicaid patients, for fear of not being able to meet payroll.

    This is, precisely, a hidden tax--true medical costs, particularly for Medicaid, are higher than government payments indicate -- the rest comes from the hidden subsidy for of higher private-sector premiums, and copays by individuals. (A "hidden tax".)

    What I don't know is any extent to which the Medicaid and Medicare payments may or may not be getting increasingly inadequate, with the numbers in your footnote showing favorable cost-control for Medicaid and Medicare over private possibly being due to an increased hidden tax.

    (The whole hidden tax notion has been disputed, in what some might consider sophistry. The argument is made analogous to a movie theater charging much less in the day than in the prime-time evening. The theater exists and supports itself based on the evening people, but can get a bit of extra revenue during the day, needing to support some staff, but not the structure, for the day people.

    Similarly, the argument is, hospitals exist for those with money. Lower-income people, if we consider that they wouldn't get any treatment at all without Medicaid, can get treated in the hospitals for less than those with money, based on returns to scale.)

  3. Thanks for an excellent article.

    I would not totally endorse your concluding sentence, which was:
    "The federal government could subsidize coverage more affordably in a public program for those now subsidized in the marketplace , with much slower annual increases in enrollees' costs. We don't do that because we are slaves to market ideology and corporate interests -- in this case the medical industry's."

    Only a minority of Congressmen really believe in 'market ideology.' Instead, the reason we have skimpy federal programs is an unwillingness and/or inability to raise taxes.

    The ACA could easily have had lower deductibles and MOOP limits, but Obama had to limit the program to $100 billion a year in order to get it passed.

    Both parties are unwillingness to raise taxes on the middle class. The Democrats propose what amount to fantasy taxes on the rich that will never be collectable in full, and the Repubs focus on tax cuts instead.

    Social insurance requires higher taxes. German health insurance requires about 16% of all payrolls, no exemptions for small businesses. Other countries have sales taxes in the 15%-20% range, no exemptions for food and clothing.