Tuesday, July 12, 2022

How prevalent is underinsurance among ACA beneficiaries?

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Big rain, small umbrella

In a New York Times op-ed Aaron Carroll, a physician and highly reliable assessor of data (his Bad Food Bible sifts expertly through a lot of bullshit in dietary research) makes two incontrovertible points about U.S. healthcare:

1. Americans are burdened with uniquely high out-of-pocket costs that induce us to forego need as well as unneeded care.

2. The ACA partly replicated this gaping flaw in our healthcare system, inflicting ridiculously high deductibles and out-of-pocket maximums on a significant number of marketplace enrollees.

But the argument includes what I regard as a slight (and common) distortion of emphasis in his overview of marketplace enrollees' high out-of-pocket costs: 

The average deductible on a silver-level plan on the A.C.A. exchanges rose to $4,500 in 2021. If people tried to buy plans with a lower premium, at a bronze level, the average deductible rose to more than $6,000. Granted, some cost-sharing reductions are available for those who make less than 250 percent of the federal poverty line, but even after accounting for those, the average deductible was more than $3,100 for silver plans.

"Average" silver deductibles are somewhat misleading, since more than 85% of silver plan enrollees obtained said cost sharing reductions (CSR), and more than 75% obtained CSR strong enough to reduce out-of-pocket costs to a level below that of the average employer-sponsored plan.  The HHS brief that Carroll links to in the passage above accordingly focuses on medians rather than averages (means):

Median and average deductibles, after CSRs, differ substantially among HealthCare.gov enrollees. The median deductible decreased from $1,000 to $750 between 2017 and 2021 (prior to implementation of the American Rescue Plan (ARP)), while the average deductible increased from $2,405 to $2,825. The difference between median and average deductibles is primarily driven by the fact that the majority of enrollees are eligible for and select CSR-silver plans; the average deductible is driven up by the smaller share of enrollees enrolled in plans without CSRs.

The HHS brief in its turn introduces some distortion, in that it focuses on the states using the federal exchange, HealthCare.gov, for which it collects somewhat more detailed data than from the states running their own exchanges (in the years examined, 2017-2021, 36 to 39 states used HealthCare.gov each year).  Enrollment in HealthCare.gov is in its turn dominated by the states that have refused to enacted the ACA Medicaid expansion (currently there are twelve). In those states, eligibility for marketplace subsidies begins at 100% of the Federal Poverty Level, as opposed to 138% FPL in the expansion states, and more than half of enrollees have incomes under 150% FPL, which qualifies them for the highest level of CSR. At that level, deductibles average below $150 and out-of-pocket maximums average about $1,200. The percentage of enrollees with the strongest level of CSR is much smaller in expansion states, which include all states with their own exchanges.

All that said, slightly more than half of ACA marketplace enrollees nationally are in plans with actuarial value either higher than the average for employer-sponsored plans (94% and 87% at the two highest levels of CSR) or slightly below the ESI average (gold plans with 80% AV). 

Moreover, the ACA Medicaid expansion is currently insuring more people  -- 20.7 million as of July 2021-- than the ACA marketplace, where enrollment as of the end of Open Enrollment for 2022 stood at 14.5 million.* Medicaid covers all expenses, or very close to it, for covered services -- call it 99% AV.  (Of the 20.7 million rendered eligible by ACA criteria, 16.5 million of them are rendered newly eligible, as a handful of states extended eligibility according to  ACA-like criteria prior to the ACA's enactment.)

Here, then, is the disposition by coverage level of people accessing health insurance via the ACA.

ACA enrollment by plan type and actuarial value

Coverage type

Number covered

% of marketplace enrollment

Medicaid, ACA-eligible (99% AV)

 20.7 million
(16.5 million newly eligible)


High-CSR silver (94% or 87% AV)

   6.2 million


Gold/platinum (80% or 90% AV)

   1.5 million (136k platinum)


Bronze or no-CSR/weak CSR silver (60-73% AV)

   6.8 million


Total marketplace enrollment

 14.5 million


Total insured

 35.2 million


Another 1.5 to 2 million people are enrolled in ACA-compliant coverage off-exchange, which means they pay the full premium. A plurality are likely in high deductible bronze plans, although gold plan enrollment is also generally higher off-exchange than on-exchange. Thanks to an odd convolution in ACA plan pricing known as silver loading, gold plan premiums are lower than those of silver plans in a minority of states and counties.

Bottom line for the ACA marketplace) about half of enrollees in ACA-compliant plans have deductibles ranging from $3,000 to $8,700 per adult and out-of-pocket maximums north of $7,000.

Bottom line more generally: of 35 million people enrolled in coverage via ACA programs, about 27 million are in either Medicaid (99% AV) or high-CSR silver marketplace coverage (94% or 87% AV).

It should also be acknowledged that while the out-of-pocket exposure for enrollees in silver plans with strong CSR (that is, for enrollees with income up to 200% FPL) is lower on average than in employer-sponsored plans, it's too often still high enough to cause financial stress and deter care for people at the income level at which these plans are available.

Carroll gave the impact of CSR somewhat short shrift. But the core of his conclusion remains dead-on, for employer-sponsored coverage as well as the marketplace:

The purpose of insurance is to protect people from financial ruin if they face unexpected medical expenses. Reducing the amount that they need to pay from six figures to five is necessary, but not sufficient. 


* Marketplace enrollment typically undergoes year-long attrition, begin with a percentage of enrollees (about 6% most recently) who never pay their first premium. Medicaid enrollment is currently inflated by a moratorium on states' regular "redeterminations" and resulting disenrollment, imposed by the Families First Act in March 2020 and in effect for the duration of the COVID-19 public health emergency, which is still in effect.

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1 comment:

  1. Many of the figures that you quote are on deductibles rather than out-of-pocket maximums.

    When I think of how well the health insurance system protects people financially, I look for the bad cases -- and think of probabilities of people getting stuck in worst- case situations of severe financial stress due to health insurance or copay cost.*

    I want the financial problems from bills and copays to be low-likelihood, like 1% over a lifetime. (Like in Canada or UK, at least for non-long-term-care.) Not like 3% or 5% over each year.

    (This is the principle of insurance. You insure against relatively low probability but highly damaging financial loss. Thus, you insure your house against a fire that will destroy it, even though over a lifetime the chance is probably 2% of that actually happening. Ditto, prudent middle-class people will pick up health insurance before the US Medicare age of 65 if they can afford it, and even if it is not subsidized, to protect themselves from serious financial loss in the relatively unlikely event they get very expensively sick. Most likely, before they are 65, they won't get really sick and the insurance premiums will have been much higher than the bills they paid out.)

    So, of deductibles and out-of-pocket maxes, I tend to look at the latter. (Because they reflect expenses that may still occur to a few percent a year of people with the policies.)

    "Actuarial value" also I pay not much heed to. It's an average case, not worst case, measure, and by the measure of high actuarial value alone, people with small bills can get them paid, and with big expenses can get thrown under the bus.

    Thus, I tend to look more, from your post, at:

    "Bottom line for the ACA marketplace) about half of enrollees in ACA-compliant plans have deductibles ranging from $3,000 to $8,700 per adult and out-of-pocket maximums north of $7,000."

    and take heed of the $7,000 (I take it per person, and $14,000 per family) out-of-pocket max. That's gonna financially strain or ruin a few percent of people, or at least older people say 55-64, over periods of a year or a few years with the coverage.


    * Or estate recovery of all medical bills that were paid out by ACA expanded Medicaid when a person was 55-64. (Don't get me started!)