How many Americans who buy their own insurance are unsubsidized?

One further footnote on the McKinsey & Co. report on the state of the post-ACA individual market for health insurance, discussed in my prior post.

McKinsey opines that the market is unlikely to enter a death spiral because ACA premium subsidies insulate most participants from premium hikes. The report estimates that 69% of current enrollees are subsidized. That strikes me as at least slightly exaggerated.

Kaiser, in its 2015 survey of non-group enrollees on- and of-exchange, found that just under half were subsidized -- or about 59% if you exclude those in grandfathered and grandmothered pre-ACA plans, which are a different risk pool (McKinsey's "methods" note indicates that they include enrollees in non-compliant plans in their estimate of off-exchange enrollees, though they may also assume that some of those in noncompliant plans are in subsidy range)*. UPDATE 5/20: Kaiser's 2016 individual market survey results, reported today, find that 64% of individual market enrollees are now in marketplace plans. 83% of marketplace enrollees are subsidized, suggesting that 53% of the individual market is subsidized.

The off-exchange market is something of a black box, so it's not surprising that estimates would differ. Also, Kaiser's estimate is from 2015, and the ACA marketplace grew modestly this year. Still, on McKinsey's own terms, I think their estimate is a bit inflated.  Here's its basis:

If you're giving people a Medicaid-like provider network, do it at Medicaid-like prices

McKinsey & Co. has a report on the state of the ACA marketplace (and the whole individual market) that reinforces one dominant point that was already clear: The marketplace is relentlessly pushing insurers toward a narrow network/managed care model.

At the individual carrier level, results varied as well. While most carriers had negative margins after accounting for the 3Rs, approximately 30% of carriers achieved a positive margin in 2014. At the plan level, patterns emerge around performance differences. In the aggregate, plans based on health maintenance organizations (HMOs) had lower losses than plans based on preferred provider organizations (PPOs), consistent with their ability to enable more tightly managed benefits and care. In both 2015 and 2016, the premium increases for HMO plans were roughly half those of PPO plans, which suggests the initial results carriers experienced in the individual market were more favorable for the HMO plans.

The disappearing shoparound on Healthcare.gov

While enrollment figures in the ACA's first open season ultimately exceeded expectations, a disturbing number of those who remained uninsured remained ignorant of federal aid that would make insurance affordable for most of them. A McKinsey & Co survey conducted in April 2014 found that two thirds of subsidy-eligible respondents who'd tried to use Healthcare.gov and cited unaffordability as the reason they remained uninsured were unaware that they were eligible for subsidies. In a more recent Kaiser Family Foundation survey, almost half of still-uninsured respondents who said they were "told" they were ineligible for aid appeared to be aid-eligible at the time of the survey (a few months later).

While there are many ways that an applicant in Healthcare.gov or the state exchanges could get that false impression, it would appear that a well-designed, prominently placed "shoparound" feature could go a long way toward remedying the problem. Healthcare.gov has such a feature, and it's pretty easy to use. Punch in your zip code, the number of members of your household with their ages, and your annual income, and within a minute of starting you get a complete list of available plans with subsidy-inclusive prices. That is, you very quickly know the least amount you can pay as a monthly premium (or if you're likely to be eligible for Medicaid) -- that is, if you accurately estimate your income. There's a lot still to figure out -- but you're not likely to be slapped with the full sticker price and think that you're on the hook for all of it, as may have happened to many people who started an application and somehow disqualified themselves for a subsidy while applying (e.g., by saying that they did not plan to file a tax return).

Healthcare.gov did put up a shoparound in the first open season, but it wasn't fully functional until December, and even then it was easy to miss if you weren't looking for it. Therefore I rejoiced when, in the runup to the second open season this November, the new and improved shoparound was one of just two buttons on the home page, labeled "see plans and prices."

That was then. In the course of open season, the shoparound faded from view. By February it was three pages deep.  Its use declined accordingly. In its weekly enrollment summaries, HHS tracked "window shopping Healthcare.gov users" as well as overall site visitors.   Here's three snapshots:

This is how you let people know what the ACA has to offer

According to a recent Kaiser Family Foundation survey, 53% of the uninsured don't know that the ACA provides financial help to low and moderate-income Americans to help them get insured. Last year, visiting Healthcare.gov or state exchanges didn't always alleviate the ignorance. An April 2014 McKinsey & Co. survey found that two thirds of subsidy-eligible respondents who visited the federal exchange,  remained uninsured and cited unaffordability as the reason did not know that they were eligible for subsidies.

I've asked before how so many visitors to Healthcare.gov could come away not knowing that their coverage would be subsidized. One answer: most did not find their way to the shop-around feature, which enables a user to enter a handful of data points (home location, household members with ages, and household income) and get plan price quotes with the subsidy included (or a notice that the user is likely eligible for Medicaid).  The shop-around was not functional until December 2013 -- and from that point on,while it wasn't exactly buried, it was hiding in plain site among several other potential starting points on the hc.gov home page.

This year it's different. The shop-around itself is streamlined a bit -- but more important, the home page steers users to it. "See plans and prices" is one of just two prominent options on the home page -- the one on the left, where reading starts.  If you pick the other -- "get started" -- you're prompted for your home state, after which you're again presented with a binary choice: see plans and prices, or apply now. "See plans and prices" is a bigger button.

In the same vein, email encouraging shop-around is pushed out to those who have created logins but have not enrolled in a health plan, either last open season or for 2015. I created a login last year, though I get my insurance elsewhere. This afternoon I received an email that looks like this:

View in browser | This newsletter created and distributed by Centers for Medicare & Medicaid Services Cyber Monday: Shop for health plans today This Cyber Monday, don’t forget to shop for health plans on HealthCare.gov. Getting covered may be cheaper than you think and you could be eligible for lower premiums and out-of-pocket costs. Take charge of your health care this holiday season. You’re on your way to the best gift of all – peace of mind for you and your loved ones. Get started today! Just enter your zip code to preview 2015 plans and estimated prices. Remember: Act by December 15 and your new coverage can start as soon as January 1 The HealthCare.gov Team

That big fat button leads straight to the shoparound, which begins with a zip code prompt. If you enter the requested info, you can get subsidy-inclusive price quotes within 30 seconds. That should give some uninsured people at least an understanding that "the government will help pay for coverage for low and moderate income Americans."

Now, if only the hc.gov shop-around would default results to silver for those eligible for Cost Sharing Reduction.  Calling Kevin Counihan....

If you answer the first question wrong on healthcare.gov, no soup(sidy) for you

Back in April, when the ACA's extended open season was finally over, surveys conducted by McKinsey & Co. and PerryUndem (for EnrollAmerica) indicated that most of the still-uninsured were eligible for ACA subsidies (or Medicaid, in expansion states) but didn't know it. In fact, McKinsey found that two thirds of subsidy-eligible respondents who visited healthcare.gov but did not enroll were not aware of their eligibility -- and so had no idea how much health insurance would actually cost them.

I have an article up at The New Republic (my first there) examining why so many of the uninsured remain unaware of what the ACA has to offer them. In all fairness, the first answer must be that knowledge penetration takes time -- the CBO always projected a 3 to 4-year path to full takeup.

"What's a subsidy?" -- It's hard to reach the uninsured

Back in May, I noted a remarkable finding in a McKinsey survey of those who bought or sought health insurance in the individual market during the ACA's first open season:  Most of those who failed to obtain coverage were eligible for subsidies but did not know they were eligible. Two thirds of subsidy-eligible respondents who visited healthcare.gov but did not enroll were not aware of their eligibility -- and so had no idea how much health insurance would actually cost them.

Those findings are corroborated in a survey conducted at about the same time (April 10-28), commissioned by EnrollAmerica and conducted by PerryUndem Research/Communication. I just happened on this because HuffPost's Jeffrey Young cited the results in a story about the challenges of meeting signup targets in ACA year 2. Ignorance among the uninsured remains perhaps the greatest barrier (excepting the refusal of about half the states to accept the law's Medicaid expansion).

The EnrollAmerica survey drew responses from 671 new enrollees and 853 people who remained uninsured. 60% of those who remained uninsured said they wanted insurance. Only 21% of those who did not try to enroll knew that financial help was available to low-to-moderate income buyers -- and only 38% of those tried but failed to enroll were aware of this basic fact.

Perhaps even more remarkably, only 56% of those who did enroll in coverage knew that the law gives financial help to low- and moderate-income buyers. At the same time, 75% of enrollees, including 69% of those who enrolled online, said that the signup process was easy. Perhaps in this one regard it was a bit too easy, i.e., it was not hammered home that your friendly federal government was subsidizing your purchase.

Whaddaya mean, you didn't know about the subsidy? --Improving healthcare.gov

Once healthcare.gov stopped crashing, how successful was it in transmitting the most basic information to most users -- how much they'd be likely to pay in monthly premiums, and how much in out-of-pocket costs they'd be on the hook for?

My sense from late December on was that the website's shop-around feature, enabling a user to get that basic information without registering or applying, worked reasonably well. I used it all the time to check premiums, deductibles and maximum out-of-pocket (OOP) costs for different ages, income levels and locations. You need to enter about eight pieces of information, including state and county, household size, household members' ages, and household income, to get a listing of available plans, ranked lowest premium to highest, and sortable by metal tier. Each plan summary clearly lists what you'll pay in premium, deductible and OOP max (if your income estimate is accurate). Cost Sharing Reduction (CSR) subsidies lowering deductibles and OOP, available to those earning under 250% of the Federal Poverty Level, are figured in.

And yet, many people who tried to use the site came away with no idea how much they would need to pay -- that is, how big a premium subsidy they eligible for, let alone CSR, or even that they were eligible for subsidies at all. A McKinsey study found that 72% of the respondents who reported that they shopped but did not buy were subsidy-eligible, and that 66% of subsidy-eligible respondents who cited perceived affordability as the reason they stopped shopping were aware of neither their eligibility nor the amount for which they were eligible. Their plight is illustrated by the tale of a newly retired Philadelphia cop who went online and concluded that insurance would cost her $800 per month, -- missing the subsidy that reduced the premium to $135.

Does the ACA shaft the working class and middle class as Robert Laszewski claims?

HHS released statistics yesterday showing that "69 percent of enrollees who selected Marketplace plans with tax credits had premiums of $100 a month or less, and 46 percent of $50 a month or less after tax credits." Among the 87% of buyers on ACA exchanges who qualified for federal subsidies, the average premium was just $82 per month.

Healthcare industry consultant Robert Laszewski is unimpressed. In a post titled "Obamacare: What About the Working Class and the Middle Class?" he writes:

The lowest income people––who pay the lowest premiums and out-of-pocket costs––are the ones who are obviously signing up. That explains why the average consumer subsidy is so high and the average net cost is so low.

As I have said on this blog before, the biggest consumer problem Obamacare has is that the plans––with their still high premiums even after the subsidy, big deductibles, and narrow networks––are not attractive to working class and middleclass families and individuals who don't qualify for the biggest subsidies.

Simply, the Obamacare plans are unattractive to all but the poorest who get the biggest subsidies and the lowest deductibles

While Laszewski's market knowledge is to be respected, he rarely backs up his assertions as to what insurance buyers allegedly want with data.  Evidence suggests that the group of Americans who earn too much to qualify for subsidies yet lack access to employer-sponsored insurance is smaller than he thinks, and wealthier than he thinks. The ACA's direct winners will continue to outnumber its direct losers -- those who will pay more for coverage in the individual market -- and get less value -- than they would have had the law not passed. Consider the following:

Are most buyers on ACA exchanges previously uninsured?

ACA signups tracker Charles Gaba, extrapolating from recent New York state data, postulates that 85-plus percent of February signups for Qualified Health Plans (QHPs) on ACA exchanges are people who were previously uninsured.

If this inference is on target, it shouldn't be too surprising -- though it either contradicts or suggest a rapid reversal of trends asserted in prior reports from insurers and McKinsey & Co. We know that over 80% of QHP signups qualify for subsidies. That suggests almost by definition that a substantial percentage of signups would previously have found insurance on the individual market unaffordable. Moreover, we also know that less than 20% of those who complete the application process on the exchanges but do not qualify for subsidies actually sign up for a plan on the exchanges.