Ambetter's donut hole coverage: high deductibles alloy ACA silver

In pre-ACA times, many low income workers were enrolled in "mini-med" health plans that provided first-dollar coverage up to very low limits, and no insurance after those limits were reached. Such plans still exist, though they don't satisfy the ACA's "personal responsibility" requirement.

Also long available: "catastrophic" insurance that provides no coverage at all (or, post-ACA, preventive care only) until a high deductible is met. That's basically a stop-loss policy for people with enough assets not to be deeply indebted by by the time they reach the deductible. Many if not most bronze plans offered in the ACA marketplace are in this category: deductibles are usually north of $6,000 per person.

Yesterday, CMS touted an under-recognized fact: lots of marketplace plans offer some benefits before the deductible is met. Put this in the category of consolation prize:

It's fair, O Robert Pear, to spotlight high deductibles in ACA plans. But some context is missing.

An article by the New York Times' Robert Pear, spotlighting the plight of ACA marketplace customers who bought plans with sky-high deductibles, had my eyeballs shooting lasers in two directions.

On the one hand, kudos to Pear, not only for showing the absurdity of offering plans with deductibles north of $6,000 per person to people who are not affluent, but for spanking HHS for emphasizing low premiums uber alles:

Sylvia Mathews Burwell, the secretary of health and human services, issued a report analyzing premiums in the 38 states that use HealthCare.gov. “Eight out of 10 returning consumers will be able to buy a plan with premiums less than $100 a month after tax credits,” she said.

I have complained about that misdirection repeatedly, most recently noting that only about 5 in 10 will be able to buy a silver plan for under $100 and thus access the Cost Sharing Reduction (CSR) subsidies that are available only with silver. So Burwell is effectively hawking bronze plans to those who, as Pear illustrates, won't be able to use them.

On the other hand, Pear exaggerates the prevalence of super-high deductibles among marketplace enrollees. His acknowledgment of CSR is buried deep and lacks context:

Why go for the bronze?

I've devoted a lot of posts to worrying about who bought high deductible bronze plans but shouldn't have, especially those who were eligible for Cost Sharing Reduction subsidies if they bought silver (Fortunately, most CSR-eligible buyers did choose silver.) This evening I have a post up on healthinsurance.org digging into who should buy bronze -- that is, for whom is a plan with, say, a $5,000 deductible at least a rational choice.

One key: in  some states and counties, some bronze plans provide substantial benefits that kick in before the deductible is reached -- say, $20 primary doctor visits or $10 generic drug copays. Another: for the unsubsidized, premiums climb steeply with age, while deductibles and copays remain the same regardless of age. For the rest, I hope you'll take a look.

NYT spotlights plight of ACA bronze plan buyers, leaves out vital context

[first posted 10/18]

The Times has a front-page story today, by Abby Goodnough and Robert Pear, that highlights the plight of ACA private plan buyers who bought plans with such high deductibles that they are foregoing needed treatment.  This is a real problem -- bronze plans in particular have terribly high deductibles, averaging $5,000 per individual -- but vital context is missing. Here's the framing:

About 7.3 million Americans are enrolled in private coverage through the Affordable Care Act marketplaces, and more than 80 percent qualified for federal subsidies to help with the cost of their monthly premiums. But many are still on the hook for deductibles that can top $5,000 for individuals and $10,000 for families — the trade-off, insurers say, for keeping premiums for the marketplace plans relatively low. The result is that some people — no firm data exists on how many — say they hesitate to use their new insurance because of the high out-of-pocket costs.

The first thing to note is that low-income ACA shoppers were generally not subject to these high deductibles. Low-income marketplace shoppers should generally not be buying bronze plans  -- not only because the deductibles are higher than those of silver-level plans, but because the silver plans alone come with Cost Sharing Reduction (CSR) subsidies. These reduce deductibles and maximum out-of-pocket costs for buyers with household income below 250% of the Federal Poverty Level (FPL). CSR subsidies are really large for buyers under 200% FPL, giving silver plans actuarial values comparable to those of the most generous employer-sponsored plans for those in that income range. The Goodnough-Pear story does explain CSR, but deep in the story, following four hard-case individual narratives.

Bronze plans had relatively low takeup in the ACA's first open season. According to HHS statistics, just 20% of users in all marketplaces (state-run as well as healthcare.gov) bought bronze plans. Since 33% of buyers who earned too much to qualify for subsidies bought bronze, less than 20% of the subsidy-eligible must have done so.

The ACA marketplace and the toilet paper aisle

My last post was in protest to a New York Times front-page article that highlighted the very real plight of ACA private plan buyers who were forgoing needed medical care because they'd bought high-deductible, mostly bronze-level plans. My beef was that the article omitted important context, e.g., that only 20% of ACA shoppers selected bronze and that the vast majority of low-income buyers who were eligible for Cost Sharing Reduction (CSR) bought silver plans that allowed them to access those important secondary subsidies.

I also suggested that the four individual narratives in the piece should not be taken at face value -- in particular, the plight of one woman who had selected a bronze plan with a $6,000 deductible but was plainly eligible for CSR that would have brought the deductible down to $500 at worst and as low as $25, depending on what plan she chose. This woman plainly made the wrong plan choice -- in itself a significant problem, but not one that the Times article addressed.

I want to focus here on a second brief narrative in the Times story, in which the woman in question was somewhat higher-income and so faced a tougher choice, with less obviously attractive options. Here's the tale:

Having some health insurance is better than having none. But American insurance...

Those of us engaged in the long struggle to pass and implement the ACA have (not wrongly) fixated on how vital it is to have health insurance, and we've been cheered by the roughly 25% reduction in the nation's uninsured in the ACA's first year. We've also celebrated the ACA's ending of arbitrary policy rescissions, yearly and lifetime coverage caps, medical underwriting, and plans lacking essential benefits like childbirth and drug treatment.

Some coverage is better than none. But recent good reporting is also highlighting the extent to which much if not most health insurance in America remains inadequate, exposing plan holders to sometimes substantial, sometimes damaging and sometimes ruinous costs. The incidence of such exposure may be rising rather than falling, as employers continue to offload the cost of care onto employees.

How to choose a health plan? Even Austin Frakt needed help

If you were shopping for a new health insurance plan, how much extra would you be wiling to pay for a plan that included your current doctor or doctors, or a nearby hospital you think well of, or a top cancer center that you don't need now --as far as you know?  How much more deductible and co-insurance would you take on to lower your monthly premium?

These questions are not easy to answer. Not for a 27 year-old transitioning off a parent's health plan. Not for a 35 year-old fast-food worker. Not for a 48 year-old self-employed consultant. Not even for a health economist.

Austin Frakt, a health economist at the U.S. Department of Veterans Affairs and Boston University and co-Editor-in-Chief of The Incidental Economist blog, has had a personal taste of the complex decisions facing shoppers on the health insurance exchanges established by the Affordable Care Act. In many states, buyers are confronted with dozens of plan options -- though for most, price will probably narrow the feasible choice to a handful. As a federal employee, Frakt has for some time chosen his family's insurance on a yearly basis  from a precursor of the exchanges, the Federal Employee Health Benefits Program, which in Massachusetts offers more than a dozen options. He has long chosen Blue Cross Blue Shield plan for his family that has a low deductible and is "accepted pretty much everywhere" -- that is, by every doctor and hospital the Frakt family has had cause to access.

Frakt has more than once considered the possibility that higher deductible plan with a lower premium might save his family money. He tells me, though, that when he considered switching to a high deductible plan without any form of decision support,  the utility of doing so was "very hard to assess. You have to know a good deal of detail about your own plan,  the plan you're comparing it to, and your own utilization pattern. Also, the deductibles and copays for everything. You would want to know if the doctors you currently use are in the other plan's network. It's a very complicated comparison. I was overwhelmed, couldn't compare them meaningfully."

Is there a hole in the heart of U.S. healthcare cost control?

It's a given that the sine qua non of providing universal access to quality healthcare is effective cost control. That's especially true in the United States, where healthcare costs 50% more per capita than in the next most expensive country, Switzerland, and more than twice the OECD average, notwithstanding the fact that the U.S. is the only wealthy country that does not insure all its citizens.

This high-cost starting point is the Affordable Care Act's pre-existing condition, the reality underlying bitter complaints about high premiums for the unsubsidized and narrow networks in exchange plans.  As Yogi Berra might say: if you want to make healthcare affordable to all, healthcare has to be affordable. To be successful, the ACA has to bend the cost curve -- or at least, maintain the windfall spending growth slowdown that seems to have taken hold over the last ten years -- at the same time it's expanding access.

The ACA's main efforts to control costs fall broadly into two categories. First, in Medicare payments, a series of pilot programs seek to move healthcare providers away from fee-for-service, via per-patient and per-episode payments and incentives to reduce costs and meet quality benchmarks. Second, in the exchanges, competition and price pressure induce insurers to reduce costs by a) putting a good deal of the cost burden on patients, via high deductibles and co-insurance payments, and b) offering narrow networks -- that is, limiting covered doctors and hospitals to those who meet the insurer's price (and, theoretically, quality) demands. In the broad category of putting price pressure on payers of all kinds also belongs the ACA's excise tax on the most expensive employer-sponsored plans, which is driving employers too toward both narrow networks and more cost-shifting to employees.

Cost control without cost controls?

Atul Gawande has expressed the hope that by seeding myriad experiments, the ACA will grow a few cost-saving sequoias  -- as an analogous outpouring of experiments and demonstration projects spurred by the U.S. Department of Agriculture revolutionized food production and drove down food prices in the early 20th Century.

I hope Gawande is right. He may be. But it might also be argued that all this experimentation is "designing around" the one cost control element that works in every other wealthy and is lacking in the U.S.: uniform pricing per procedure, imposed or at least overseen by government. (It's "overseen" in Switzerland, where hospital rates in each canton are negotiated by hospitals and insurers acting collectively, subject to approval by the cantonal government. Physicians are paid on a national fee-for-service scale.) Without that core shift in leverage away from healthcare providers, reforms are balkanized and incentives may fly in various directions.

The ACA's pre-existing condition

Ezra Klein is that rare interviewer whose questions are determined almost as much by what his interlocutor just said as by what he's got planned.  That often includes teasing out real or apparent contradictions between two statements in the interview. So it was in this exchange between Klein and healthcare consultant/ACA critic Robert Laszewski:

K: That brings up two issues. The first is the individual mandate, which begins this year but is a much bigger penalty in year two, and then even bigger in year three. So one question here is how well that works.

RL: I have an interesting answer for that. I think the mandate is almost worthless because the word is getting around that they can’t really collect it. And by year three, it’s really a lot of money. I think there’ll be real pressure to just get rid of it. I don’t think you can force people to buy this insurance. If they don’t want it there’ll be a political groundswell to get rid of it. So in my mind the individual mandate is kind of irrelevant to this.

A country struggling to share too-high healthcare costs

Jonathan Cohn today posted a roundup of eight health care experts' prognoses for the Affordable Care Act. Among them is Sean Parnell, author of the book and blog The Self-Pay Patient, information sources for those forced to pay all or most or a good portion of their medical expenses out of pocket. Regardless of whether the ACA "succeeds" or "fails," this part of Parnell's forecast is a near-certainty and worth noting:

There will be more Americans who pay directly for more of their health care. The ACA is projected by the Congressional Budget Office to leave 30 million people uninsured, and tens of millions more will get high-deductible plans through exchanges or their employers. These self-pay patients will demand price transparency and discounts for paying in full at the time of treatment, and innovative entrepreneurs will step up to cater to them while ignoring the traditional third-party payment system.

Many have pointed out the irony of Republicans excoriating the ACA for offering high-deductible plans, which conservatives have long touted as a means to promote patient responsibility and cost control. Some reforms intended to make patients weigh costs could be effective if they include the information required to make an informed choice -- e.g., incentives to choose providers with high performance ratings and transparent pricing -- or reference pricing, where the use of a plan-preferred specialist is fully covered, while patients pay the difference if they want a more expensive provider. 

An all-too-hidden benefit in ACA insurance

Eugene R. Anderson, a pioneer in insurance coverage litigation for policyholders for whose firm I've long worked, was fond of saying that insurance is a unique product. You pay up front, and you get what you pay for much later, if ever.

That's less true of health insurance than of most other forms of insurance, since we all need some healthcare in most years. But it's true of high-deductible health insurance.  And that may prove a problem for public perception of the Affordable Care Act.