Via Andrew Sprung at Xpostfactoid, there is a potentially easy Wyden waiver application for states that actually want their population to get good health insurance on the Exchanges:
Austin Frakt has a series of posts (1,2,3) reviewing research that highlights what a hard time most people have making good choices among insurance plans — mainly in balancing premium against deductibles and copays. One such study, by a team led by Peter Ubel, highlights (to my mind) a defect in ACA marketplace design:
…two of us recruited a convenience sample of participants from public buses in Durham, North Carolina, and asked them which category of plans they would look at first if they were shopping for health insurance. To half the people, we described the gold plans as having higher monthly premiums and lower out-of-pocket costs — the language used by many exchanges. For the other half, we switched the gold and bronze plans, describing the gold plans as having lower monthly premiums and higher out-of-pocket costs. …among participants who were below the median in mathematical ability, the majority said they preferred gold plans over bronze plans, regardless of which plan was labeled as gold.
People anchored in on the analogy of valued metal for their choice instead of examining the details of the policy. This passes my smell test as health insurance is confusing as hell, and while the ACA with its metal bands does create a useful proxy, the proxy produces a lot of really bad information and cues for people who are eligible for cost sharing assistance.
This is fixable with a Wyden (Sec. 1332) waiver that any state can file for. The waiver would be a relabeling of the metal bands to reflect the actual actuarial value being sold.
Right now there are five bands on the Exchanges. Catastrophic and Bronze both cover roughly 60% of expected costs after a very high deductible. Silver pays roughly 70%, Gold pays 80% and Platinum pays 90% of expected medical costs. So far that is intuitive and fits the decision heuristic people seem to be using. This works great for people who make more than 200% of Federal Poverty Line as the Cost Sharing Assistance (CSR) subsidy bumps a 70% Silver to 73% Silver so the benefit is a little richer but it does not change the actuarial value ordering of the metal bands.
Where this breaks down is for people who make under 200% FPL. Here CSR subsidies are far richer and bump up the actuarial value of Silver over that of Gold and/or Platinum. Let’s look at the following table
For someone making 199% of FPL, Silver is better than Gold. For someone making 149% of FPL, Silver is better than Platinum and Gold.
That is not intuitive.
The fix would be simple. A waiver would allow a state to relabel CSR Silver 87% as Gold Plus and the CSR Silver 94% would be relabeled as Platinum Plus. That would produce a simple cue for people that the CSR benefit is a really good value. People who qualify for CSR Silver 87% would see the following plans in descending order of AV: Platinum, Gold Plus, Gold, Bronze, Catastrophic.
burnspbesq
Semi-OT: A nice surprise in yesterday’s mail. Blue Shield of CA missed the MLR target for 2014, so I got a check.
Big R
Richard, I’d like to talk to you off thread about some work I’m doing about officiating. The contact widget isn’t working for me. FYWP. How can I contact you while minimizing my hijacking of the thread?
Richard Mayhew
@Big R: Check the email address that you use to enter a comment here… just sent you an e-mail.
ThresherK
This is fast becoming the best place on the intertubes to read all about efficiencies in the health care market and skill-adaptive soccer adjudication, two subjects which have more in common than I thought at first.
Peter Moore
Excuse a uninformed question, but how does the subsidy change the actuarial value? I thought actuarial value was just “the percentage of total average costs for covered benefits that a plan will cover” and the subsidies just a reduction of the monthly payment. In which case the actuarial value would be the same for all holders of that particular plan, regardless of income. So I must be missing something.
Does, perhaps, the subsidy also affect co-payments, caps, etc.? In which case I could understand the actuarial value changing…
Richard Mayhew
@Peter Moore: Good question.
There are two sets of subsidies in the ACA. The first is the premium tax credit (APTC) that is available for people buying on Exchange with adjusted incomes between 100% and 400% of Federal Poverty Line. This is what most people think of when they hear ACA subsidy. It is a government payment to an insurer for the gap between the individual responsibility portion of the 2nd lowest Silver in a market and the actual price. For instance if the second Silver costs $350/month and the ACA formula says I am able to pay $175/month, my APTC would be $175. That $175 applies if I buy a Bronze that costs $290/month, it applies if I buy the 1st Silver at $315/month, it applies if I buy the most expensive platinum at $872/month.
For people who make under 250% of FPL, there is a second set of subsidies called the Cost Sharing Reduction (CSR) subsidies. These bump up the actuarial value of coverage by reducing the maximum allowed out of pocket amount. For instance a straight 70% Silver might have a $2,500 deductible and no other cost-sharing. A CSR-94% Silver for someone making 140% FPL would have a $500 deductible as the government pays the insurance company for the actual actuarial value.