Penny on the track are you coming back

The Hill reports that a gaggle of Democratic Senators will be introducing a modification to PPACA shortly.

The first bill from the group of Democrats would add a new, cheaper option, a copper plan, to ObamaCare’s existing menu of platinum, gold, silver and bronze plans. The bill also seeks to spur competition in the marketplaces by restoring funding to nonprofit healthcare co-ops.

The copper plan has been floating in the proposal space for a while.  It has been pushed by Sen. Mark Begich of Alaska for the past six months.  On a technical level, it is a feasible idea.  On a policy and political level, I’m not so sure.  Let’s look at the details first and then do some analysis:

v Adds a new copper level of coverage to the metallic tiers of qualified health plans for 2015 plan years;

v The copper plans will feature a 50 percent actuarial value, ensuring that, on average, at least half of medical costs of covered services will be paid by the insurer;

v Like other metallic tiers, individuals and families purchasing copper plans within the Marketplace can qualify for premium and cost-sharing subsidies;

v The copper plans will also feature the ten services included as essential health benefits;

v For copper plans, increases the annual maximum out-of-pocket limit to make feasible copper plan designs in high-cost marketplaces.  The Secretary of the Department of Health and Human Services must ensure the limits are reasonable for every marketplace;

v Permits Multi-State Plans to include the new copper plans; and

v Copper plans meet minimum essential coverage.

The bill has not actually been fleshed out, scored and simulated, so things will change.  However these bullet points could work without doing any damage to the rest of the law.  Details below the fold.

Right now, minimal essential coverage for people over the age of 29 and those not facing a hardship is a Bronze plan.  That plan covers 60% of the average expected acturial cost.  All Bronze, Silver, Gold and Platinum policyholders from a single company in a single state make up a unified risk pool. The metallic band plans are subsidized by tax credits. Minimal essential coverage for people 29 and younger is catastrophic coverage which covers less than 50% of the expected acturial cost.  Catastrophic coverage has its own seperate risk pool and is non-subsidized.

The copper plan would be a redefinition of essential minimum coverage for most people from 60% acturial value to 50%.  This is a 16% decrease in expected coverage value, and it is getting insurance to the point where it is truly hit by the bus coverage.  The 16% decrease in coverage will probably lead to an 18% to 20% decrease in premium pricing if the pricing differentials between the same insurer/same plan design Bronze-Silver-Gold-Platinum hold up.  To get that decrease in acturial value, the maximum out of pocket levels will increase from the current $6,350 to between $8,000 and $10,000 (I’m not a pricing expert).  It is a trade-off between lower guaranteed monthly payments and the possibility of much higher oh-shit payments.  That is a legitimate trade-off for insurance.

The key thing is that is seems like the Copper plans would be in the larger Metallic risk pool.  There would be some selection of these plans by healthier people, but their premiums and low medical utilization will still cross-subsidize sicker individuals who bought up the metal scale.  Copper plans would offer the full array of Essential Health Benefits (including contraception), and premium subsidies.  Since subsidies would still be based on the second cheapest Silver in a county, it is highly likely that quite a few copper plans would have no purchaser premiums to be paid.  That is attractive but again, the coverage itself is skimpy. 

So who would be interested in Copper?  I’m betting that the market for Copper is almost exclusively the subset of people who are buying anything below Silver already.  HHS reports that approximately 19% of all purchases on the Exchanges from October 1st to March 2 were Silver or Catastrophic coverage.  This is the total market.  I think the market can be restricted even more to the individuals who are buying Bronze or Catastrophic policies without significant subsidy.  That is roughly 5.5% to 7% (depending on how you define “without significant subsidy” — 5.5% if subsidy is $0)  of the total Exchange market right now which would be particularly interested in Copper plans.  That is a large enough market to justify product creation.   These individuals have already indicated that they are willing to pay full price for low acturial value coverage, so the option of getting a lower price for a bit less coverage could be attractive.  I don’t think too many people who are getting subsidized Silver plans, especially those with cost sharing assistance will shift to cheaper but skimpy plans as Bronze has not been particularly attractive on the marketplace (as expected), so Copper would need an amazing price to make up with the demonstrated disinterest in low acturial value coverage. 

There are two purposes behind this bill.  The first is political. This is an attempt by Democratic Senators who represent conservative leaning states to create some distance from the President and Obamacare while also genuflecting in the direction of “improve” and “mend not end” the law.  I think this will work as a genuine “mend not end” goal that could potentially demonstrate some value as a “mend” while not pissing off base Democratic voters.  Will it be enough to save a seat — I have no idea.  Is it a good attempt?  Yes.

The second is a policy implication.  The policy justification is that in some areas, the cost of plans, even with subsidies are too high.  This bill approaches the problem that the benefit design is too rich, and that the way to bring down prices is to offer lower benefits.  It will do that.  I don’t think it will be attractive to too many people, but it would offer an even lower price alternative.  This is a conservative (not Republican, not reactionary) approach to the problem of high health care costs — consumers don’t have enough skin in the game, so increasing the exposure will lead to better choices. 

Going this route is a political decision. 

There are three other routes available that could improve the cost of coverage problem that Begich et al have identified.  The first is to make subsidies richer.  That could be done by changing the formula for how subsidies decline as families make more money, or changing the base minimum amount that someone over 100% FPL will pay, or increasing the cap on family income eligible for subsidy.  There are seventy six ways to increase subsidies, picking two or three is not hard.  It would cost money, but that could be paid for by either baselining against the CBO’s 2011 projections or instituting a public option or Veteran’s Adminsitration offering a Medicare Part D formulary or raising taxes or deficit spending.  The second alternative that is not being addressed would be to increase competition in the insurance market of high cost regions.  The easiest solution is again, a public option, or a Medicare buy-in or a Medicaid buy-in.  I don’t think this will have too much impact on pricing in regions like Southwest Georgia which is an extremely high cost region not because of the lack of insurance competition but a lack of provider competition.  This is where the third option to drive down prices has to come into play.  An aggressive anti-trust enforcement out of DoJ for hospital consolidation and provider group mergers where the level of analysis is at the county or multi-county region is a needed step.  Breaking up provider monopolies and provider cartels will drive down pricing as people and insurance companies will have viable alternatives.

Any of these options will drive pricing down without decreasing the acceptable minimal coverage.  They are all more politically disruptive and politically risky.  My assumption is that none of these options including the Copper plan will actually pass this Congress, so the policy question is subsumed by the political imperative.  The question that the Copper plan raises is what is minimal acceptable coverage in our society.  Begich and his co-sponsors say 50% acturial value, the Republican Party says no acturial value and PPACA says 60%.  That is a moral question with technocratic overtones, not a technocratic question with moral overtones. 


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58 replies
  1. 1
    currants says:

    Thanks for your posts, Richard–they are invariably informative and useful. Slightly sideways, the comment about healthcare coops reminded me I wanted to ask about one in Maine. I’m interested in coops generally, though have not given much thought to them as health insurance vehicles. But apparently it’s a big deal in Maine.

  2. 2
    NotMax says:

    It’s all beginning to sound as ludicrous as color-coded Homeland warnings.

    All that’s missing is a Lead Plan which provides a free toaster if health care services are never utilized.

  3. 3
    Baud says:

    I agree that this won’t go anywhere and that there are better reform proposals that could be implemented. But this sounds like the type of sane debate we should be having rather than “Repeal Obamacare” rants the GOP has been engaging in. Hopefully, it will be enough to convince the “mushy middle” that they should vote to preserve D control of the Senate in 2014.

  4. 4
    Baud says:


    Labels can be useful, and here the labels mean something — a trade-off between deductibles and plan benefits. The color coded terror alert was stupid because it didn’t mean anything. We were always either at yellow or orange, depending on how much Bush wanted to scare people.

  5. 5
    MomSense says:

    I guess if I ruled the world, I would do a couple of different fixes first.

  6. 6
    Patricia Kayden says:

    @currants: I echo your thanks to Richard. Always informative posts about the ACA.

  7. 7
    Patricia Kayden says:

    @Baud: It won’t go anywhere now, but perhaps the next Democratic President (looking at you, Secretary Clinton) can pass this reform and some others to improve the ACA.

  8. 8
    Richard Mayhew says:

    @currants: damn you — I’ve got to write about this now — which means I have to research it some over the weekend —

    Actually, that is really good news, and the Co-ops are one of those things I’m aware of but I don’t know much about.

  9. 9
    currants says:

    @Richard Mayhew: ummm…you’re welcome!

    I’ll add this–probably obvious point–it’s a consumer coop, not a worker coop, and there are structural differences implied as a result, but I still think it’s pretty cool. Maine’s doing some interesting coop work generally these days (necessity being the mother of invention and all). For anyone who’s interested:

  10. 10
    Baud says:

    @Patricia Kayden:

    Yes. Either the madness wins or it breaks. If it breaks, then the ACA will be modified, reformed, and updated (sometimes not for the better, sadly) over time.

  11. 11
    Baud says:

    @Richard Mayhew:

    which means I have to research it some over the weekend –

    You realize that you’re on the Internet, right?

  12. 12
    BGinCHI says:

    Richard, if you check back I have a question for you.

    Any chance you could do a post on changes to mental health benefits when ACA is completely rolled out? My mother is a therapist with her own practice and when I spoke to her this week she had a not very clear idea of what changes would be coming (if any).

    Thanks in advance if you can do this, as you are the man with his finger on the pulse.

  13. 13
    Matt McIrvin says:

    The first things to do, obviously, are to fix the existing holes in the federal subsidies: the missing clause that’s the subject of that scary lawsuit, and the one left by refusal to expand Medicaid.

    A stripped-down bill to just do those two things might not pass, but it would at least identify anyone who opposes it as someone just looking for any excuse to kill the law rather than fixing it.

  14. 14
    Baud says:

    @Matt McIrvin:

    it would at least identify anyone who opposes it as someone just looking for any excuse to kill the law rather than fixing it.

    Or you could just look up their party registration.

  15. 15
    Richard Mayhew says:

    @BGinCHI: I’ll write what I know, but most of my mental health knowledge is fairly cursory, so it won’t be as in-depth as the physical health and major medical insurance knowledge base.

    The short version is that PPACA requires insurers to include mental health services as just another service for PPACA compliant policies. Same types of co-pays, same application to out of pocket limits etc. Services are to be paid for, and mental health condition can not be underwritten out. Now what the reimbursement rate is for those services to providers, PPACA does not say much about it. so your mom can probably see more patients at the same fee schedule that she has always seen.

  16. 16
    NotMax says:


    The thinner the pieces the cake is sliced into, the greater the amount of crumbs.

  17. 17
    Chyron HR says:


    No! Any form of color coding is WORSE THAN BUSH! Roy G. Biv? More like BETRAY D. BASE.

  18. 18
    Baud says:


    I’m not sure how this relates to cake slices. I think it obvious that if you have a scheme with 100 different metals, there will be a lot of confusion in the marketplace. I think consumers can probably handle up to 5 metals, however. So long as you have good rules on how the risk pool is determined, it should be ok.

  19. 19
    Richard Mayhew says:

    @Chyron HR:

  20. 20
    BGinCHI says:

    @Richard Mayhew: Thanks Richard!

    If you think it’s worth doing a whole post I would appreciate it, but up to you. I imagine some people here who are in (or seeking) therapy would find it helpful.

  21. 21
    NotMax says:


    Each step towards creating yet another division is another step away from single payer. Movement in the wrong direction, IMHO.

  22. 22
    Baud says:


    I guess I disagree somewhat. The most important step toward single payer is getting everyone covered under an insurance plan. If a “copper” plan (a proposal which I’m only tentative about, BTW) helps do that, then that’s a good thing, IMHO.

  23. 23
    MomSense says:


    I asked Richard about this too because that is my insurance company!

    I love them!

  24. 24
    MomSense says:


    For some background, I should say that there have been a number of groups in Maine that have been meeting and organizing around health care for decades. I think this is why we were able to get one started as soon as the ACA provided the legal framework.

  25. 25
    Just Some Fuckhead, Thought Leader says:

    We already had shitty health insurance coverage options available before the Affordable Care Act.

  26. 26
    aimai says:

    @Patricia Kayden: The point of this “reform” as I see it is not, in fact, to go anywhere at all but rather its a sop to the ravening dogs on the right, a way to show that some Democratic Senators “get it” without actually botching up the entire ACA.

    As a society we don’t want people to only have catastrophic care or, as Richard puts it, “oh shit” care. The high deductible means that the holders of this Copper care are going to put off a lot of stuff–maybe they would anyway–and potentially get pretty deep in the hole if anything goes wrong. Better tweaks would simply raise the subsidy for everyone so that these loons bitching about the premium cost of a Silver plan can buy Silvers for lower premiums. But that wouldn’t satisfy the strange logic whereby you can presumably buy some votes by offering some of your constitutents a substandard return on their premiums.

  27. 27
    aimai says:

    @Chyron HR: That really made me laugh.

  28. 28
    hrumpole says:

    Politically, for these senators, they are looking to get reelected in red/purple states, and are focused on ensuring their own survival. But given the current environment, it’s ridiculous (and by that I mean look-up-into-the-rain-till-you-drown stupid) to even think about bringing this kind of bill to the floor for a whole mess of reasons, including:

    1. playing into the frame that Obamacare is somehow oppressive or a tax-fleecing scheme for “those people”, which is going to occur when the tax for not being insured is assessed.
    2. presenting the republicans with yet another vehicle which they will attempt to add onto through a series of amendments designed to ensure the failure of the ACA; and
    3. Conceding that the “liberally designed’ ACA was too expensive for real ‘mericans, making the idea of single payer far harder to achieve, if you’re into that sort of thing.

    The D’s really need to begin to understand the “bitch slap” theory of politics which the Tea Party and the Republicans will run on. Obamacare works. They want to take away your health insurance and leave you to die destitute. So no, we’re not repealing it, and we’re not going to apologize for passing it.

    When you have a legislative majority, then you can fix it. For now, you have to preserve the ground that you have, and build the public case to expand representation. If there’s any doubt about this reality, look at the litigation in the DC circuit on the individual mandate, or the Chris Hayes clip from yesterday with the Koch-addled advocate that was missing her medication.

    The case was brought by a group of R operatives, and is based on what is — without a shadow of a doubt– a drafting error, one that in a saner time would have been fixed through a technical amendment. Technical amendments to this law would become a christmas tree for the likes of Louis Gohmert and other recent emergents from the primordial stew. So if they win this case, the individual mandate falls and the law blows up. And you want to introduce a “copper” level into this? Maybe “tin”? How about “aluminum foil” “Lead”?

    Seriously, merits aside (and I’m not sure I buy the merits case either, as even catastrophic care would bankrupt a lot of people, and then what)? (I here introduce the pierce rule of economics. fk the deficit. people got no jobs. people got no money. Here’s another thought: up the subsidies. I am perfectly willing to pay another hundred bucks or more in taxes so that my neighbor, or a family on the other side of town, doesn’t go into chapter 7 because their child fell of the monkey bars and needs pins in his arm. Raising social security is popular. Increasing the subsidies will be too. Maybe someone ought to do a poll.

  29. 29
    Bobby Thomson says:

    This just sounds like Return of Junk Insurance. Not a good sequel.

    Why Begich? There are no insurers based in Alaska. Is it just that it’s cheaper to buy a Senator there?

  30. 30
    currants says:

    @MomSense: I think that’s awesome! I’m on the coop listserv, so we hear about lots of other kinds of coops (food coops are front and center at the moment it seems), and it’s been highly informative (and SO encouraging).

  31. 31
    C.V. Danes says:

    I guess this is better than the “vapor” plan they have been pushing.

  32. 32
    rikyrah says:

    uh huh
    uh huh
    it never happens until it happens to these mofos.
    they just can’t have empathy – JUST BECAUSE


    Facing own chemo treatments, Rep. Czaja changes mind to support cancer bill

    IRMA — A state lawmaker from Lincoln County who once opposed a bill that would force insurers to cover chemotherapy pills says she changed her position after she learned she has cancer.

    Mary Czaja, R-Irma, the state representative for the 35th Assembly District, said her view on the bill — which could take effect next year — began to change in January. That’s when she began her own battle with stage 3 breast cancer.


  33. 33
    Shakezula says:

    OT but I wondered if you’ve been following the latest Medicare pay fix follies?

  34. 34
    RSA says:


    It’s all beginning to sound as ludicrous as color-coded Homeland warnings.

    Or wedding anniversary gifts. I think we need wood, leather, and paper plans.

  35. 35
    Chyron HR says:


    Facing own chemo treatments, Rep. Czaja changes mind to support cancer bill

    What? She wants honest hard-working Americans to give her free cancer control pills? Is she some kinda slut or something?

  36. 36
    Villago Delenda Est says:

    @Chyron HR: Pretty much my thought exactly.

  37. 37
    Patricia Kayden says:

    @rikyrah: Well ain’t that a b….? Wow. Just wow.

  38. 38
    Mnemosyne says:

    @Patricia Kayden:

    At least it made her stop and think, Hey, maybe other people who aren’t me are having the same trouble. Not like that state rep (in Georgia?) who got into a drunk driving accident as a teenager, has gotten government help with his medical care ever since, and still thinks everyone on Medicaid that’s not him is a moocher.

  39. 39
    RaflW says:

    Front page NYT article about ACA implementation on the website today. When I see this, I think about asswipes like Jonathan H. Adler who want to fatally f*&# up this experiment among the several states. Isn’t this exactly what the lying conservative bastards claim to like about our federal system?

    The disparities reveal a stark truth about the Affordable Care Act: With the first open enrollment period set to end Monday, six months after its troubled online exchanges opened for business, the program widely known as Obamacare looks less like a sweeping federal overhaul than a collection of individual ventures playing out unevenly, state to state, in the laboratories of democracy.

    Now, when I read “In Texas…some residents believe, erroneously, that the program is banned in their state,” I just want to strangle (metaphorically, thank you) Rick Perry and all his cronies.

  40. 40
    Villago Delenda Est says:

    @Mnemosyne: Arkansas, but same general part of the country…the old Confederacy.

  41. 41
    Elizabelle says:


    And strangle John Roberts and his SC pals, too, for their part in discouraging state participation.

    Can you see the comments on the NYTimes story? Allegedly almost 200; won’t come up for me at all. Would love to see what the readers have to say.

  42. 42
    RaflW says:

    @Elizabelle: The “Times Picks” all seemed sane. I glanced at a few of the uncurated comments, and it’s a mixed bag but not raving loonies.

  43. 43
    Ruckus says:

    The cooper plan sounds like it might appeal to someone 30-45 who doesn’t need family care and is nominally healthy. More financial risk, but they probably aren’t using much health care now and don’t see that as changing for at least a few years. With no pre-existing conditions to limit them, if they have a problem they could figure to move up at a later date if necessary. Not for everyone or maybe even a lot of people but a very low cost plan takes away the crying of “Obamacare raised my rates for my very crappy insurance with something less crappy.”
    A political proposal sure but it may actually have some merit.

  44. 44
    Gene108 says:


    In Dungeons and Dragons metallic dragons – copper, bronze, silver and gold- are good aligned, while chromatic dragons – white, red, blue green and black – are the spawn of Tiamat and are evil.

    A correlation between metallic insurance plans and chromatin terror alert levels I did not notice until you brought it up.

  45. 45
    Elizabelle says:


    Ah, so you can see the comments. I usually can, but they won’t appear for me. Mac user.

  46. 46
    Ruckus says:

    I agree with you but political reality does get in the way. A lot.
    Would this work better for some? Not really unless they had no issues while on the cooper plan. But if they had no insurance prior, this is better. And it is better than the crap insurance they maybe would have bought before, that didn’t have the ACA mandates because they didn’t get those before either.
    Baby steps. Yes single payer would be better, conservative politicians all coming to jesus rather than whatever it is they think they are doing would possibly be better as well, but neither of these are happening today.

  47. 47
    David M says:

    Is there really a need for a deductible and / or max out of pocket higher than $6350? This sounds like a solution in search of a problem.

  48. 48
    Ruckus says:

    @David M:
    No, there isn’t.
    That said I’ll ask an example. What is the deductible on your car insurance? At the cost savings I get a high deductible that pays for itself over time if I don’t do anything stupid, or someone stupid and uninsured does something to me. Some people are willing to take a higher risk. Is that wrong? Remember this insurance level is only different in out of pocket expenses, not in coverage. That could not be said of the cheap policies out there before the ACA.
    Yes health insurance is different than auto insurance, the costs can be/are exponentially higher, it is mostly impossible to mitigate possible problems(you can drive less or give up your car) but for someone at a low risk age, less money monthly may be attractive. Having priced plans here in CA I would not go this route because I can get much better insurance for very little more. That doesn’t describe everyone.

  49. 49
    Original Lee says:

    I can think of a few people who would have bought Copper if it had been available. Sometimes life just kicks you in the teeth, though.

    A friend from back in the day just finished chemo and had a fundraiser to help meet hospital bills. She bought a Bronze plan – was thrilled because her COBRA was running out and with her diagnosis would not have been able to buy health insurance anywhere – but apparently didn’t look at it very carefully and now is in danger of losing her house because the deductible is (IIRC) $1500/month. Not sure if there’s a cap on out-of-pocket, because I don’t know enough to do more than listen. Of course she’s now all Thanks, Obamacare, NOT.

  50. 50
    Mnemosyne says:

    @Original Lee:

    There is no Obamacare plan that has a monthly deductible, much less one of $1500 a month. All deductibles are annual.

    Does she mean her monthly payment is $1500 a month and, if so, she sure as heck didn’t sign up for a Bronze plan at that price. More like a Platinum one.

  51. 51
    Original Lee says:

    @Mnemosyne: All I know is, she says that after her COBRA ran out, she was eligible for Obamacare, but that under her plan, she has to pay $1500/month for her stuff. Maybe she’s in a small network and all her treatments are out of network? She’s in Michigan. I really don’t know enough to tell her anything except that it sucks.

  52. 52

    Allow me to congratulate the Democrats for taking a bad system and offering a proposal to make it worse.

  53. 53
    Juju says:

    I wish the subsidies were an option to all of the lower income levels. I live in NC and I am a substitute teacher. I was a full time teacher, but have dropped to substitute for personal reasons. The district I work in now limits the number of days I can work a month so that they don’t have to provide insurance for the substitute teachers. That limit prevents me from reaching a level of income where I qualify for subsidies, and because I am in NC where they didn’t take the medicaid expansion, I don’t qualify for that under NC rules because I am a single woman without children. I have signed up for insurance, but I got the bare minimum and it is going to cost me a bit over $300 a month. Even if I did qualify for Medicaid, I think I would rather have an option to do the subsidy. I am happy about the insurance I have. When I was on the open market I couldn’t find anything but junk for around three times the cost of what I am paying now, because I have a pre-existing condition. So I can’t complain too much.

  54. 54
    Mnemosyne says:

    @Original Lee:

    She’s not giving you the right information somewhere, because the maximum out of pocket is $6,350, so even IF she was doing everything out of network at $1,500 a month, she would hit her OOP maximum by May 1st and not have to pay anything for the rest of the year.

    Whatever her financial issue is, it ain’t “Obamacare.”

    ETA: Sorry, anything else other than her premiums.

  55. 55
    Elizabelle says:

    @Original Lee:

    Yeah, having been scrutinizing plans in Virginia: friend’s account does not hold water.

    At some point, your further expenses are covered. Was she $6,000 from losing her house going in?

  56. 56
    KithKanan says:

    @Mnemosyne: that $6,350 is only an In-Network limit. Out of network can have a different/higher limit, and even above that limit the patient is still stuck with expenses beyond the Allowable Amount.

  57. 57
    Original Lee says:

    @KithKanan: @KithKanan: I’m thinking that’s what is going on. She started her chemo while she was paying COBRA and it could be that her oncologist was in-network for that plan and out-of-network with her new plan. The good news is that her oncologist is optimistic that she is cancer-free at this point, so hopefully she will be able to pay off her expenses incurred so far.

  58. 58
    pseudonymous in nc says:

    Belatedly, but I hate the “copper plan” concept. Hate hate hate.

    There’s already too many choices, too much confusion, and too much fucking about. The point of ACA was to get people off dogshit insurance, and the Senate wants to give the thumbs up to not-quite-dogshit insurance, so that people who choose the cheap premiums get soured on the networks and the out-of-pockets?

    Larger pools, less divvying up, less fucking about.

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