We’ve talked about the Copper plans being proposed by Senator Begich (D-Alaska) and others earlier this year. The basic thrust of the policy is the following:
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% actuarial 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 actuarial value, the maximum out of pocket levels will increase from the current $6,350 to between $8,000 and $10,000. 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.
Erik Loomis, at Lawyers Guns and Money, in service of making the larger and correct point that there was never 51 votes in the 2009-2010 Senate as it was for high acturial coverage, low monthly premium insurance for all or at least all citizens and permanent aliens, points out the Copper plan as evidence that there is a significant caucus for making insurance worse. However he makes a point that I think needs significant modification.
“a significant percentage of the Democratic caucus is looking to fix the ACA by making it a lot worse for poor people. “
We need to divide the analytical universe into three segments. I think only one segment would be significantly worse off, one would be in a series of trade-offs in a larger option space, and the third would be untouched.
Let’s get to the easy one first.
People who are buying their insurance on the Exchanges and are receiving federal subsidies won’t change their decisions all that much as long as the subsidy anchor point is the second cheapest Silver AND the expected personal contribution for a given income level stays constant. If we define poor or working poor as people making under 200% of the Federal Poverty Line, the subsidies are rich enough on the premium side of the equation to make Silver very affordable AND Silver has the cost sharing assistance subsidies that makes a 70% actuarialvalue plan jump to either an 87% actuarial value plan or 94% actuarial value plan. The working poor who get their insurance on Exchange can save $30 or $40 a month in premiums but see their deductible go from $500 to $9,000. I don’t think this makes people want to choose Copper as they did not choose Bronze last time around.
The segment where Copper is a toss up are the people who bought their insurance on the Exchange with minimal to no subsidy. The May 2014 data says that 17% or 18% of people bought on the Exchange without subsidy. 5% of the Exchange policies were no-subsidy Bronzes and another 2% were Catastrophic which can not receive subsidy. This is the market for Copper. People buying no-subsidy Bronze and Catastrophic plans were buying minimal coverage. Cheaper but skimpier minimal coverage could be appealing. People on Catastrophic might see a better deal with subsidized Copper for slightly higher deductibles.
I am not a big fan of high or very high deductible plans for most people. The one situation where they are appropriate is when the buyer has no pre-exisiting conditions, fairly young and can quickly access the entire deductible for the year without destroying their future. When we looked at why the Americans for Prosperity (AFP) anti-Obamacare ads sucked so much last winter, we identifed two groups of clear losers. One of them would benefit directly from Copper:
Young single males with absolutely no health problems, no relatives with health problems and incomes over 250% Federal Poverty Line that previously had a $42 a month, $25,000 deductible plans that did not cover maternity or mental health needs. Those policies got cancelled and they actually have to buy good insurance. Young guys making under $25,000 a year usually will get decent subsidies, past that, it is hard to be sympathetic to someone bitching that they (a member of a high accident group) have to buy decent insurance.
Copper does not quite get the 24 year old guy with a $50,000 a year job and no employer provider health insurance back to where he was pre-PPACA, but it would improve his lot. And as long as Copper pays into the general risk pool, this could be okay from a system’s perspective. That is a small group. I would guess 1% to 3% of the Exchange population would take a serious look at a Copper plan as we know the rest of the non-subsidized population valued high actuarialvalue coverage over low premiums, so some of the Bronze buyers would stay at Bronze as that would be the best they could afford.
Now the last segment is one that was not really in play in 2014. This is the segment of employees who work at large companies which want to offer the skimpiest plan that they can get away with to dodge the employer mandate penalties in 2015. These people, especially the working poor who have minimal leverage, would be getting screwed.
Right now the employer mandate is going into effect 1/1/15 for companies that employ more than 100 FTEs. Anyone who works, on average 30 hours or more per week, must be offered a qualifying health plan that costs, for single employee coverage no more than 9.5% of annual wages. If a person is offered that coverage but declines it, they can buy coverage on the Exchange without subsidy. If affordable and adequate coverage is not offered, the employer is fined in the following manner:
The annual fee is $2,000 per employee if insurance isn’t offered (the first 30 full-time employees are exempt).
• If at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total.
The most common route that I’ve been seeing for large employers to expand coverage has been to set up a seperate Bronze plan for their non-full timers where the payroll deduction is 9.5% of the check. The company then pays the remaining premium. This coverage has a$6,300 out of pocket limit and the narrowest HMO network out there. It is hit by a bus coverage. Someone in an Expansion state making under 138% of FPL is better off on Medicaid, and anyone making between 100% or 138% FPL to 250% FPL is better off on a cost-sharing Silver plan, but the subsidy lock was designed to keep the employer sponsored coverage market from unravelling at an unseemly pace.
If Copper qualified as minimal essential coverage for the Employer Mandate, what I think would happen is that the seperate Bronze plan would be downgraded to a seperate Copper plan with no other changes. The payroll deduction would still be the lesser of 9.5% of salary or total premium, with the company kicking in even less money to cover the rest of the premium. The coverage would have a $9,000 out of pocket limit, the narrowest HMO network available and be even more unusable. It would be more expensive and less useful for the working poor as it is hit by the bus and then run over by the ambulance coverage.
I could see Copper being a useful policy on the individual market if it was solely aimed at the current non-subsidized Bronze/Catastrophic buyers who are in good health and decent financial shape. If Copper meets the minimal essential health benefit for Employer Mandate purposes without a significant drop in the total employee contribution limit, it would be a disaester for the working poor, and should be opposed.