Active purchasing exchanges prevent spamming

Andrew Sprung at Xpostfactoid  has some interesting information on the market share of a Medicaid Managed Care (MCO) based Exchange provider in California, Molina:

In the much smaller Region 13, comprising Mono, Inyo and Imperial Counties, Molina got 78.3% of new enrollees (3,580). There, in much of the region — i.e., most or all of Imperial County, by far the largest of the three counties — Molina put up an insanely cheap silver plan, fully $136 per month cheaper than the benchmark for a 40 year-old, rendering it essentially free ($1 per month, as CA does not allow 0-premium plans) for our $23k earner. Its bronze plan was the same $1 per month for that customer. In San Diego too (Region 19), Molina put up both cheapest silver and cheapest bronze, and won 24.5% of new enrollees (10,080). For a 40 year-old $23k earner, Molina silver was $109 per month, a $10 discount from the benchmark, and Molina bronze was $54. Here, though, an interesting contrast emerged.  Sharp Health Plan won 22.7% of new enrollees (9,350), despite the fact that i’s silver plan would cost our 40 year-old $23k earner $151, and its bronze plan, $67….

Andrew digs into the quality differences between the plans in Region 19.  I saw something else of interest to me.  Molina was not allowed to dominate the second Silver benchmark price point because Covered California is an active purchaser exchange.  Covered California actively chooses the carriers that it allows on the Exchange and then actively minimizes the number of isomorphic representations of the same actuarial value on the exchanges.

I had spent a good chunk of the fall worried about low cost carriers spamming the exchanges  by offering policies that are functionally similar but have minimal changes to benefit configuration to meet minimal “meaningful difference” criteria:

A company can offer numerous plans that have minuscule differences in benefit configuration.  Each plan counts as a separate entry in the Silver category, so a company can spam the Exchange with isomorphic plan designs.  If a company is fairly confident that its base configuration is in the running to be either the #1 or #2 lowest priced Silvers, there is minimal marginal cost of slightly tweaking benefit designs by bumping up co-pays or shifting some deductible dollars to co-insurance dollars or otherwise making small marginal and effectively meaningless changes to a plan to spawn mirrors….

However if there is a spread of $40 dollars between the #1 Silver and the #2 Silver, adding a Silver between those two points so the new subsidy point is only $5 more than #1 Silver, spamming the Exchanges makes sense.

The active purchaser model gives consumers meaningful choices.  They can choose a cheap but low quality Molina plan for significant cost savings as it is the #1 Silver with a wide spread between its price and the benchmark Silver price.  Or they can choose a higher quality Silver that is fully subsidized as that high quality Silver is the benchmark Silver.  That decision process falls apart in an active purchaser exchange once there are two MCO based Exchange carriers, but the large gap between the first and second Silver gives consumers significant choices.


1 reply
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    Barbara says:

    The Medicare Advantage program faced spamming and, although it didn’t have exactly the same consequences, CMS stepped in to limit the number of benefit packages that could be offered under a single contract in the same service area. There are now fewer plans that beneficiaries need to compare, and they have meaningful differences. This is the beauty of having a federal program with consistent federal oversight. For the exchanges, unless the feds step in, every state has to evaluate this and come to their own conclusions.

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