The individual market under AHCA V2

This is going to be a wonky, speculative post as to what the individual insurance market could look like under the AHCA as rumored to be as of 0030, March 23, 2017. I want to speculate about how insurers would do their plan designs.

The major policy planks that would influence plan design are the following:

  • Guarantee issue at a universal price (community rating)
  • No Essential Health Benefits
  • No actuarial value requirements
  • 5:1 premium rating
  • Risk adjustment is either ineffective/easy to game or gone
  • Fixed, age based subsidies
  • No ability to transfer surplus subsidies to HSA

Smart insurers will bifurcate their product design.  They can’t underwrite their way to a healthy risk pool so they will use benefit design to segment it instead.

The first stream of product design will be aimed to cover very little.  The primary objective of these plans are to be priced at the subsidy point.  They will be very narrow networks with no major academic medical centers involved; their benefits will be designed to drive away sick people with chronic conditions.  For instance, asthma inhalers or insulin or Epi-Pens might not be covered.  Hep-C drugs would not be covered.  Maternity care would not be covered except after a $15,000 stand-alone deductible. They will use donut benefit designed principles where the first couple of PCP visits are no cost sharing but everything else comes with $300 co-pays and $20,000 deductibles.  Utilization is designed to be very low and the population that will choose these policies will have to be very healthy.

The selling point for this plan is that it is free out of pocket after the subsidy AND it is sufficient to not incur the continuous coverage 30% premium penalty.

For the 50% of the population that drives 3% of the spend, this will be sufficient for most people as long as they don’t get hit by a bus nor come down with cancer during the policy year.

The other path of coverage is a full service insurance for the sick.  It is a privatized and non-inclusive high cost risk pool.  It will offer a network with top tier hospitals, it will cover chemotherapy.  It will cover the cost of chronic disease management.  It will look a lot like the insurance people get from their jobs.  It will be massively out of reach for most people with chronic conditions as the subsidies will be grossly inadequate and the cost of care for some conditions are more than half the median income of an American family.  But “access” to a good policy will be there.

There are a lot of moving parts so this is purely speculation but if I was working for an insurer, that is the strategic choice that is clear given the rules of the AHCA.

31 replies
  1. 1
    Baud says:

    Wasn’t there some talk a while ago that the bill would affect the employer-based health insurance market? Is that still true?

  2. 2

    So, it’s “Don’t get sick, and if you do die quickly”.

  3. 3
    Baud says:

    @🐾BillinGlendaleCA: It’s abstinence-only applied to health care.

  4. 4

    @Baud: As comedian Al Franken used to say about abstinence-only sex ed, “It works until it doesn’t”. Wonder what happened to that guy, he was pretty funny.

  5. 5

    @Baud: Any touch on the employer market right now is through a second order effect.

  6. 6
  7. 7
    Baud says:

    @🐾BillinGlendaleCA: The problem with abstinence only birth control is that it requires abstinence.

  8. 8

    @Baud: I think that was Al’s point.

  9. 9
  10. 10

    A class system, enshrined in law. Isn’t this what libertarians and conservatives always warned us about? Guess they only opposed it because they secretly wanted it, like the homophobes who get caught cruising the men’s room.

    David, can you put some numbers to this? It’s important to my family.

  11. 11
    BBA says:

    The ideal they’re striving towards is the Never-Pay Policy.

  12. 12
    D58826 says:

    @David Anderson: So an employer could delete things like maternity or scripts if they wanted to? May not actually do it since would be bad for morale but the law would not stop them?

  13. 13
    Another Scott says:

    AARP press release from Tuesday:

    AARP has urged all members of Congress to vote “no” to the proposed bill, and has vowed to make it an “accountability” vote —meaning the association will let its nearly 38 million members know how their representatives voted.

    It used to be that the AARP made people quake in their boots. It’s hard to say how much power it has now, but this is a good sign.

    That said, I’ll be very surprised if they don’t pass something in the House. In the Senate? Who knows – there are 100+ people there who quite often act as if they think they should obviously be President no matter who holds the office, and as an institution the Senate hates the House (and hates being forced to accept whatever the House throws over the wall). There will be a few GOP senators who will try to get something for their states, and try to appear “moderate”. But the Party Imperative™ is very strong there, so it’s really hard to say what will happen…

    No matter what happens, it’s not the end of the story. Price will continue to work to gut the ACA from the inside no matter what bill passes. I hope there’s a well-funded group, an equivalent of the ACLU if such a thing exists, that is willing to sue DHS and Price and Trump over their administrative actions. And they’ll continue to try to pass bills to cut the ACA’s funding, throw people off coverage, gut Medicaid, etc., etc. We have to keep fighting.

    I fear that things will not get better until we vote them out. They must own their policies alone. No quarter. Never give up, never surrender. Remember the Maine. Etc. ;-)

    Cheers,
    Scott.

  14. 14
    Weaselone says:

    The first stream of product design will be aimed to cover very little. By which you mean, the cost will be at the subsidy level and the effort in the plans will go into making it look like they cover as much as possible while actually covering nothing.

  15. 15
    Alex says:

    If there’s no Essential Health Benefits, how do they know whether you have continuous coverage? I mean, could you just sign up for a plan that covers nothing, use that to say you are covered, and avoid the 30% price hike when you get sick and have to buy real insurance? Or would continuous coverage only apply to the same type of plan, so that once you buy a crappy plan you’re locked in?

  16. 16
    daveNYC says:

    Considering how bad the bill is and how much worse it gets with each revision, you could probably replace your post with the thisisfine.gif.

    As far as I can tell, the AHCA gets us back to a position that’s even worse than pre-ACA.

  17. 17
    Bob Hertz says:

    Well written, Dave.

    Regarding the full-service expensive plans — essentially a kind of high risk pool without the title — can a carrier make a profit on these? Won’t some carriers just give up on this product line, given how few insureds in the indvidual market can pay premiums over $1,000 a month?

  18. 18

    @Raven Onthill: I can’t put any numbers on anything yet as there is no text.

  19. 19

    @Weaselone: Pretty much… for an individual with a $2,000 subsidy, it would be priced at $2,000 and try to pay out less than $1,600 in total claims for the year. I would set it up so that it covers 3 PCP visits ($450), 1 ObGyn ($150), generic drugs ($150), and half of a gym membership at a low cost gym ($100 — self-selection mechanism to get healthier people enrolled) as before deductible services and then a massive deductible before kicking back in for specialty care. All non-generic Rx would be immediately deductible paid.

    @Bob Hertz: Smaller carriers in smaller states/sub-state regional markets might decline to set up a super high risk pool. Large carriers in large states could probably make enough money between the combination of very high cash premiums and Stability Fund payments.

    @daveNYC: I think you’re onto something that this makes the 2009 individual market look functional

  20. 20
    daveNYC says:

    @David Anderson: Yeah. Right now, the best we’d get out of the AHCA is with something like pre-ACA regulations, but with moar freedom in the form of selling across state lines, plus additional Maximum Fuck for poor people in the form of letting states slap on additional requirements (or mandatory degradations, whatever) on Medicaid. Worse case is roughly the above, but with enough contradictory regulations so that the industry death spirals.

    That’s not even getting into the issue that the insurance industry has rejiggered itself around the ACA, so the AHCA would be making a mess of things even if it were competently put together.

  21. 21
    Another Scott says:

    Via SenateDems on the Twitter Machine: Shaheen:

    Sen. Jeanne Shaheen ‏Verified account @SenatorShaheen

    Sending letter w/ 42 senators to @SpeakerRyan: repealing essential health benefits isn’t going to fly in the Senate

    https://www.shaheen.senate.gov/news/press/shaheen-leads-42-senators-in-delivering-warning-to-speaker-ryan-house-republicans-were-not-going-to-help-you-erode-healthcare-coverage

    7:22 AM – 23 Mar 2017

    More of this, please.

    Cheers,
    Scott.

  22. 22

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  24. 24
    Scott says:

    Good news! You just got a link in memeorandum.

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    David Anderson says:

    @Scott: I have not looked at Memerandum in years

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  6. […] will be no hearings. There will be no mark-ups. And what they are talking about doing could have truly radical consequences. Here’s a little speculation what it would allow from health insurance wonk David […]

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