Gold gaps and dominated strategies

New Mexico has released their ACA rates for 2018. I looked at their region 2 non-smoker rates and noticed something unusual. The four different insurers have two different means of loading CSR costs into their baseline rate structure. Christus, Health Care Services Corporation (a Blue) and the New Mexico Health Connections, a co-op, all loaded any CSR uncertainty into the general rate structure. Silver plans were always less expensive than the Gold plans that each company offered.

Molina did something different. They put all of their CSR costs and placed it directly into the Silver plan. This changed the order of their relative pricing. Molina’s pricing order was Bronze, Gold and then Silver. For a 40 year old, Molina’s Gold plan is $85 less expensive than the benchmark Silver plan offered by HCSC. The Molina Gold plan is priced like it is everyone else’s Bronze plans. Molina’s Bronze plan is priced $158 less than the benchmark Silver.

What does this mean?

First, from a technical level, it means that at least some states are allowing anything to go. I was surprised when I saw that New Mexico approved two very different rate structures and solutions to the CSR problem. I naively thought that states would have chosen one approach.

Secondly, the market is heavily tilted towards Molina getting almost all of the healthy people enrolled. For people who earn under 150% Federal Poverty Line (FPL), they qualify for a Silver 94% actuarial value Cost Sharing Reduction (CSR) plan. Molina is price competitive with the rest of the silver plans. However only the people who strongly believe they will be sick will stay in CSR plans. Someone making $17,000 a year can either pay $47 for the least expensive CSR Silver or $1 for the Molina gold plan. Healthier individuals may gamble that the $500 a year in premiums will be a net savings over the difference in deductible exposure.

People who earn between 150% and 200% FPL are eligible to buy a CSR 87% AV Silver. An individual making $19,000 a year could pay roughly $70 a month for a plan with a $1200 deductible or $1 a month for a Molina Gold plan with perhaps a $2,000 deductible. The price differential means almost everyone who has any chance of not being admitted to the hospital in the first week of January is better off (network/provider relationships excluded) by moving to the Molina Gold plan.

After that, Molina’s Gold plan is priced like everyone else’s Bronze plans while the Molina Bronze is $75 less than the Molina Gold plan for a 40 year old. Even people who qualify for CSR 73% AV Silver are significantly better off by moving to Molina Gold unless they strongly value their current relationships with their docs as the Gold plan is less expensive and will have lower out of pocket costs.

The only markets which will be competitive for the remaining insurers are people earning under 150% FPL and who want the CSR benefit. Molina will clean house. Off Exchange, Molina will clean house among anyone who is not intensely loyal to their doctors. On net, Molina will have incredible risk adjustment outflows but very large membership due to being the only insurer using a Silver load strategy.

I think the Silver Load strategy under most conditions is a dominating strategy. If anyone else attempts to use other strategies without incredible baseline price advantages, they are giving away membership. States that allow mixed strategies will see significant insurer exits in 2019 as the non-Silver Load insurers will have lost money in 2018.






14 replies
  1. 1
    PhoenixRising says:

    So, local report:
    1) Molina has a reputation for a lousy network. They are known as a Medicaid MCO all about cost containment. If they can add retail customers who aren’t facing a forced choice among 3 MCOs to try to keep their records in 1 system, I’d be surprised. Everyone knows their clinics are full of pertussis & we’re not all mistaken.

    2)We have 2 HMOs plus the Blues, and if you wanna see an oncologist who knows anything you need Blue Cross. If you think you’re gonna need a visit to urgent or emergent care that knows how to fix a broken bone, also you need BCBS or one of the HMOs. The other HMO is staffed by retirees and locums hoping to get unrestricted US medical licenses someday. If you might need disease care or know anyone who has fallen in front of a city bus, you know you can’t get decent care from Red.

  2. 2
    PhoenixRising says:

    So, local report: Since we don’t have enough primary care providers in the region to screen and refer to specialists, some weird stuff happens when it comes to insurance shopping. At a regulatory level, the commission is run by grifters appointed by party apparatchiks so you can’t expect any approach to the ACA’s incentives for insurers to be ruled out.

    1) Molina has a reputation for a lousy network serving poor people who aren’t insured. That’s their brand. They are known as a Medicaid MCO all about cost containment. If they can add retail customers who aren’t facing a forced choice among 3 MCOs, choosing based on keeping their records in 1 system, I’d be surprised. Everyone knows their clinics are full of pertussis & we’re not mistaken.

    2) We have 1 HMO, Red; Green is a network that accepts Blue Cross cards but not AFAIK Molina’s cards. Green was recently bought by DaVita. We also have an excellent university health system.

    Providers are captive within Red and so are patients.

    If you wanna see an oncologist who knows anything you need Blue Cross, which Green primary care docs accept. They refer to UNM. If you think you’re gonna need a visit to urgent or emergent care that knows how to fix a broken bone or DX a concussion, you need BCBS or Green. Red is staffed by retirees and locums hoping to get unrestricted US medical licenses someday.

    If you might need disease care or know anyone who has fallen in front of a city bus, you know you can’t get decent care from Red. So Molina’s network, which doesn’t include access to the only competent specialty and emergency care in town, would be a deal-breaker for anyone who isn’t still convinced the tax penalty is better for them financially.

  3. 3
    Another Scott says:

    @PhoenixRising: What a nightmare.

    How is someone who doesn’t have time to investigate all the issues you raise supposed to make an informed choice?

    It’s clearly not enough to know the prices and actuarial coverage and “in/out” network stuff, you have to know their history of challenging payments, the quality and characteristics of their in-network medical staff, etc., etc.

    We need a CFPB for consumers of health care, also too.

    (sigh)

    Thanks.

    Cheers,
    Scott.

  4. 4
    ArchTeryx says:

    @Another Scott: My life depends on good medical coverage and *I* am not at that level of know-how of different networks. I did do some network research into CDPHP vs. Fidelis (Albany, NY) and found that CDPHP was great for “normal” medical care but lousy for mental health, Fidelis was great for mental health providers but had a lousy network for physical health. I ended up with CDPHP and (eventually, after years of searching) found a psychiatrist that took my insurance.

    And even that level of research wouldn’t be enough in New Mexico, apparently.

  5. 5
    StringOnAStick says:

    Maybe the intended side effect is what you describe: insurers leaving the local markets. Being a monopoly, even on a local basis, allows higher charges to customers. The amount of desperate profit seeking, no matter how fine a margin is being considered, seems baked into every short term business solution with no consideration of the long term.

    I had been under the impression that the health insurance industry was happy with the ACA, or at least accepted it because they got a larger market of all age ranges plus guaranteed premium payments thanks to the CSR. I’ve been a bit surprised at how little they fought back on the R replacement bills just because of the chaos they would cause in the entire health care system; chaos can’t be good for the bottom line. What am I missing?

  6. 6
    Applejinx says:

    Market based health care doesn’t and cannot work.

  7. 7
    rikyrah says:

    I saw this on MSNBC last night. If the word gets out, you can get a gold plan for good money.

  8. 8
    lagarita says:

    Looks like Molina needs $$$ (i.e. higher margins):

    http://www.latimes.com/busines.....story.html

  9. 9
    David Anderson says:

    @rikyrah: that is the key… Getting the word out

  10. 10

    David, where can I find this information for my state (Ohio) ?

  11. 11
    ken says:

    @PhoenixRising: I appreciate your input but am confused about Molina’s network. Molina’s provider site includes several pages of UNM providers, including cancer and hematology centers and docs. Are you saying the top docs at UNM don’t participate in Molina, but the less competent ones do? This isn’t an idle question, I live in NM and will be buying insurance on the exchange soon. Also, who are ‘Green’ and “Red’ in your post. Thanks, we moved to Santa Fe not long ago and we’ve been healthy so we haven’t been forced to look into providers closely.
    https://providersearch.molinahealthcare.com/Provider/ProviderSearch?RedirectFrom=MolinaStaticWeb&memstate=nm&State=nm&Coverage=MMP https://providersearch.molinahealthcare.com/Provider/ProviderSearch?RedirectFrom=MolinaStaticWeb&memstate=nm&State=nm&Coverage=MMP

  12. 12
    David Anderson says:

    @Frank Wilhoit: it is slowly coming out. By the end of October the public use files will be available and I will have it set up for all HC.gov states

  13. 13
    PhoenixRising says:

    @ken: Welcome!

    To clarify, Molina seems to have added a LOT to their network since getting the exchange plans ready for market. The gold plan might indeed be a bargain, assuming that the docs in network are taking new patients…which you can’t ever assume.

    The issue in New Mexico with any level of care below ‘specialty that can make you dead on someone’s malpractice premium’–in other words, hematology/oncology–is unacceptable wait times for an appointment. We’ve never had a wait for any oncology or hematology DX or treatment (my family has been…unlucky), which I can’t say for the Cleveland Clinic or MD Anderson. But when my teen needed to see an adolescent lady-parts doctor…7 months out, and then she moved so there isn’t one anymore. Dermatology is a 5-7 month advance book. If they FIND something, you’re seeing oncology that same week, but the other people in the waiting room are gonna be pretty sick (hopefully you’re not that guy).

    In Santa Fe, you’re looking at another set of problems in the event that you need emergent care: wait times AND quality. I know people who have driven their kids’ broken limbs from the St Vincent’s waiting room to UNM because they know treatment will be faster and WAY better.

    Drive carefully, get lots of exercise and eat your vegetables! It’s probably not so important what plan you buy if you stay healthy; if not, it’s still not important as long as you don’t have coverage from Team Red*. Captive practice, have a ‘cancer center’ in Albuquerque, partners with St Vincent for admitting in SF, make people dead if their DX is serious and unexpected for their life stage.

    *I’m not at liberty to name the HMO that tried to kill me, or failing that leave me permanently disabled, based on their out of network coverage contract, because of the settlement requiring them to pay for the care that extended my life and saved my vision.

  14. 14
    ken says:

    @PhoenixRising: Thanks again. We’ve heard similar stories of St Vincents, but so far we’ve stayed healthy and only had our annual physicals. The clinic is fine and our docs take Molina. I’ll have to ask around more. BTW, I apparently submitted the only consumer letter to the NM insurance rate setting superintendent, and I presented the argument why they should not let insurers spread the CSR/uncertainty costs over all plans but should concentrate them on silver policies only. I even quoted one of David’s posts. Apparently, it didn’t convince them. Sigh. Now, with the lower silver premiums attributable to spreading the CSR/uncertainty cost over all policies, our benchmark will be lower and so will subsidies.

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