Bronze and CSR Silver trade-offs

Andrew Sprung has a good point on the value of $0 Bronze premiums that I want to explore some more:

The prevalence of free bronze plans for enrollees with incomes under 200% FPL (and for a fair number of older buyers over that threshold) is head-turning. But for those who know they need healthcare and have little or no savings or spare income, a bronze plan — free or otherwise — can be close to useless….

Take the case of a family of four, parents aged 46 and 44, with an income of $49,000, just under 200% FPL in Durham, NC (zip 27702), where the state BCBS has a monopoly. The kids are in CHIP, and that’s good. Strong CSR raises the actuarial value of a silver plan — the percentage of the average enrollee’s costs the plan is designed to provide — to 87%, and that’s pretty good by current standards — better than the average employer sponsored plan, in fact. It’s also better than Medicare….

The bronze plan is free — but if the family has no assets or surplus cash flow, it’s largely worth what they pay for it, or may feel that way. No benefits except the mandated free preventive kick in before the enormous deductible. In many markets, bronze plans that do not subject doctor visits or generic drugs to the deductible are available. That’s helpful, but not does mitigate the risk inherent in enormous bronze out-of-pocket maximums.

The silver plan offers more attractive coverage. But $242 per month is a big bite on $49k for a family of four.

The fundamental question is how valuable is additional option space?

In previous years, the same family in the same situation would have had an option to buy the least expensive Bronze for some premium value that was equal to or greater than zero and less than the Benchmark Silver post-subsidy premium price of $257/month. That has always been the case in counties where a Silver and Bronze plan is offered. For this particular family, the least expensive Bronze premium, after subsidy in 2017 would cost slightly more than $100 a month. Now there is a $2,900 difference in annual premiums between CSR Silver and Bronze.

CSR Silver only has incremental value to the family if there are individual medical expenses between $800 and $6,650 without considering the difference in premiums. The additional 6% in family income that is not being spent on premiums pushes the breakeven point of the the CSR Silver $3,700 in medical expenses for one individual or up to $4,500 in expenses for the couple. In 2017, that same set of calculations has Silver CSR having incremental value at $2,000 in medical expenses for an individual.

Most people don’t have $3,700 in medical expenses in a year. Most people don’t have $2,000 in medical expenses in a year. It is a gamble that 2018 will be a decent year of health for a couple in their mid-40s. If they know that they are on multiple medications and are anticipating a minor surgery next year, Silver makes a lot of financial sense. If they think that they are relatively healthy and they are insuring against a cancer diagnosis then Bronze can make sense.

The difference in 2018 versus previous years is that the Silver vs. Bronze trade-off point changed. The option space got bigger.

4 replies
  1. 1
    Fair Economist says:

    I feel like a broken record, but even if you never make the deductible, insurance is great because it keeps the medical providers from ripping you off. I always get billed about 3 times what the insurance eventually allows. $0 Bronze is just plain great.

    Incidentally, this is the situation I’m in personally even though I’m on an employee plan. Our deductible is fairly high and we generally don’t make it, even though we have a fair amount of prescription bills and doctor visits due to pre-existing conditions. But if we didn’t have insurance, we’d go far over our deductible every year because we’d pay almost 3 times as much as we do now.

  2. 2
    curmudgeon52 says:

    But I am not taking Tricare for Life. I have been offered Korean national health insurance. About $55 for each of us per month. Cheaper than the $124 per month each in the US military/medicare system.

    Doctor visit for bronchitis is about $25, another $10 for prescription. National plan will cover wife’s laser surgery on her eye.

    US costs are too high and that has not been addressed.

  3. 3
    Starfish says:

    I agree with curmudgeon. When most people are paying into a system and not getting anything out of it besides negotiated rates, it feels like a raw deal.

    The prescription drug prices have gotten absolutely ridiculous. The companies need to have caps on how much they can raise the costs of things that exist and have already been on the market for years and years. Orphaned drugs that are adopted need to have their potential retail values capped at not much more than what people were paying the compounding pharmacy.

  4. 4
    Kelly says:

    We’re going with a Bronze HSA. We’re bumping up against the high end of the subsidy cliff. We used the estimate costs option on Healthcare .gov with one low cost and one medium cost which looks typical for us. The low monthly payments for the Bronze + HSA tax savings gives the HSA Bronze about a $6k advantage over available Silvers and even one Gold option. Also the worst case scenario for HSA Bronze is around $9k saved.

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