SRW1 asked a good question this morning:
Is it possible insurance companies are as remarkably quiet as they are because they have been promised something like the opening up of the bundle of essentials at stage 2 or 3 of the process?
Besides the fact that the major insurer groups are screaming their heads off, insurers will have a very hard time making money on low actuarial value insurance that is priced to the flat age based subsidy. Jed Graham at IBD has a very smart piece that looks at the budgetary sleight of hand of the Ryan plan and makes a very critical if subtle point:
If ObamaCare’s essential benefits requirements were axed, health policy experts believe that insurers would inevitably offer people coverage that costs no more than the value of their tax credit under the GOP plan. In other words, people would find a way to use their tax credits, even if they could only afford to buy the skimpiest coverage — too little in many cases to be considered insured under CBO’s assessment. Still, if that’s the GOP’s eventual plan, it means that the CBO is underestimating the true cost of RyanCare by about $600 billion.
A 20 year old with a $166 a month subsidy in a low cost region can buy a 60% to 75% Actuarial Value plan. A 64 year old in a high cost region with a $333 a month subsidy and a 5:1 age band can afford a 30% AV plan with a $15,000 to $20,000 deductible.
Administrative costs are a bear for insurers. My former jobs at UPMC barely scaled. For my last position there, they needed one of me for every hundred thousand covered lives. For my first position at UPMC, they needed one of me for every half million lives but hey needed one of me after the first 5,000 to 10,000 covered lives. There is a fairly large bolus of costs that have to be absorbed to sell the first policy that are minimally variant. After that there are variable costs of claims processing, authorization, appeals, and member services. Younger and healthy patients tend to have a lower cost of maintenance than older or sicker members. People who never use their insurance outside of hit by the bus events don’t call, they don’t appeal their denials and they don’t send claims to get reprocessed because the bucket accumulators aren’t working right. Sixty year olds have already gotten hit by the bus of age. They use more administrative services to manage their care. And the health insurer uses more administrative resources to either deny care or direct care to lower cost or more efficient pathways.
Insurers can make money on a cherry picked low actuarial value covered population. That was the business model of the individual market. But the combination of high need patients and high administrative costs means making a bundle on selling minimal plans that are priced at the subsidy point a hard way to make unusually large profits. It could be profitable for some insurers but it will be a grind.