Penny on the track are you coming back

The Hill reports that a gaggle of Democratic Senators will be introducing a modification to PPACA shortly.

The first bill from the group of Democrats would add a new, cheaper option, a copper plan, to ObamaCare’s existing menu of platinum, gold, silver and bronze plans. The bill also seeks to spur competition in the marketplaces by restoring funding to nonprofit healthcare co-ops.

The copper plan has been floating in the proposal space for a while.  It has been pushed by Sen. Mark Begich of Alaska for the past six months.  On a technical level, it is a feasible idea.  On a policy and political level, I’m not so sure.  Let’s look at the details first and then do some analysis:

v Adds a new copper level of coverage to the metallic tiers of qualified health plans for 2015 plan years;

v The copper plans will feature a 50 percent actuarial value, ensuring that, on average, at least half of medical costs of covered services will be paid by the insurer;

v Like other metallic tiers, individuals and families purchasing copper plans within the Marketplace can qualify for premium and cost-sharing subsidies;

v The copper plans will also feature the ten services included as essential health benefits;

v For copper plans, increases the annual maximum out-of-pocket limit to make feasible copper plan designs in high-cost marketplaces.  The Secretary of the Department of Health and Human Services must ensure the limits are reasonable for every marketplace;

v Permits Multi-State Plans to include the new copper plans; and

v Copper plans meet minimum essential coverage.

The bill has not actually been fleshed out, scored and simulated, so things will change.  However these bullet points could work without doing any damage to the rest of the law.  Details below the fold.

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Good News Everybody


Here you go…hot off the presses…um, Twitter-feed, anyway…

@charles_gaba MT @igorvolsky: BREAKING: Obama says on a call that 6 million people have enrolled in Obamacare.

— Seth Trueger (@MDaware) March 27, 2014

Things are moving VERY quickly now…

For example, I just added this update from the WSJ, which claims 100K QHPs per day on Mon/Tue.

I just checked the front page of and it looks like it is getting slammed as I see the queueing warning. The queue system allows the system to “call-back” people at moments when there is slack in the enrollment process. The procrastinators are finally coming off the side-lines. And this is why there is a legitimate need for the extended period for people who are trying to sign-up but can’t this week. 

If there are 100,000 successful enrollments on per day on Monday and Tuesday, I am projecting at least that many Wednesday, Thursday and Friday.  I would not be surprised if there are 250,000 enrollment  on Monday as that is the absolute last momemt to get a regular application in.  There are limited extensions for the open enrollment period and then normal qualifying life event enrollments, but the hard deadline is almost here.

Makes much more sense to live in the present tense

As expected there has been a minor extension to the deadline for the 2014 open enrollment period on the Exchange.  People who have accounts set-up on by March 31st but have not selected a plan will get a few extra weeks if they ask for it.  Plans selected in those extra weeks will be effective for coverage on May 1st.

The Washington Post has details:

Federal officials confirmed Tuesday evening that all consumers who have begun to apply for coverage on, but who do not finish by Monday, will have until about mid-April to ask for an extension…

Under the new rules, people will be able to qualify for an extension by checking a blue box on to indicate that they tried to enroll before the deadline.

Administration officials said the accommodation is an attempt to prepare for a possible surge of people trying to sign up in the final days before the deadline. Such a flood could leave some people unable to get through the system.

We’ve seen a few minor extensions in the past.  The most notable one was the change from a Dec. 15th deadline for Jan. 1 coverage to a Dec. 23rd deadline that then got pushed back to Dec. 24.  This is a simpler and more straightforward extension as coverage won’t be starting in a week or be retroactive coverage.  It will be coverage starting in two or three weeks after the extension deadline, so the insurance companies should be able to accomodate the late leakers fairly easily.

Cadillac Mechanics

Most people won’t have a Cadillac health care plan.  The threshold for Cadillac taxes to kick-in are fairly high at 180% the average individual plan total premium level or 180% average family plan coverage.  Cadillac taxes don’t start until 2018, so everything right now is speculation dependent on plan design choices as well as aggregate health care inflation rates. 

But as a quick check, if you are curious, people should look at box 12DD on their W2.  If you have single coverage, and the number is greater than $8,500, there is a decent chance this plan absent signficant changes will have at least a dollar of Cadillac coverage in 2018.  If you have family coverage, Cadillac coverage is a decent probability if the 2013 box 12DD value is greater than $24,000.

So what does a real Cadillac plan look like? 

Let’s look at Texas’s favorite asshole’s health coverage.

A spokeswoman for the senator confirmed Cruz’s $20,000 coverage plan with the paper. “The senator is on his wife’s plan, which comes at no cost to the taxpayer and reflects a personal decision about what works best for their family,” Catherine Frazier said. 

According to a 2013 Kaiser study, the average for a employer-provided family coverage plan is $16,351. A 2009 New York Times report shows that Goldman Sachs’ plans for executives and managing directors are worth double the average plan–more than $40,000 annually in premiums for each family. 

 This is a plan with 24/7 on-call doctors who treat only a very limited number of patients, minimal restrictions on services, minimal restrictions on network and an attitude that money does not matter, keeping the Galtian overloads happy is what matters.  It is an extreme case, as there are Cadillac plans which are very comprehensive plans for older and sicker risk groups in very high cost areas (like SW Georgia) that would also qualify as Cadillac.

But the mechanics are simple.  Let us assume the Goldman Sachs’ plan has a total cost of $40,000 a year for family coverage.  The Cadillac threshold would be $27,500.  The first $27,500 of the premiums for the Cruz family would be tax free and enjoy an implicit subsidy of $10,800 in tax benefits.  The Cadillac margin is the premium minus the threshold.  That margin is $12,500.  At a 40% excise tax, the government would levy a tax of $5,000.  The Cadillac threshold is indexed to change at CPI-U+1 for the first two years and then CPI-U in the out-years.  CPI-U is the base measure of inflation for urban residents and it tends to be increase at a lower rate than healthcare inflation. 

The economic thought is that most if not all of the excise tax will be passed along to the employee which will create a strong pressure group for high end cost control. 

There are two goals with the Cadillac tax.  The first is to raise revenue for the government in order to pay for the affordability tax credits.  The second is to encourage firms to engage in legal tax avoidance by finding ways to get under the threshold or minimize the size of their Cadillac margin.  If firms can begin to reduce the size of these plans, that is seen as a significant public policy win as that means there are more payers that are willing to say no.  More payers willing to say no to some providers means there should be a downward pressure on per-unit pricing.  Saying no can mean narrower networks, and it can also mean fewer elective and ineffective procedures. 

These two goals are in tension (much like the use of raising cigarette taxes to pay for CHIP).  If the taxes are high enough to produce significant revenue gain, they will produce significant behavioral gain that will move people away from smoking and away from high cost plans.  I think solving the revenue problem in 2025 is a good problem to have if healthcare spending grows at or below the rate of the general economy for a decade or more.

Relax and keep the knees up

This advice is applicable to both Victorian brides on their wedding night and pedestrians who are about to be hit by a car.

It is also applicable to companies that are worried that they will need to start paying the Cadillac tax in 2018 on high cost health plans.  United Health Care has a nice quick explainer:

Beginning in 2018, a 40 percent excise tax will be imposed on the value of health insurance benefits exceeding a certain threshold. The estimated thresholds are $10,200 for individual coverage and $27,500 for family coverage. The thresholds may be increased depending on actual medical inflation between 2010 and 2018 using a measure that looks to the Federal Employees Health Benefits (FEHB) program. The thresholds may also be increased for individuals in high-risk professions and pursuant to an age and gender adjustment.

The goal is to start clawing back the Employer Sponsored Insurance tax deduction.  The foregone tax expenditures will be used to fund subsidies and indirectly it will be used to structurally rebuild the insurance market.  This will be disruptive, it is intended to be a disruptive reform. 

Large employer groups whose benefit consultants are telling them that they are either already in the Cadillac zone or are on course to enter the Cadillac tax zone have four options.  The first option is to do nothing besides hope that the general market for health insurance and health provider services experiences low inflation for the next couple of years. The next three options are ways to avoid or at least minimize the amount of premiums subject to the Cadillac tax.  Smart firms who want to avoid as much Cadillac tax as possible should be attempting to get on a glidepath instead of jumping at the cliff for the 2018 open enrollment as gradual change is easier to accept. 

  • Pay for less coverage
  • Pay less per service performed
  • Use fewer services

These three options can be intermingled and depending on benefit design, they will interact.  Read more

Mining the Mountaintops

One of the interesting questions that will fuel more than a single dissertation is the impact of  local political factors on PPACA acceptance and utilization.  The obvious answer is that states where there is uniform elite political support for PPACA will see higher public acceptance compared to states with uniform elite PPACA opposition.  We’re seeing this in the California versus Florida comparisons.  The more interesting question is in states where there is conflicted elite and popular support. is passing along some great news and a great research topic:

Excellent news out of West Virginia: Medicaid expansion has increased yet again, from 87,000 to 98,000 residents. This is particularly impressive considering that the total number of people in WV who are eligible for Medicaid post-expansion is about 143,000, according to the Kaiser Family Foundation.

Doris Selko, Southern Regional coordinator for the West Virginians for Affordable Health Care, said over 98,000 residents had enrolled in the Medicaid expansion by March 15 and an estimated 105,000 are expected to be enrolled by the end of the month.

Selko said three southern counties — Nicholas, Summers and Wyoming — have all enrolled over 100 percent of the anticipated enrollment numbers, and Raleigh County has enrolled 99 percent.

West Virginia and Kentucky are interesting case studies of states that don’t support Obama or Obamacare per se are doing aggressive implementation because the deal on the table is too damn good to pass up.  West Virginia is mining its mountaintops and hollows for Medicaid eligibilty and they are aggressively finding people who can benefit.  I am curious what the nationwide numbers would look like if every state was as aggressive as West Virginia in reaching out and more importantly signing up the people who are newly eligible for Medicaid.

Michigan Medicaid Madness?

Last fall, Michigan approved Medicaid expansion with a few minor local modifications that the federal government approved.  The vote passed the Michigan Senate with a coalition of all Democrats and a minority of Republicans.  Under Michigan law, a law can only go into immediate effect if there is a supermajority.  The Medicaid expansion passed with a bare majority, so it is not going live until April 1st.  I have not paid too much attention to Michigan Medicaid expansion as I thought this would be the typical pattern of the second round of expansion states — a coalition of almost all Democrats plus the caucus of Republicans who can count to eleven or greater with their pants on to take effectively free money. 

However, commenter Red Apple Smokes made a comment and a follow-up e-mail that led me to get interested in Michigan Medicaid:

I’m currently trying to get signed up for health insurance before the end of the month deadline (my fault for waiting until the last minute), and I was under the impression that Michigan expanded its Medicaid program. Maybe it was wishful thinking on my part, but I thought that a person that was currently unemployed and who made less than $8,000 last year would be eligible. From what I’m seeing, this isn’t the case.

Two interesting things.  People like Red Apple Smokes are why there will be a massive surge at a deadline.  They have enough other things to manage and coordinate that other things which don’t have immediate impact get pushed back until they cannot get pushed back any further.  That is a minor point.  The more important point is that Michigan is doing something odd from a mechanical point about running their Medicaid enrollment.

The odd thing that is happening is Michigan has not released their application process for newly eligible Medicaid membership to the public yet.  Right now, they are still displaying the very stingy and hard to qualify for legacy Medicaid on their portion of  Red Apple Smoke easily qualifies for Medicaid expansion but does not qualify for Legacy Medicaid.

Michigan Live on 3/20/14:

Michigan will start taking applications for its expanded Medicaid program on April 1.

State officials as recently as this week said it might not be ready until later in the month, but on Thursday announced that all systems are go for the program that’s expected to cover 320,000 Michiganders in the first year.

This decision is odd for a couple of reasons that we’ll talk about below the fold:

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