Charles Gaba is passing along an interesting piece comparing the pricing of on and off-exchange plans. I think his analysis is significantly incomplete.
Overall the least expensive metal plans from United Healthcare, Aetna, Cigna, and Assurant were significantly more expensive than the least expensive metal plans available on state exchanges. Across the bronze, silver, and gold metal tiers, the least expensive plans offered by the four off-exchange carriers were over 40% more expensive on average than the least expensive plans on the exchanges.
There are a couple of things to remember. First, carriers that offer a plan on-Exchange have to offer the same plan off the Exchange. However, carriers that don’t offer a plan on the Exchange can offer basically whatever they want (as long as it qualifies as providing defined minimal coveragE) off Exchange. Secondly, and more importantly, the target audience of the on and off-Exchange plans are very different. I think this is the significant driver of the cost differential.
On Exchange most people make under 400% Federal Poverty Level (FPL) and are expecting subsidies. The subsidies are structured to create an incentive for very low cost Silver alternatives. On Exchange, people are looking for very low cost plans, so that means narrow networks, HMO configurations and usually carriers that are engaged in either optimistic pricing or loss-leader strategies.
Off-Exchange, especially for carriers that aren’t on the Exchange yet, the population is different. Typically, the shopper is someone who makes more than 400% FPL or at least more than the subsidy cut-off income level for their county of residence . This means they are less price sensitive as they expect to pay full price. The off Exchange plans are competing only against other off Exchange plans, so they are competing more on features than pricing. This means the default setting is probably a wider network with either a PPO or EPO configuration as the baseline default as the market for Off Exchange policies is probably too small and fragmented to make it worthwhile to build seperate policy configurations that deviate significantly from past offerings. The number of “value” shoppers off-Exchange is low for the amount of work needed to create a dirt cheap policy. If someone is off-Exchange, they have money to spend and will buy something decent. If they are cost sensitive, they can go on the Exchange and get a cheap policy without subsidy.
I would speculate that the major off-Exchange carriers in 2014 will have reasonably competitive on-Exchange pricing in 2015 because the Exchanges are big enough to make it worth their time to build brand new products from scratch to anchor near 2nd Silver pricing. But the market segments this year are very different, so it is an apples to tangerine comparisons.
Tom Levenson
Note, just pulled my quickie post for later…
Violet
From the quote:
I’m feeling kind of stupid, but I thought those companies were offering plans on the exchanges? Is that not true? Or maybe only some of the major companies and in some states? What companies are offering plans on the exchanges?
soonergrunt
So basically, the system is working more or less as intended, and people who are price sensitive have real options on the exchanges and those who are not aren’t seeing their options foreclosed, if I understood you correctly.
Richard Mayhew
@soonergrunt: pretty much
Violet
Have you explained why this is in a previous post? If not, could you elaborate?
Richard Mayhew
@Violet: On Exchange, most people are getting subsidies, usually lower incomes.
Off Exchange, no subsidies, people usually have higher income.
GHayduke (formerly lojasmo)
Open thread for bitching about insurance?
Need a venous laser ablation, but my primary insurance denied coverage. Secondary insurance does not require pre-auth, but Mayo is out of network. Now I need a referral to Fairview (in Minneapolis) to travel 89 miles to have this fucking procedure done.
Fuck insurance companies.
Edit: new study in health affairs finds that US hospitals spend up to 4X as much on bureacracy as neighboring Canada, and it accounts for 25% of spending
Villago Delenda Est
You know, this isn’t ideal, but it’s better than we had. So we’re moving forward, the fuckheaded dogshit that are the Rethugs notwithstanding.
Villago Delenda Est
@GHayduke (formerly lojasmo): Private bureaucrats are NEVER as wasteful as government ones.
Because “obscene profits” are, by definition, not wasteful. Feature, not bug.
NonyNony
@Villago Delenda Est:
Interestingly, when it’s government spending, salaries for bureaucrats are “government waste”.
When it’s a private company, salaries for bureaucrats are “job creation”.
Funny how that works, ain’t it?
Violet
@Richard Mayhew: Thanks. I had misunderstood what you wrote and thought you meant that this year (upcoming, 2015) the market segments were different from the current year (2014, when people had to enroll last year).I read what you wrote the wrong way
Villago Delenda Est
@NonyNony: Well, when you understand that government cannot create jobs, that follows logically.
Which explains why I was unemployed for three years in Germany, unemployed for a year in Korea, etc.
Steeplejack
@Violet:
I believe some (many) of the companies offer plans both on and off the exchanges.
Richard Mayhew
@Steeplejack: yep, all companies that offer something on the Exchange must offer that same plan off the Exchange.
For intance Mayhew Insurance offers plans A, B, C on and off Exchange, as well as offering Plan Design H exclusively off-Exchange.
Companies that elect not to sell on Exchange can sell to the individual market off-Exchange.
CONGRATULATIONS!
Thought I’d lay this here and get some input. I work for a small (about 30 employees, spread through three states) company. There’s only six of us in CA. We can get Kaiser (bad) or UHC (craptastically bad and insanely expensive). This was all the company could get (I was in on the negotiations from start to finish). A person can go on the exchanges and get better insurance than I can, and can get subsidies to boot, if they make little enough money. I make enough that I can’t get subsidies, and anyhow, I have employer-provided insurance. But I want something better, because my only two options are not good! What are my options?
(Don’t say “make your employer get better insurance”, because we can’t.)
PS: Once Republicans find out that people on the exchanges can get better coverage than “working people” (you know that’s how they’ll word it) they are going to whine to the heavens over the unfairness of it all, so I hope somebody’s ready for that. Young bucks with T-bones and MRIs on demand.
Xantar
@CONGRATULATIONS!:
Get on the Exchange. The fact that you have employer provided insurance merely means that you can’t get subsidies on the exchange, but you indicates that you make too much to qualify for subsidies anyway. You don’t have anything to lose.
richard mayhew
@CONGRATULATIONS!: for 2016 go on SHOP exchanges for small businesses
CONGRATULATIONS!
Thanks, guys. I see no reason to suffer with shit insurance just because my employer isn’t oozing money.
gelfling545
I have 5 nephews. Four of them are adults & all of them are good people except that one of them has secretly been a moron all this time & I never knew. Moronic nephew is 30, makes a decent living as a contractor in the construction trade & is single. He likes a glass or 6 of beer on occasion, snowboards, hunts, boats & is in general a pretty active guy. He just – just – bought a house. After some (inebriated, I imagine) horseplay at a Labor Day picnic he injured his leg. Long story short he broke, as in completely snapped in two his leg in two -two- places. Needed surgery complete with plates, screws, etc. & will need extensive rehab. All good, right, I mean, here we are in NY State? Lot’s of choices. No, actually, moron nephew never really purchased insurance. Jesus! Just because his father died at 55 from complications of diabetes or his mother, all of her siblings and every one of her paternal cousins has had cancer of one type or another, why would a young guy need health insurance? I don’t think it was because of any political convictions on his part (although I’d be the last person he’d tell that to & he does have a “repeal the Safe Act ” bumper sticker which I’ve given him grief about). Maybe he was just lazy, preoccupied or didn’t want to spend the money. This looks to be a very expensive lesson indeed.
Charles Gaba
Excellent point. Post updated:
http://acasignups.net/14/09/07/holy-cats-cheapest-exchange-based-qhps-29-less-expensive-exchange-tax-credits
Mnemosyne
@CONGRATULATIONS!:
As Xantar said, you have the right to refuse your employer’s insurance and purchase it through the exchange, but won’t be eligible for any subsidies. The Giant Evil Corporation I work for here in California sent us a letter last year explaining it. But we have very good insurance (because being Giant and Evil means you have a lot of negotiating power) so I stayed with my employer insurance.
Steeplejack
@CONGRATULATIONS!:
What’s wrong with Kaiser? I’m on Kaiser (exchange plan in Virginia), and it seems pretty good, though I haven’t had occasion to use it much. But I have heard that there are problems in (some part of) California?
Mnemosyne
@CONGRATULATIONS!:
Here’s the blurb from the Covered California website:
Mnemosyne
@Steeplejack:
CONGRATULATIONS! is probably in Northern California. Kaiser is split into two separate divisions for Northern California and Southern California. SoCal is fine, but Northern Cal has had massive problems with patient care. They even got their ability to do organ transplants yanked after several patients died due to their negligence.
WaterGirl
Richard, I hadn’t seen this post from you, so I emailed you with an insurance question. I hope that’s okay.
catclub
@Mnemosyne:
Does that include getting the employers contribution to the expense? I would be amazed at that.
Mnemosyne
@catclub:
It does not. But you might be surprised at how good the Exchange prices are, at least here in California — even without employer subsidies, a Silver plan is running about $150-$200. YMMV in other states that didn’t go whole hog on health insurance reform, though.
richard mayhew
@WaterGirl: I will reply tonight after kids are in bed. I need to do some research. Best bet is to speak with a navigator
WaterGirl
@richard mayhew: I had even forgotten about the navigators! Will look for more later, thank you so much!
superfly
My off exchange Gold PPO from Assurant in CA is $50 cheaper then the least expensive Gold PPO on CoveredCA, I acquired it via an agent who assures me it is ACA compliant, nothing tricky or hidden in it, went off-exchange for the wider network since my previous insurer, who is on the CA exchange, went with a very narrow network.
Any ideas on the discrepancy?