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.