One of my hobby horses for Exchange improvement is reducing the cognitive load of making good choices. Differences should be clear, they should be obvious and they should be meaningful. And these words should be defined by the average person who only thinks about health insurance for an hour or two a year instead of an insurance industry geek.
This is an area where the Centers for Medicare and Medicaid Services (CMS) needs to have better regulation as there are multiple regions throughout the country where an insurer has multiple plans of the same network, same plan design (HMO, EPO, PPO), being offered in a region with minor ($1 or $2 per member covered per month) premium differences that are driven by minor changes in cost sharing. One plan might have a $25 co-pay for PCP visits and $12 prescription co-pays while another plan that is very similar has a $30 PCP co-pay and while generic prescriptions cost $5.00.
The current regulation on meaningful difference is below (P.71 and P.72):
We proposed, in § 156.298(b), that a plan within a service area and metal tier (bronze, silver, gold, or platinum, and catastrophic coverage) would be considered meaningfully different from other plans if a reasonable consumer (the typical consumer buying health insurance coverage) would be able to identify at least two material differences among seven 53 key characteristics between the plan and other plans to be offered by the same issuer. The key characteristics were proposed in paragraphs (b)(1)–(b)(7), and include (1) cost sharing; (2) provider networks; (3) covered benefits (including prescription drugs); (4) plan type (for example, HMO or PPO); (5) premiums; (6) health savings account eligibility; and (7) selfonly, non-self-only, or child-only coverage offerings.
We proposed that, at a minimum, a reasonable consumer would have to be able to identify two or more of the characteristics proposed at § 156.298(b) as different in order for the plan to pass the meaningful difference test…
To address concerns with the proposed meaningful difference standard, we have modified § 156.298(b) to have the standard set at one material difference rather than two,
and have removed premiums as one of the characteristics among which plans must be different.
In areas with minimal competition, this might be sufficient, however in regions with significant competition from multiple insurers, I would want a clearer distinction between plans being offered. A rule stating that in counties or rating areas that have three or more insurers offering a plan within a metal band meaningful difference would require two of the following three differences: different network, different plan configuration (HMO or EPO or PPO) or different covered benefits (dental/vision add-on or not added). Cost sharing changes would have to be significant changes if the plans were the same network, same configuration and same basic benefit structure. For instance Silver plans can have big deductibles and no-coinsurance or low deductible but high co-insurance. Either model can produce a fair Silver, but they are different risk models.
This rule would solve two problems.
The first problem it solves is spamming the 2nd Silver. Right now the current incentive structure is for insurers that think they are competing for the second Silver slot to issue half a dozen barely different plans to increase the odds that they’ll get the first and second Silver slots which means a single insurer would get the only two subsidized plans. This is a minor problem as long as the other competing plans are trying to get 2nd Silver as well. They should cluster fairly tight so $5 a month in additional non-subsidized costs aren’t a massive deal breaker if the rest of the value proposition is solid.
The second problem is that it reduces the cognitive load. As I mentioned yesterday, my family had seventy three choices on Healthcare.Gov. I’m an insurance company geek, I know how to navigate plans. If I had to make a good choice for my family on the Exchange yesterday, I would have been in trouble. I could have filtered down to Silver or Gold and the restrict by price to get to six or seven choices, of which two or three were not meaningfully different to me (I don’t care if my copay is $25 or $30 for PCP and $5/$12 for prescription drugs), but I would have hit choice overload. And if I was hitting choice overload, most people would have hit choice overload.
For markets to work well, people must be able to differentiate in meaningful and accurate ways the differences of the wares being sold.