Andrew Sprung at Xpostfactoid has been doing the long and very valuable slog of figuring out average acturial value of what is being sold on the Exchange. Right now, once you factor in cost sharing assistance, the average acturial value of insurance being sold on the Exchange looks a lot like typical employer sponsored insurance:
only 20% of ACA private plan buyers in 2014 selected bronze plans, most of them probably in higher income brackets. By my estimate, over half of ACA buyers obtained plans with an actuarial value of 80% or higher, including about 90% of buyers with incomes under 200% of the Federal Poverty Level, who accessed Cost Sharing Reduction subsidies by buying silver plans. And while ACA coverage can have troubling limitations, from high deductibles to narrow networks, I just stumbled on information that indicates what an improvement the actuarial mandates constitute.
This 2012 study found that more than half of the health plans sold in the individual market in 2010 had actuarial values of less than 60%, and that 60% was the average AV of all plans sold on the individual market in that year. Many of the “rate-shocked” holders of canceled individual market plans who hit the news in fall 2013 probably had plans that were skimpier than ACA bronze
On Exchange are mostly people who qualify for subsidies. Acturial values in the mid-80s is an appropriate level of coverage for people as the actual shock of a big claim is mostly eaten up by the insurance. As a side note, the average AV of newly insurance people for PPACA will be even higher as Medicaid tends to have acturial values in the very high 90s, and that is roughly half of the newly covered people.
Off-Exchange is everything else. A person who is buying off Exchange is far less likely to have qualified for subsidies due to either making too much money, or immigration status. Here, moving acturial value from the 40s% or 50%s to 60% is a real increase in the value of the policy.
As I’ve said before, I’m not a big fan of high deductible health plans (HDHPs) or catastrophic coverage for most people. Typically, I’m only in favor of HDHPs for people who are very healthy and have access to financial resources to cover a kick in the balls claim on their deductible. The off-exchange buyers that had previous underwritten coverage and who don’t qualify for subsidies because they make too much money is one of the few easily identifiable clusters of people where a HDHP/catastrophic coverage scheme makes a lot of sense.