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You are here: Home / Anderson On Health Insurance / Off Exchange absorbing shocks

Off Exchange absorbing shocks

by David Anderson|  January 22, 20158:10 am| 10 Comments

This post is in: Anderson On Health Insurance

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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.

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10Comments

  1. 1.

    Tommy

    January 22, 2015 at 8:41 am

    I have a question for you Richard. I buy off the exchange. I work for myself. I don’t get any subsidies. I am 45 and NEVER get even a cold. I have a high-end bronze plan. I say high-end because from the research I did before I signed up last year, it might be better than some of the lower-end Sliver plans.

    I know I have until 2/15 to change my plan and well I think I will but I am confused.

    Background out of the way I have, and it has only been for the last few years, terrible insomnia. I sleep on average, and using a Jawbone health bracelet to monitor it now, less than three hours a day. My current plan won’t cover any of the costs.

    I’ve looked at some of the Gold plans and they will cover some of the costs, but the cost of the plan is so much more expensive.

    I guess what I am asking is I am finding it hard to determine what they will pay and won’t pay. Couple in the increase in costs for the plan and my out-of-pocket, it might be better/less expensive to stay with the plan I have now and just set-up a payment plan with the hospital (that is where the sleep clinic is, at Barnes in St. Louis).

    But I can’t seem to figure it out. Is there someplace I can go and/or call to help me understand my options better?

  2. 2.

    Richard Mayhew

    January 22, 2015 at 8:55 am

    @Tommy: First recommendation, is to talk to a broker, as they’re the ones who know the local market and have a good feel for what insurers will cover sleep treatments when pushed hard.

  3. 3.

    jibeaux

    January 22, 2015 at 9:05 am

    That makes sense, because isn’t the idea to have a broad and deep pool of people in the exchange, so that it looks essentially like any other large group of Americans and wouldn’t be demographically too different from employer coverage?
    I’ve had “spouse” coverage for a couple of years but it’s not subsidized by the (state) employer and adds over $400 a month, so this year I’m trying a silver plan on the exchange that’s not quite as generous but is $150 a month less. It may or may not be a great idea, but I do appreciate that there are choices. Years ago there were options with state employee insurance, but now there aren’t. It’s not an angle I’ve heard discussed much.

  4. 4.

    Morzer

    January 22, 2015 at 9:05 am

    “a kick in the balls claim..”

    Which can have a rather.. deflationary… effect.

    Sorry, but like Bill Belichick I just couldn’t resist.

  5. 5.

    Richard Mayhew

    January 22, 2015 at 9:59 am

    @jibeaux: In 10 years, the Exchange risk pool will be very similar to a generally representative risk pool of 18 to 64 year olds who don’t qualify for Social Security Disability and who make more than 138% FPL, but not yet.

    Right now the Exchange pool is still slightly sicker, and poorer than then the general non-disabled 18-64 population as employer sponsored coverage skims the healthiest and higher income individuals.

  6. 6.

    mpowell

    January 22, 2015 at 1:36 pm

    What do you regard as a high deductible in an HDHP? My employer offers one with max out-of-pocket of $2500 per individual and $5000 for the family. But also offers $2000 up front if you choose that over a standard deductible plan. That seems like a great deal to me. The extra money will always be there from lower premiums on the individual market as well. So the worst that you can do is $5000-$2000-deductible ($500) or $2500. It seems like you need a pretty low income before $2500 really qualifies as a kick in the balls.

  7. 7.

    Don Bashline

    January 22, 2015 at 6:26 pm

    You do great work on this site, but as a retired actuary, I do wish you’d spell it “actuarial” instead of “acturial.” Thanks!

  8. 8.

    Cervantes

    January 22, 2015 at 9:02 pm

    @Don Bashline:

    Well, he has it right in the material he quoted — so there’s that!

    Anyhow, I agree: Richard’s contributions are excellent.

  9. 9.

    richard mayhew

    January 22, 2015 at 9:51 pm

    @Cervantes: close enough… to me I don’t hear the first a

  10. 10.

    richard mayhew

    January 22, 2015 at 9:53 pm

    @mpowell: legally for a single person 1350, family 2700. Practically 5% to 7% of pretax income is more reasonable a “high”

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