2015 exchange attrition reached almost 25% from OEP to year end. We need more research on why ppl are dropping coverage. (1/2)
— Caroline Pearson (@CPearsonAvalere) March 11, 2016
This is a reminder about the individual health insurance market. It is a very churny market. There are a few key takeaways from a 25% in-year attrition rate and then a 15% to 20% switching rate during open-enrollment shopping periods.
The first is that this churn rate in the individual market is not unexpected. The pre-PPACA indivudal market had 60% churn. This makes sense as there are two major buying groups in the individual market. The first is where there is no other insurance available. The classic example would be a free lance writer or an independent consultant where the individual market is their first choice. This segment should be reasonably sticky during the course of the year. The second major segment is a holding tank until something better came along. That something better could be employer sponsored coverage, it could be Medicare, it could be Medicaid, it could be CHIP, it could be the VA.
PPACA really does not change this dynamic. The individual market is more open and accessible to more people, but since subsidies shut off when a family member is offered “affordable” coverage through employer sponsored coverage and the individual subsidies are shut off for a particular family member when they become eligible for other and usually cheaper governmental programs, “something better” is both more common and more accessible today than it was eight years ago. The big difference between today’s individual market and the 2009 individual market is that the premiums are subsidized so dropping coverage due to the lack of affordability is happening less. Throw in the individual mandate, the choice to stay covered is a lot easier today than it was in 2009 for anyone who has a pre-exisiting condition (including age) and a pair of ovaries.
The other thing that we have to remember is that the individual exchanges are a fairly small part of the insurance market. It is roughly 4% of the entire population and 4.5% of the covered population.
High attrition and rapid switching during the open enrollment period is what we see in the individual market. It is very tough for insurers to provide good population health incentives when the average length of stay for a member is under a year. Easy things such as flu shots would still be pushed, but longer term cost saving and quality improvement programs will be made available to members and doctor groups but not pushed as hard.
And that is (mostly) okay.
The big push for quality based payments, complex case management and global budgeting is at the Medicare level. There, individuals have a much longer length of stay with any one insurer and also a much higher average expense profile. Gains through not being dumb can be internalized even after initial capital/prep expenses are accounted for. PPACA is many things. It is not just the Exchanges, it is not just Medicaid Expansion, it is not just Medicare Advantage payment reform, it is not just throwing every cost saving idea against the wall to see what sticks, it is a complex piece of system reform where some reforms touch some pieces far more effectively and deeper than it touches others.
C.V. Danes
Richard, could you some posts on high deductible plans (or so-called consumer driven plans) that the corporate world seems to be pushing now? My company went that route a couple of years ago, and my real costs, in terms of doctor vists and prescriptions, have trippled. Is this a trend you’re seeing and what are the options?
MomSense
Richard, did you see the Democratic Town Hall last night? A woman asked Clinton a question about why her health insurance is so expensive because of ObamaCare. This woman was comparing her pre-PPACA plan (probably bare bones) to the cost now. She also said that she purchases insurance through a private broker currently but of course blames the cost on ObamaCare.
Richard Mayhew
@C.V. Danes: good set of questions, and this is something that I am struggling with. As I’ve stated before, I am not a huge fan of them for most people. They can be a decent deal for people who are healthy and have the ability to absorb a one time maximum deductible. For people who either have chronic conditions or can’t come up with several grand on a day’s notice, I don’t like them.
HDHP do cut care and employer costs but they don’t make people better consumers of healthcare. The information costs are just too damn high. More later
Two papers I am trying to digest and reconcile in my mind:
http://www.nber.org/papers/w21031 — Havilland et al on HDHP with no catch up care finding
and http://www.nber.org/papers/w21632 Chandra et al on HDHP and piss poor shopping
Starfish
@C.V. Danes: I saw this happening when I worked for a small business ten years ago and now some large ones are switching to this too. This is the last year that my family will be on a PPO, and the pharmaceutical costs are going to eat us when we have to switch.
This type of stuff may be a savings vehicle for an individual twenty something DudeBro who needs no medical care, but it sucks for everyone else.
A lot of things on the exchange are designed like this, and this is why you see the people who are just above the subsidy line screaming. They have to pay monthly fees for insurance that they can’t afford to use due to co-pays and deductibles on top of monthly fees.
Richard Mayhew
@MomSense: I did not see it, Charles Gaba has a good amount of research on what probably happened:
http://acasignups.net/16/03/14/important-update-wout-details-ohio-womans-story-blaming-obamacare-her-rate-increase-makes
TLDR: She is subsidy eligible but went off exchange and thus off subsidy and is paying full price.
maryQ
Tell that to my neighbor, who has decided to vote for Sanders because, you know, he’s going to institute single payer on Jan 30th or something. You see, my neighbor, here in, uh, Massachusetts, which had its own version of PPACA before many people had even heard of Barack Obama, well, my neighbor used to work for a law firm and had employer-provided insurance. Then, he hung out a shingle and had to buy his insurance on Mass Connector (again, nothing to do with PPACA, except that it made MA instantly compliant). Its expensive and he did not qualify for a subsidy right away because qualification is determined by last year’s tax returns and he made decent money last year. Working for a law firm, getting insurance, and all. Anyway, so he paid an ugly monthly premium for some less than awesome bronze plan, with high OOP for he and his wife and their three kids. And therefore, Obamacare SUX! So..
maryQ
@MomSense: Yep-see my comment about my neighbor. And, you know, he’s a pretty smart, progressive guy.
C.V. Danes
@Richard Mayhew: @Starfish: Thanks. Based on my experience, I agree that this option is cheaper for those who never get sick, but more expensive for everyone else. Personally, I don’t consider it to be health insurance so much as catastrophic coverage. Health savings on the ‘consumer’ side occur mostly because people do what those who don’t have coverage do: they don’t go to the doctor when they’re sick, and they’re less likely to pay for preventative care. Hard to see how this results in improved health outcomes, unless the only outcome you care about is short-term cost over long term health.
Case in point, my wife’s asthma medication went from $90/quarter to $750/quarter. I just had to pay $1700 for her annual mammogram, and so on. Fortunately I can afford it, but not happily.
My company, which is one of the largest IT companies in the world, used to provide this as an option, but since they phased out the ppo, it’s now the only option.
Fair Economist
Didn’t you get the memo from the Congressional Republicans? Complicated is bad, everything has to be simple.
Unless it’s having to read a 20 page legal contract to check your email in a coffee shop. Then you don’t want to interfere with the free market.
MomSense
@Richard Mayhew:
You would be proud of us, Richard. We were discussing the situation in a relatively informed way on the debate thread the other night. I don’t recommend you go through that thread because we were also engaged in Republican potty talk. I may have started it even.
Richard Mayhew
@MomSense: you, never :)
Fair Economist
@Richard Mayhew: My husband and I were manipulated into a high deductible HSA account by a substantial subsidy from his employer. The tradeoffs were complicated, but by my calculations the HSA was usually a slightly better deal than the PPO, so we switched. However, it seems that the price negotiations in the HSA high deductible account aren’t as good as they were for the PPO (allowable amounts have gone up, especially for drugs) so I’m a lot less sure which is better. I have no way to compare the allowable amounts, so I really can’t know.
I assume HSA’s have the same motivations as 401(k)s: the top management loves them because they benefit more from the tax deduction, so they shove the whole company into them. The 401(k) they need to shove people into because of the legal limits on the ratio of contributions by highly-paid individuals to those of everybody else. I’m not sure why they so want everybody on an HSA plan but they obviously do.
Tom65
I really wish we could get out the mindset that health care is a consumer item like car insurance; a fifteen minute call to GEICO isn’t going to help when you’re looking at a $15,000 bill for a broken arm.
Roger Moore
@C.V. Danes:
How is that PPACA compliant? I thought all health plans had to provide $0 out of pocket preventive care, which damn well ought to cover mammograms.
Steve in the ATL
I have a corporate job so insurance hasn’t been an issue for me in a long time. I know un- and self-employed people who now have insurance who didn’t before PPACA. Some are Obamacare evangelists and some complain about non-stop.
On FB, I see a lot of bitching about what a colossal failure it is. That has always been the case from the right wingers, but now I’m seeing from the Bernistas as well. So only Hillary supporters don’t hate?
So my question is: what do knowledgeable people, such as people in the industry or non-partisan experts, think about the PPACA?
Davis X. Machina
This is why I remain unconvinced that whether or not the feds provided a public option on those exchanges was in fact the biggest political issue in the young century.
C.V. Danes
@Roger Moore: Seems that everything is out of pocket until the yearly deductible is reached, which in my case is $2600 because I’m on the ‘gold’ plan, after which it more or less reverts to the ppo coverage I had before. For me, the monthly insurance contribution is about the same as before, plus an extra $100/pay period I put in an HSA to cover the annual deductible.
FlipYrWhig
@Roger Moore: My wife’s experience with mammograms and insurance, and I hope I’m remembering this correctly, is that they tend to bill $0 for the preventive mammogram, but if they see anything they need to look at, they’ll bill for a diagnostic something or other, because it’s no longer deemed preventive.
Raven Onthill
@Roger Moore: What the ACA calls “preventative care” is what everyone else calls “screening tests.” These are high false-positive tests which refer people to other testing which is billed at the plan rate. Also, if you already have a condition in treatment — high cholesterol, for instance — it is no longer “preventative care” to monitor it.
ACA “preventative care” is basically a way to sell additional tests which are usually unnecessary.
Ken
As a health insurance user, no doubt I’ve contributed to churn lately. My wife and I had couples coverage through the New York Health Exchange.
1. At beginning of January, we (wife & I) switched coverage from Insurer A to Insurer B.
2. At beginning of March, we left Couples/Insurer A/Health Exchange, because;
3. I became eligible for Medicare on March 1st; I took Insurer A’s Plan B and my wife took single coverage from her employer.
The ACA has been better than sliced bread in my estimation. From its inception, my wife and I were getting better coverage and at a lower price than we could through other options (local CoC, in this case; I am self-employed, so..).