There is now talk about a bi-partisan deal in the Senate on minor, technical fixes to the ACA. We need to be careful and think through the mechanics of the changes.
Axios has the Republican wish list:
Funding for the Affordable Care Act’s cost sharing reduction subsidies, which are currently being paid by the administration.
A reinsurance program that would help insurers pay for high-cost enrollees, blunting the impact of these enrollees on overall premiums.
Expanded state innovation waivers, which would allow states to waive some of the ACA regulations, like essential health benefits. (A similar proposal was part of the Senate’s repeal-and-replace bill.)
Allowing everyone in the individual market to buy plans that only cover catastrophic care. The ACA limits those plans to people younger than 30.
The first two items make perfect sense to me. Expanding the innovation waivers is something that I really need to see the language and the intent. I could see an explicit proposal that allows states to elect to link their Section 1115 (Medicaid) with 1331 (Basic Health Plan) and 1332 (ACA Innovation) waivers as long as the Office of the Actuary rules that apply to 1332 then apply to everything involved in a linked waiver. This could be contentious but there is grounds for an agreement somewhere.
The one big conflict I see is the last item. Catastrophic coverage is roughly 57% actuarial value coverage with minimal initial benefits (I think it is 3 PCP visits) and then a $7,000 deductible. It is sold on and off Exchange with severe limitations. The strongest constraint is that subsidies can not be used for it. The second constraint is that except in very limited circumstances, only people under the age of 30 can buy it. There is another mechanical quirk to the Catastrophic plans — they are a distinct rating risk pool. It is a carve out of a small, young population from the general single risk pool.
Catastrophic has never been a popular plan. In 2017, 1% of all on-Exchange purchases were for Catastrophic. Catastrophic is not offered in all counties. Healthcare.gov covered 2,722 counties in 2017. 340 counties did not have an offered Catastrophic plan. Another 515 counties have the least expensive catastrophic plans being more expensive than the least expensive Bronze plans. Bronze plans offer slightly better benefits and access to subsidies.
I think the intent of this bullet point is to offer cheaper plans to healthier buyers. From there, the logic would be that this would make the risk pools healthier and thus lower average premiums for non-subsidized buyers.
There is a major problem. The Catastrophic risk pool is segregated from the general risk pool.
If the goal is to actually get cheaper policies sold, then going to a “Copper” model as proposed in 2014 by former Senator Begich (D-AK) would make more sense.
Right now, minimal essential coverage for people over the age of 29 and those not facing a hardship is a Bronze plan. That plan covers 60% of the average expected acturial cost. All Bronze, Silver, Gold and Platinum policyholders from a single company in a single state make up a unified risk pool. The metallic band plans are subsidized by tax credits. Minimal essential coverage for people 29 and younger is catastrophic coverage which covers less than 50% of the expected actuarial cost. Catastrophic coverage has its own separate risk pool and is non-subsidized.
The copper plan would be a redefinition of essential minimum coverage for most people from 60% actuarial value to 50%. This is a 16% decrease in expected coverage value, and it is getting insurance to the point where it is truly hit by the bus coverage. The 16% decrease in coverage will probably lead to an 18% to 20% decrease in premium pricing if the pricing differentials between the same insurer/same plan design Bronze-Silver-Gold-Platinum hold up. To get that decrease in actuarial value, the maximum out of pocket levels will increase from the current $6,350 to between $8,000 and $10,000 (I’m not a pricing expert). It is a trade-off between lower guaranteed monthly payments and the possibility of much higher oh-shit payments. That is a legitimate trade-off for insurance.
Splitting the risk pool any more by pulling out healthier individuals is one of the last things that should be done to the ACA. Keeping healthier individuals in the general risk pool with Copper plans that are eligible for subsidies will be more effective at achieving the goal of offering lower cost policies to the non-subsidized market without destabilizing the risk pools.
“Splitting the risk pool any more by pulling out healthier individuals is one of the last things that should be done to the ACA.”
David, I don’t understand why you (or any Democrat) expects to get a good compromise from the Republicans on health care. They hate the ACA and any compromise is going to have to undermine it in some way to be acceptable to the Republicans. So to get a bipartisan solution, especially to get it past the radicals in the House, Democrats will have to settle for something less than what we have now. Last time I remember Sen. Murray making a bipartisan deal, on unemployment insurance with Rand Paul, thousands lost their unemployment insurance. I wonder how many will lose health care under a bipartisan compromise?
And when people come to vote, and complain that they lost their health care, the Democrats won’t be able to say it was all the work of the Republicans.
When I first hit the individual health insurance market in the 1970s catastrophic coverage was the ONLY coverage available for young single women. So forty years later, the Republicans want us to go full circle.
@Raven Onthill: because what is the counter-factual?
That is the key question. Mine is that complete sabotage is the counterfactual. So I am looking at improvements from that baseline.
You are looking at a counterfactual of the ACA being run by the Obama administration with the intent of making it work as well as possible.
Two very different counter-factuals that lead to two very different analysis.
Why isn’t #3 a deal-breaker as well?
If we don’t hold the line on Essential Benefits, aren’t they going to hollow out the coverage altogether, and sell shell-insurance that doesn’t do anything?
Welp, it looks like Anthem is pulling out of the exchanges in most of California. I now live in a one-insurer county as far as the exchange goes.
One interesting note: “Blue Shield is expanding its HMO product to a larger part of this region.” I’m not sure if that includes this county and Santa Barbara County (in both of which they will be the sole exchange insurer) but as pre-ACA their HMO coverage was significantly more expensive than their PPO coverage around here this could be an attempt at a silver gap strategy given the otherwise tight restrictions imposed by Covered CA.
“…Splitting the risk pool any more by pulling out healthier individuals is one of the last things that should be done to the ACA….”
Draw the conclusion. The strongest argument for “single-payer” (or whatever you would prefer to call it) is the ability to define a single risk pool consisting of exactly the human inventory of the country. Any risk segmentation creates (very) short-term opportunities for risk arbitrage but quickly becomes destructive to the “market”, adding more perverse incentives over top of all the structural perverse incentives. This is why no private entity can ever have compatible incentives in this field. The only way the system can function is if massively countervailing regulation is imposed to swamp the perverse incentives.
What about all the Ds and a handful of Rs forging a compromise?
That would be my question for David as well.
I do not like the last two at all. Those catastrophic plans just mean that people wait to seek treatment and end up much sicker by the time they do. Also it leads to the same problems with uncompensated care which drive the prices of health care up for everyone.
@oldster: Because this one is so vaguely phrased that it could mean coordinating 1332-1115 waivers or it could mean gutting EHB. If the actual language is gutting EHB, then hell no. If it is either a figleaf or a meaningful improvement on the ability of a state to coordinate their health care delivery and finance systems, then it is is worth talking about.
@MomSense: Right now Catastrophic is fundamentally similar to Bronze plans. I’ve said it before and will say it again, very high deductible plans are appropriate for some people in some cases. There are strong constraints in that the people must have both good a priori health, reason to be strongly believe that they will continue to have good health and sufficient resources to be able to come up with a $7,000 or $10,000 deductible. This is not a huge population but it is a real population.
Honestly, this year if I had to buy on the individual market, I probably would have gone Bronze because I could afford the risk if I got snake-eyes on my health AND I’m reasonably healthy so the odds would have been in my favor.
Dear Democrats in the Senate: Stop trying to kick the football already!
David, this morning I heard that Blue Cross/Anthem is pulling out of 16 of the 19 regions in California. (Hearing errors possible.)
Back when we were buying our own insurance, before aging into Medicare, my spouse and I purchased from BC/A because it was the only company offering a policy in our area.
The. Only. One. And this was the case before the ACA became law.
Off the top of your head, might it make sense for the state of California to create its own “public option”? We took a run at state run single payer but that was a mountain too tall. Perhaps a state run insurance company that (starts out) offering coverage in areas served by less than two private providers.
(I’ve already contacted my state senator and representative. If you have some words of wisdom I’ll pass them along.)
Villago Delenda Est
Thank you, David!
I don’t trust Tom Reed as far as I can throw his bloated carcass, so my worry is that if we let the discussion start, it will end in “gutting EHB” rather than “meaningful improvement.”
Do I need to add this to my comment so that David will see it?
If so, added.
David, comment #12….
@Bess: Let me look into this before I have an opinion
@David Anderson: Thanks.
I’ll check this thread later. (The @ stuff does not reach me here in primitive lands.)
@David Anderson: “Mine is that complete sabotage is the counterfactual.”
Complete sabotage, I believe, is nearly inevitable. Kidnappers often kill the victim even when the money is paid. There is no indication that Trump will honor any agreement that does not involve a complete erasure of Obamacare. Why wouldn’t Donald Trump and Tom Price just let Congress pass whatever and then sabotage it anyway?