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You are here: Home / Anderson On Health Insurance / Expanded Catastrophic plans

Expanded Catastrophic plans

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It seems that Senators Alexander (R-TN) and Murray (D-WA) have most of an agreement together on appropriating CSR funds and tweaking elements of the ACA.

One of the tweaks is expanding access to Catastrophic plans. Catastrophic plans can not currently receive premium subsidies. I had been scratching my head on this for a couple of days as Catastrophic plans are currently sold to people under 30 or have a hardship exemption. It has a similar to Bronze actuarial value. A standard Catastrophic plan has $7,150 deductible with 3 PCP visits covered before the deductible has to be paid.

This is a risk adjustment play to lower premiums.

Rebecca Stob, a health insurance actuary who wrestles with risk adjustment every day lays out the mechanical implications:

Right now in the ACA there are two distinct risk adjustment pools. The catastrophic pool shifts money between catastrophic insurers. The money is mostly covering healthy and young people. The other risk adjustment pool is the Metal pool. Bronze, Silver, Gold and Platinum buyers are all shifting money amongst the plans. Typically Bronze plans will send a significant proportion of total premiums into the risk adjustment pool while Gold and Platinum plans will be net recipients of risk adjustment funds.

IF the Catastrophic concession is to open up Catastrophic plans to all ages and includes APTC subsidies while not integrating Catastrophic into the common risk adjustment pool, we get a quasi-split risk pool. Very few people will buy Bronze plans as Catastrophic will be cheaper as the Catastrophic plans won’t be sending money to the Silver-Gold-Platinum plans while Bronze plans have to cover their own medical costs plus kick money into risk adjustment outflows. Few Bronze buyers means the Silver-Gold-Platinum plans all get more expensive as they will be receiving far less risk adjustment money coming from Bronze plans.

The Catastrophic pool will still be fairly healthy as the $7,150 deductible is scary to anyone with a chronic condition but premiums will be low as the pool just needs to cover their own costs without funding risk adjustment outflows to cover sick people in Silver-Gold-Platinum.

From a distributional point of view, this is good for healthy subsidized and non-subsidized buyers, no significant change for subsidized CSR buyers, slightly worse off for subsidized Gold and Platinum buyers as the relative price spreads will increase, and bad for non-subsidized metal buyers. It might be a net improvement for non-subsidized but very high cost buyers with severe medical conditions as they were always guaranteed to hit the Out of Pocket Max in any scheme but premiums might drop enough.

Update 1 If I had to vote on this legislation, based on the reporting of the past couple of hours, and with the proviso that I actually need to see the text, I would be a yes with at most modest grumbling.

Reader Interactions

31Comments

  3. 3.

    randy khan

    It’s all fun and games until you try to get 218 votes in the House.

    It seems likely something like this can get through the Senate, particularly since you’d figure that Murray has been communicating with Schumer along the way, but I have a hard time figuring out how you can cobble together enough votes in the House, given the number of Republicans who would rather die than do something to tinker with the ACA.

  4. 4.

    p.a.

    The net modeling effect would be to siphon more healthy people into Cat plans which don’t pay into the metal pool, yet the net effect is a wash? If your review is accurate, there’s significant use of qualifiers re:what happens. Should any Dem get behind this? For 2 years of subsidies when 2018 Senate numbers are bad for Dems? Then what?

  5. 5.

    dmsilev

    @randy khan: You don’t need too many GOP yes votes; you just need Paul Ryan to be willing to give it a floor vote. That’s probably the biggest hurdle. Once it gets to the floor, 1/4th of the GOP plus most of the Democrats would be enough to pass.

  6. 6.

    khead

    So, catastrophic shit plans? Really? Not sure I am buying this. And I am wondering why Democrats would sign on. That term “fairly healthy” is doing a hell of a lot of lifting in your post.

  7. 7.

    Barbara

    @khead: The are catastrophic plans but still regulated under ACA. They are being sold now, they just aren’t subsidized.

  8. 8.

    David Anderson

    @khead: Catastrophic Plans are effectively Bronze plans with funny risk adjustment and subsidy rules right now.

    They are not ideal for everyone. They make sense in some circumstances. If someone is earning over 400% FPL and relatively healthy, they can make a lot of sense. If they lower the premiums after subsidy so that it is attractive to someone who is currently uninsured and making 300% FPL, it might get that person covered.

    I’ve never been a huge fan of high deductible plans for everyone but they have a place. And if the price of getting Republicans invested as ACA stakeholders is a tweak that lowers the premiums of high deductible plans while holding most subsidized buyers harmless, I will make that trade every day of the week.

  9. 9.

    rikyrah

    @dmsilev:

    @randy khan: You don’t need too many GOP yes votes; you just need Paul Ryan to be willing to give it a floor vote. That’s probably the biggest hurdle. Once it gets to the floor, 1/4th of the GOP plus most of the Democrats would be enough to pass.

    Tis true. Must get rid of the pedophile rule.

  10. 10.

    jl

    ‘Thanks for a very informative post.
    And thanks to your recent posts, I think I am getting a handle on how the states were going to jiggle things to handle the loss of CSR funds.
    So, I figure it out just as the info goes out of date? I should have hit the internets sooner on that.

  11. 11.

    khead

    @David Anderson:

    Pretty sure I get it. But subsidizing catastrophic plans seems to me like a backdoor way to cause a death spiral and put the blame on the gov’t. You’ve moved from “fairly healthy” to “relatively healthy”, but it is still the same issue though. You really don’t know how that risk pool is gonna shake out yet. I would guess we disagree about how much of “a place” those high deductible plans have now. Also, I think that no matter how much the GOP is “invested” the blame will still land on Democrats – because they are the prominent endorsers of the subsidy. Would be happy to be wrong about all of this.

  12. 12.

    jl

    @khead: My understanding is that under the proposed deal, there will still be no cross-subsidies between catastrophic and the Metals. So any death spiral in the Metals would not be due to subsidies, but due to flow of very risk-adjustment-wise profitable healthy older people from Metals into catastrophic plans. So, I agree with you on the kind of danger, but not sure you have the correctly ID’d the mechanism of how it would work.

    An important issue is how much the inherent benefit design of a catastrophic plan would scare away even relatively healthy older people. Even the healthy among the older adult population are in some actuarial sense, much frailer than younger people.

    I hope David has the time and the stomach to wade through the text, when it becomes available, and posts some updates.

  15. 15.

    Raven Onthill

    There are reportedly other parts, including the extension of short term plans, and allowing states to waive coverage requirements. All the Dems are getting from it is two years of CSR payments. Looks to me like Sen Murray has given away the store again.

    If this passes, it will probably kill my friend with cancer in Texas.

  16. 16.

    randy khan

    @dmsilev:

    You don’t need too many GOP yes votes; you just need Paul Ryan to be willing to give it a floor vote. That’s probably the biggest hurdle.

    And will he risk his speakership to do that without at least a majority of GOP votes? It seems unlikely to me.

  18. 18.

    Another Scott

    @David Anderson:

    If they lower the premiums after subsidy so that it is attractive to someone who is currently uninsured …

    That’s the rub, isn’t it?

    How much of a reduction in premiums could be expected for one of these subsidized catastrophic plans compared to the status quo “cheap” but more comprehensive Bronze (or affordable Silver) plans? 20%? 50%?

    My worry is that Donnie and Price (whoever replaces Price) and the Teabaggers still want Obamacare gone. They’ll still throw monkey wrenches into the system if they can. And if premiums still end up going up 10-20% a year after this bill passes because of their actions (even after the subsidy tries to cover much of it) then it would seem like we soon (< 5 years) would be back where we started – too many people not being able to afford an Obamacare policy that meets their needs.

    I understand that politics is the art of the possible, but I really don't see what these Catastrophic policies are doing to address the problem in a meaningful way. I worry that Democrats will vote for something that was claimed to be bipartisan and "fixes the problem of XXX" and 2 years down the road it blows up and Democrats get blamed "see, they're all the same" and we aren't able to vote-in people who would actually work hard to fix the real problems with the system.

    But I'm like that – I worry.

    Thanks.

    Cheers,
    Scott.

  21. 21.

    Gvg

    @dmsilev: I can’t see most of the democrats being supportive of this. One democrat does not imply the rest are fools. They have stuck together pretty well since mr. Disaster was elected.

  22. 22.

    Frank Wilhoit

    “…with the proviso that I actually need to see the text…”
    A proviso that few Republican legislators have recently asserted.

    People want (okay, they think they want, which is the same thing) cheap insurance, never mind the fact that you don’t get what you don’t pay for. As in so many other markets, the vanishing minority of intelligent consumers cannot have what they need because of the race to the bottom to serve the majority.

    Someone needs to dig out the Monty Python sketch with the clergyman at the insurance office, where the fine print that he did not read is being explained to him: the reason his car insurance is so fantastically cheap is because the policy states that no claims will be paid.

    The insurance industry may be whining about certain aspects of this, for show or leverage; but they are eating it up, because it moves towards a net reduction of accountability, which is all that they (or any other Republican constituency) have ever really wanted.

  25. 25.

    Raven Onthill

    Just called Senator Murray’s office. The staffer said there is no public text yet, I should watch the Senate website, and that it could be several weeks.

    So right now, this is a pig in the poke. We’ve no idea what’s in it except for copper plans. I suspect Charles Pierce is probably accurate. I would trust that man to ferret out a rumor. But so far, all that there is is a handshake deal. So we’re going to have to wait and see.

  26. 26.

    Raven Onthill

    Slavitt says: “If language changes, my view could change. Details matter.”

    Also, “Language due out on Thursday.” I think senator Murray needs to train her staffers better.

  28. 28.

    Raven Onthill

    @dr. bloor: she also made a bipartisan deal that cut off my unemployment when it hurt, back when.

    Only problem is her opponents are even worse. Astonishing what cranks the Washington state Republican Party comes up with.

    So I’m waiting to see.

  29. 29.

    Raven Onthill

    “Bipartisanship” when one party is fascist means compromising with fascists. Do you wonder that I am skeptical of this deal? I’m a cynical old bird, and I expect there will be a number of poison pills in anything that actually passes. I hope this will work out better than I fear; the ACA itself has, after all. But given the factions involved, I have my doubts.

  31. 31.

    Raven Onthill

    It appears Pierce was wrong. Good.

    I wonder how this plays out with Trump’s already-ordered regulatory changes.

    I’m not sure I understand all the implications here, though with Tom Price and the Republican state governors, I expect some of the waivers approved with be rather dicey. In particular I note that this allows a Republican governor in a state to make changes in the state system without the approval of the state legislature, which could hurt a lot.

    It makes the already miserly individual insurance system even moreso. People are bad at judging risk and, in the USA, apt to gamble. I expect that will lead to more medical bankruptcies (does anyone have any data to the contrary?) Don’t retire early.

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