One of the major challenges of the Exchanges going forward will be the morbidity of the risk pools. I am modestly concerned about the size and health of the well subsidized component of the risk pools. I am very concerned about the size and average health of the low or no subsidy components of the risk pool.
Katie Keith at Health Affairs summarized two recent actuarial studies on the impact of expanding underwriting and the removal of the federal individual mandate:
Two new analyses—issued by the actuarial firms Wakely and Oliver Wyman—examine the impact that the proposed rule, if finalized, would have on the Affordable Care Act’s (ACA’s) individual market. Both find the impact to be much higher than federal estimates, which is consistent with a previous analysis from the Urban Institute….
Wakely’s report modeled three different scenarios…Combined with the repeal of the individual mandate penalty, premiums would increase by up to 12.8 percent and enrollment in the ACA market would decrease by up to 26.3 percent.
Wakely’s findings are consistent with an analysis from Oliver Wyman on behalf of the D.C. Health Benefit Exchange Authority. Oliver Wyman found that the proposed rule alone would increase claim costs in D.C.’s individual market by up to 3.1 percent; enrollment in the city’s individual market would decline by 900 people. Combined with repeal of the individual mandate penalty, claim costs would increase further, up to 21.4 percent, and enrollment would decline by about 6,100.
Both analysis show that healthy, low cost individuals will leave the ACA market. Some will be uninsured and others will get low premium, underwritten plans. For well subsidized buyers, this won’t matter too much as the federal government eats all of the premium price hikes. For non-subsidized buyers they get whacked with massive premium increases.
States are taking action to temper some of these increases. Republican controlled Wisconsin submitted a reinsurance 1332 waiver that will hold lead to a 10% decrease in premiums compared to no other action. New Jersey’s legislature just passed a state level individual mandate and authorized a reinsurance 1332 waiver application.
These are reasonable and appropriate steps to keep some of the non-subsidized premiums from increasing even faster. They also require significant state funding.
I am curious if states that want to do something but either can not or will not find state funding can go an alternative route to provide some minimal assistance to indviduals who do not qualify for subsidies but who will not pass underwriting. Can states apply for a 1332 waiver that allows for the creation of Off-Exchange only Copper(50%) and/or Tin (40% AV) plans that are tied into the common risk adjustment pool.
There are two angles here that could provide at least incremental relief. First, slightly lower cost plans with high out of pocket expenses will bring in slightly more people who are reasonably healthy which will bring down the total average morbidity slightly. This is a bankshot.
Secondly, the ACA’s low actuarial value plans (Bronze) are a really good deal for two classes of unsubsidized people: those who anticipate very little healthcare needs for a year and those who anticipate an incredible amount of healthcare needs. For the first cohort, they are buying solely on premium. A Copper plan will be more attractive to them than a Bronze plan as the incremental out of pocket maximum is barely relevant while the decrease in premium is very real. People who know that they need lots of expensive care have a more complex calculation. They are optimizing on the minimal total cost (premiums plus out of pocket maximum) of plans with a minimally sufficient network.
Last October we looked at the Healthcare.gov counties and some variant of Bronze is the least expensive choice for most middle aged individuals who are highly likely to max out their benefits.
For someone who knows that they are facing a $50,000 claim year, the lower premiums of a Copper plan may lower total costs even as out of pocket maximums increase. IF they do, the person is better off going Copper instead of Bronze. If not, they are no worse off.
So can states file a 1332 that allows for the offering of a Copper plan off-Exchange only?
David Anderson @ Top:
Is that really a good idea? A decent argument could be made that 40% AV would be more accurately marketed as a discount coupon, not insurance.
Obamacare is Intended to be practical approach to increasing coverage in a bizarre world of 50 private insurance markets making different and changing rules subject to whim and political currents. But at some point, it becomes so complex that it is incomprehensible to all but specialists. One has then to consider a simpler system such as universal Medicare supplemented by private insurance (see Australia or France).
Was this base metals system always used within the industry to describe plans?
I agree that this stuff is getting complex, but it is hard to see any changes unless we get a Democratic Party majority in Congress.
With respect to your closing question, I think there’s a legal barrier from the 1332 “guardrails” that makes it very unlikely. This is leaving aside the timing issues with putting in such a proposal so late in this year as you noted in a post from a few weeks back.
Leaving aside that sometimes Seema Verma just shrugs her shoulder and says “screw it” when it comes to legal requirements (e.g. Medicaid work requirements and the APA), the biggest hurdle for a copper 1332 waiver would probably be 45 CFR 155.1308(f)(3)(iv)(A), AKA the comprehensive coverage requirement. There’s a procedural hurdle in the waiver approval process for that component of the waiver criteria that isn’t entirely in the Verma’s hands. The Office of the Actuary has to certify that the innovation waiver is at least as comprehensive in coverage. Since the Chief Actuary, a civil servant, is unlikely to check his intellectual honesty to serve his political masters the way Verma, a political appointee, will (e.g. the stated rationale for work requirements in Medicaid), I don’t see a way that a copper proposal could pass the comprehensive coverage requirement or, if it did, survive any lawsuits that might follow. Of course, Verma pretty obviously doesn’t care if CMS gets sued.
These types of waiver probably don’t have any issues with the other requirements for the waiver program but I think the comprehensive coverage issue is a good reason for why copper plans were mainly discussed during the ‘repeal and replace’ fiasco. The most actuarial value reduction that CMS seems to be able to get away with is the expansion of the de minimis variation thresholds for the metal levels which doesn’t reach nearly as far as copper would.
Australia’s experience is interesting. A Labor govt in the 1980s introduced an Obamacare-like scheme, then lost to the conservatives who tried to sabotage it. The resulting outcry helped put Labor back in, and the Medicare for all plus private supplement system emerged.
@Brachiator: No, the metal plan descriptions were an ACA thing.
@Consuela Bananahammock: I think I could squint through an argument that since Bronze/Silver/Gold is still available, there is no decrease in comprehensiveness of the benefit and (hand wave + magic occurs here) that the relative options for individuals buying copper are either nothing or copper it increases comprensiveness. Yeah, that is a slim counter-argument to the very good point you bring up but this is what I was thinking about last night as I was watching a hockey game whose result I really did not care about.
@Consuela Bananahammock: Love the nym.
Hey David, I have a wonky question about the intent of QLEs..can I contact you offline?
Use my Duke e-mail