I’m wrapping up the week on spread and level sensitive buyers with a the idea that we should expect a significant shift in purchasing patterns of individuals who newly become level sensitive buyers.
Right now, the non-subsidized market is heavy on Bronze and Gold plans but light on Silver. The subsidized market is heavy on Silver as those plans have Cost Sharing Reduction (CSR) subsidies attached to them.
A pair of 62 year olds earning 600% FPL in reportable income for 2021 could easily spend $15,000 or more just in premiums for the cheapest bronze plan under current law. That would buy a plan with an $8,500 individual/$17,000 combined deductible in Chapel Hill, North Carolina. The cheapest silver and gold plans have $18,000+ premiums and lower deductibles but same out of pocket maximums as the cheapest bronze plans.
Moving to the Warner/Underwood subsidy table where the maximum applicable percentage of income for anyone to buy the benchmark silver plan would be 8.5%, there options change dramatically. The cheapest Bronze is now a zero premium plan. The cheapest Gold and Silver plans have $700-$750 per month premiums for a total of ~$8,400 in premiums.
This is a $10,000 swing in annual costs.
$10,000 should be enough money to change decision-making. Some of the different decisions will be bringing people who are uninsured into the insured universe via low premium plans with very high deductibles and cost-sharing. Some of the decisions may be a shift from Bronze that provided hit by a meteor coverage to Silver or Gold plans with lower cost-sharing where some of the money currently spent on premium could be put into a tax advantaged savings account and the rest spent on another road-trip to visit the grand-kids a time zone away.
We know that the on-exchange market is fairly sticky once someone is in it. Choice inertia is real. Upcoming research that I’ve written with Petra Rasmussen showed that the huge price shock of Silverloading still left a lot of people in dominated plans when those people were not actively shopping. However, Dr. Rasmussen and her colleagues at UCLA also showed some increased plan switching behavior in 2018 as a response to Silverloading as a relative price shock with movement out of Silver and to Bronze and Gold. A new working paper by Brot-Goldberg et al found that low income individuals in Medicare Part D were not responsive to default quality (good or bad) in their switching behaviors.
So given this background that is mostly focused on folks earning under 400% FPL with a very large subgroup earning under 200% FPL, should we expect incumbent off-exchange buyers who currently do not receive subsidies to continue to stay in plans that are not eligible for subsidies and if they do switch to the subsidized portion of the market, do they change their plan choices as relative prices will be scrambled and absolute net premiums will have collapsed?
600% FPL doesn’t mean much to me. Looking it up, I think it would be $103,440 / year for 2 people. So we’re talking $15,000 just for premiums which yeah – IMO unless those individuals know that one or both will use a lot of services is enough to price them out of the market and leaving them taking their chances until they turn 65. While the income level sounds generous, it’s not really that high in many places; especially given all the other commitments people get themselves into.
I don’t know if this is off topic. But I’m motivated to get my 55 year old brother signed up for health insurance during this window that Biden opened up. He’s never been insured before.
Lives in Juneau, Alaska, single. Probably earns in the $30k range but I’m not actually sure as he is self employed and runs his own business and I’m not sure how clever he and his accountant are in hiding income and such.
Based on what I’ve picked up here it sounds like the Silver plans are usually the sweet spot. There is only one hospital in Juneau so I’m not sure how much choice of plans there are.
My wife and I have never had to do this as we have always had employer-based insurance our entire lives. So this is all new. Can one research the plan options for someone else in a different location without knowing all the specifics of their income?
@Kent: Yep, go to Healthsherpa.com, enter the zip code and guesses on income etc and then look at plans and options.
Silver may or may not be best — esp if he makes more than 200% FPL as that is when the Silver benefits fade out fast. It will really be a question of his risk tolerance, his health and his cash flow
If you have any questions, e-mail me.
Choice disfunction: Limit choices and automate part of it. For example, an automated list of plans (between 3-5) similar but less expensive can help with the stickiness. Empowered to manage everything in our lives is exhausting. I would rather pay you, David, than do it on my own. We have forgotten why we have experts. DIY is not paradise, it is hell.