I’m working on a couple of different manuscripts and I am involved in a few side discussions on the question of how do enrollees experience value when they purchase ACA health insurance plans?
Actuarial value is a technical concept that attempts to describe one form of value — roughly what percentage of allowed claims from a standardized population distribution does an insurer pay through either premiums, reserves or Wall Street start-up money? Bronze plans have the insurer pay about 60%, Silver plans have the insurer pay about 70%, while Gold and Platinum see the insurer pay about 80% and 90% respectively. This is a good short-hand. It is a very imperfect short hand as it is based on standard populations which really may only have a chance to be standardized in large states and it is based on national average cost profiles. An insurer with a low cost profile in the same market covering the same people will have a lower effective actuarial value than an insurer with a much higher cost profile.
Where I’m stuck right now is thinking about the mirror-image of insurer side actuarial value — individual side actuarial value.
I’m stuck on two parts. First, actuarial value is a collective number. It applies to hundreds of thousands of people. It never applies to a single individual. Given the differences in claims probability at the individual enrollee level and differences in benefit design, it is quite plausible that a Bronze plan with 60% AV is a better value than a Gold plan with 80% AV even before we look at premium differences.
Secondly, AV is mostly an insurer side concept. Individual side AV is a residual of the insurer side concept. We would think that the individual AV for a Bronze plan would be about 40%. I don’t think that is right, even accounting for the standardized population instead.
That 40% is what the insurer does not pay.
That 40% is not what the individual pays.
That 40% is made up of a lot of different components:
- Individual cost-sharing (deductible, co-pays, coinsurance)
- Third party payments of cost-sharing (Ryan White AIDS programs, kidney disease groups etc)
- Co-payment coupons for drugs
- Bad debt ultimately paid for by the provider groups
There may be a few more things at play, but those would be the big ones in my mind.
There is a wedge between what the insurer expects the individual to bear as part of the actuarial value of a plan and what the individual actually experiences. I’m not sure how big that wedge is, nor how important that wedge could be.
We need to really think more about a standardized way of presenting individual level insurance value to people as I don’t think the insurance side “actuarial value” model is all that useful in the production of a fuzzy residual.
MattF
One issue I see right away is that extreme values matter a lot for individuals. This suggests that different quartile or something-tile segments of user populations can have very different outcomes.
Starfish
If people are paying a monthly cost, intellectually, they expect to get something so when they are also paying full negotiated price when they go to the provider, they are feeling like they are getting nothing for the insurance fee that they pay every month.
That negotiated price looks like a real cost as opposed to the ridiculously high price that the medical entity actually bills.
Starfish
The paying entities see lack of use as a good thing when lack of use can mean people are neglecting their health. Like some car insurance companies cut you a check for not getting into a wreck, health insurance companies should bribe you to go to your annual physical if you have not scheduled it in the year that you are on their plan. If you schedule AND attend your annual physical, then you get something. Hopefully, this will nudge men to doing basic preventive care.
trollhattan
Mostly OT but what are your thoughts about John Oliver’s new Johnny Care?
“Health care sharing ministries” were not something I knew about and at the same time, the least surprising religious scam since MLM vitamins.
David Anderson
@trollhattan: I love John Oliver and his writers —
Lobo
Individual value is something I characterize as the 3-C’s: cost, coverage, and concern(administrative hassle). As in linear programming you cannot optimize individual factors and the overall solution. Tradeoffs happen to optimize the whole. When looking at this people want predictable, reasonable costs with a decent amount of coverage with minimized paperwork. I love our “high” deductible plan because even though it was 10k out of pocket, the savings from picking this plan allowed the company to subsidize a good part if it. The first x was out of pocket. After that it was all on the insurance company. It was so administratively easy with not that much added $$ cost. I didn’t have to worry about the 80/20 pay. I think it hit the sweet spot where we and the company paid health costs most years, but it was there when we had an heavy healthcare year. I also like this plan because I think it is easy. Simply subsidize the out-of-pocket cost of those less fortunate and their premiums, e.g., a sliding scale.
Ruckus
David, you work with this and write about it, a lot. You see the nuances about the concepts and definitions of terms that just make most of our minds spin or go completely blank. I’ve often wondered if a lot of the language and concepts are there for precisely that reason, to make our minds go blank, and write a check. The level of due diligence one has to do to decide what policy they need and what policy they can afford and what policies they should run away from as fast as possible, is that really designed to get us good coverage or to confuse us beyond anything other than signing that check?
I have stated here before that I can and do use the VA. The care is good, the structure works and there is very little to deal with monetarily. If I had to choose, right now I’d likely go Kaiser HMO, because from what I’ve seen, the result is about the same medical care as the VA. I paid up front with my military service for the VA, and I think I got a good deal. When President Obama got the act signed I looked at what my options would be in CA and I have no idea how I would have made a decision. Are people really doing the work necessary to make a good decision or just going with the cheapest, or getting assistance to chose?