Andrew Sprung at Xpostfactoid highlights a challenge of choice in New Mexico’s new state based marketplace for ACA insurance buyers:
At an income of $24,000 (a bit below 200% FPL), in the same Albuquerque zip code, a 40 year-old will pay $16/month for lowest-cost silver plan (deductible $1200), $33/month for the benchmark silver plan (deductible $500), and $0 for the four cheapest gold plans available — one of which has a deductible of $750. Some will go for gold. ***
That may look sensible to many, but it obscures a major advantage of high-CSR silver: a much lower annual out-of-pocket (OOP) maximum. For the two cheapest silver plans, the OOP maxes are $2200 and $2500, respectively. In the four zero-premium gold plans, the OOP max ranges from $4500 (unusually low for gold plans nationally) to $8700 (the highest allowable).
We’ve talked a lot about dominated plan choice on Balloon-Juice and in a good chunk of my recent research. Dominated choice occurs when we have two options, A and B with a set relevant comparison points. And Option A is either the same or better than B on all relevant comparison points but people still choose B. This is an expensive mistake.
However the scenario that Andrew outlines above is not a dominated choice scenario. It is just a messy choice scenario. And messy choice is far more common on the ACA marketplaces than dominated choice.
We should make some assumptions about spending distribution and attribute prioritization. We know that most individual market buyers are buying overwhelmingly on premium. Most people barely touch the medical system.
The median individual in the US has well under $500 in allowed claims. They have even less in claims that could potentially be subject to cost sharing as some claims are preventive services like flu shots and annual PCP visits.
So the choice challenge here is does a person think that they will have enough claims in the following year where the differences in out of pocket maximums are relevant? If someone has one PCP visit, a cheap antibiotics prescription to clear up a case of pink eye, and an urgent care visit because their knee is making really funny noises, the out of pocket maximum is not relevant. They are not out of their deductible in any of those plans. At that point, the relevant attributes are premium and network. However, if someone thinks that they are likely to have a medium size claim experience like an uncomplicated pregnancy next year, then the out of pocket amount and benefit design likely matters a lot.
The ACA choice space, is, in the best of times, confusing and complex. This is an area where enhanced navigation support, decision support and likely pruning of the choice trees would lead to aggregate improvements in choice quality and satisfaction with the system.
No name
David, I’d appreciate some advice…currently on ACA; moving out of state in January…when enrollment opens, should I sign up in my current state and switch when I move, or just sign up in the new state? Both states have their own exchange if that makes a difference. Thank you!
ProfDamatu
Not the point of the post, I realize, but…holy hell, even with CSRs, those OOP maxima are going to be pretty hard to afford for that $24k/yr person.
David Anderson
@No name: I would contact a navigator for the best advice. My first thought would be to sign up for coverage in the state that you will be living in January. Or at least try that first and let them say no.
No name
@David Anderson: Thanks David. I will do this.
Matt
IMO this demonstrates the utter silliness of the idea of a “market” for health insurance – for the customer making $24k/yr, whether the surprise expense is $2200 or $8700 is likely immaterial. They’re on the express bus to medical bankruptcy either way.