A recent paper in the American Journal of Managed Care led by Vicki Fung estimated the distribution of ARPA subsidies by income bracket for off-exchange buyers. Their top line finding was the benefits of subsidizing households over 400% FPL were wildly dispersed:
The median annual PTC in 2021 for eligible off-marketplace enrollees was $311 but varied greatly by age, family or individual plan, and household income (5%-95% range, $0-$14,836).
However there was a secondary finding that has been bugging me since I read the paper:
We know that choosing health insurance in the ACA’s marketplaces and other American individual choice markets (Medicare Advantage, Medicare Part D, Medicaid managed care etc) is challenging. People routinely make expensive choice errors that are fairly persistent. We know that the program knowledge elements are both costly and obscure. We also have a huge industry of assistors who are supposed to have the ability to acquire that costly detailed knowledge and then translate it, for a fee, to people who are rationally ignorant of the details. In the insurance industry, we call those people brokers and agents.
When I was looking at dominated plan choices with Petra Rasmussen, we found that people who got help versus those who did not barely had any difference (unadjusted) in picking a dominated plan. Picking a dominated plan is wicked expensive and objectively an inferior choice relative to picking a non-dominated plan. This is a clear choice error. It is an error that a broker or an agent should never advise. Yet, it happened fairly frequently. I question the effectiveness of help in this choice space.
The new finding by Fung implies that least ~40% (69%-(1-51%))/51%) of the people who received broker help were not aware of a critical programmatic fact — subsidies were only available to people who bought plans categorized as “on-Exchange” instead of “off-exchange”. This is an important fact as buying on-Exchange for people who estimate that they are likely but not certainly going to earn too much money to qualify for subsidies means they are giving up a nearly free option for subsidies that gets triggered if they modestly overestimated their income. Now this case does not apply to everyone who buys non-subsidized, off-exchange coverage. A consultant making 1900% FPL with a 500% FPL termination clause in their contract could remain rationally ignorant of this fact even if they are being advised by a broker.
This sub-finding is making me go “hmmmm” even more on the quality and value of assistance on plan choice.
Wapiti
If a broker or agent is recommending a clear error, one assumes they have their reasons. Though it could be lack of training. Or blindness to the needs of people not like themselves, I guess.
Interesting (irritating) problem. My solution is always more government involvement.
Another Scott
Getting/giving bad recommendations seems to be a common feature of human systems. Not to hijack the thread, but I’m reminded of the mailers that I would get from SallyMae about consolidating my 4 college loans. It sounded like a no brainer to do so, but it actually would have (unsurprisingly in hindsight) cost me much more over the long term. I didn’t.
Follow the money. People in the system respond to incentives. If companies make more money with complex, convoluted, confusing systems, then that’s what the system will be without action by outside parties (regulators, etc.). Even people of good will who want to do the best job have limited time to fight with a convoluted system.
Thanks for all you do.
Cheers,
Scott.
gene108
My experience in working with brokers, when I did corporate HR, is they have a limited scope of knowledge based on the insurance companies they normally work with.
Maybe the same thing applies to advice on individual markets? They know a few plans well, but not everything that’s available.
Brachiator
Hmm.
So, it is almost a coin toss as to the value of taking time to try to get subsidies. Maybe some of these people looked and got no relief in the past and assume no relief later.
Also, since many people get insurance through an employer, why we’re these people off market place?
Also, many of these people appear to have modest incomes, if I am reading the report correctly. Why would they be going to an insurance broker in the first place?
Were these people receiving any mail about insurance plans that qualify for credits?
Feathers
One of the difficulties I had in working with the people giving assistance is that they wanted all my info up front and then they would tell me what was available. My issue is that many of my variables were flexible. I had savings which would put me on the edge of not qualifying for a subsidy, but that was because I was saving to go back to school. I could juggle my start date and do a prepayment to the university of my tuition to make sure I stayed under the asset requirement. Also, I was temping and doing freelance writing, so my income was going to be variable.
So what I needed was to know what the requirements for the various programs were, so I could see where I best fit. But no one would effin just be honest with me so I could make decisions. Also, there didn’t seem to be anything that took into account what you are paying in rent. The asset levels they require certainly don’t give you the key money to move someplace cheaper.
ETA It seemed that they just had a calculator, not a sense of the moving parts.