Hanson et al released a new ahead of print Health Affairs article that looks at the prices ACA regulated health insurance plans pay. They look at on-Exchange/subsidized individual market plans, off-exchange individual market plans and fully insured small group market plans. They find a substantial difference in prices paid by market segment. They then baseline these payment levels against standard Medicare rates.
So what are the highlights?
We estimated Marketplace plan prices to be 26 percent lower than small-group plan prices for outpatient services compared with 7 percent lower for professional services. Another notable difference relative to professional services was that payment ratios for all segments were significantly higher for outpatient services, particularly for imaging services (representing 25.3 percent of outpatient spending within our sample), where Marketplace plans paid 2.76 times Medicare rates and small-group plans paid nearly 3.70 times Medicare rates….
Prices in Marketplace plans averaged 15 percent lower than prices in small-group plans, with larger price differences for outpatient hospital services (26 percent) and smaller differences for inpatient hospital (13 percent) and professional (7 percent) services.
Why is this the case?
We know in the individual subsidized market that there is a strong incentive for insurers to gain market share by pricing at or below benchmark. This creates downward price pressures that are typically achieved by narrowing networks. Small group plans don’t have that same market dynamic and the decision-maker is not an individual where a small network that is local to a household could be more than good enough. Instead the HR administrator is trying to balance a budget constraint with a power weighed scream minimization function so the networks may be broader.
On the policy front, if we assume that small group ACA looks somewhat like large group employer/ERISA regulated plans in provider pricing, the 15% pricing wedge for the individual market is where things like ICHRA could make a lot of sense.
Bill Arnold
You are, in my biased opinion (IMBO), being too nice to HR administrators. :-)
Anonymous At Work
@Bill Arnold: Budget admins typically enforce the goals set by their bosses. That’s who you need to lure to a cornfield, beat with baseball bats and bury alive (Goodfellas).
But whatever gets the imaging services under control and better covered. Some days, it feels like exploratory surgery would be cheaper, easier, and quicker than imaging studies.
AM in NC
Hey David, just wanted to thank you for these posts, because they are an education. I don’t usually comment, because I don’t have anything to add, but just wanted to say thanks for all the expert info on this very complex part of public policy.
Villago Delenda Est
I hate the entire concept of “networks”. A friend of mine had a significant accident with a carboy (a big bottle used in brewing), but he felt obliged to be sure before getting treatment that he was “in network” with the urgent care clinic. He was assured he was covered. However, as it turns out, the physician who was “in network” was out of the clinic at the time, so the on call substitute, who was not “in network” actually treated him.
Naturally he was billed for being not “in network” even though he was assured he was indeed “in network.”
It took him months to unfuck this situation.
I hate networks, I hate health insurance companies, I want single payer to eliminate all this parasitical bureaucratic middleman bullshit.
West of the Rockies
Not sure if you’ve addressed this, David, but, straight up, do you think the ACA is in real danger of being axed in 2025?
gene108
Having been in HR shopping company’s insurance renewal, the choices available between the medium group and small group markets, in NJ, is staggering.
The NJ small group market is essentially the non-marketplace individual market, but the employer purchases the insurance and not the individual. Prices are preset and rated based on age and location of the employees on the plan.
Starfish
@Villago Delenda Est: We passed a state law so medical places can’t do this. You are either in or out. No Swiss cheese network.
Riverboat Grambler
Millions of Americans go bankrupt and tens of thousands die each year because of the for-profit system that Democrats ceaselessly defend. The ACA is a joke, your $500/month Bronze plans aren’t helping anyone who can’t afford healthcare and “substantial price differences between markets” is obviously a feature, not a bug, of for-profit healthcare. I personally had my cancer go undiagnosed for two years because I didn’t have insurance, and beforehand I was told repeatedly that I made too much for WI Medicaid. Suddenly after my diagnosis, I qualified. What a system! I could have easily been one of those uninsured death statistics that Democrats routinely ignore!
And I’ve watched this blog go to the mat to defend that system against the vicious threat of Medicare For All and any Dem pol who supports it. I’ve seen the tired talking points about wait lists in Canada that never go into any detail about how many people die on said lists, or how that compares to our preventable deaths. I’ve heard the whining about how the polls that show majority support for single-payer actually don’t matter because they’re not using the exact scary phrasing that the Dem’s health insurance lobbyist donors want. I’ve even seen this blog whine about the prospect of putting all the fine health insurance company workers out of a job! Won’t somebody think of the health insurance workers?????
Since the ACA the Dems have not put forth a single plan to cover all Americans, even a hybrid public/private plan that they claim as an alternative to single-payer. Why? Because even a public/private plan like you can find in European countries would require a massive haircut to private healthcare. Preventing that is the Democrats (and this blog’s) only goal in healthcare policy. How shameful. If you wanted to substantially improve the day-to-day life of every single vulnerable minority group in this country along with millions of voters, all you’d have to do is support single-payer and at least start laying the rhetorical groundwork in the public sphere. But you don’t. Again: how shameful.
No support for universal healthcare? No vote. It might be worth thinking about while you grope in the dark for something to stand for that’s not just dumping taxpayer money into Ukraine and Israel!
Melancholy Jaques
@Villago Delenda Est:
I am caught up in this right now. I had a heart attack in June, triple bypass in August, coverage for various charges being denied left and right. They authorized the surgery but are denying coverage for the doctor visits while I was in the ICU. This is bullshit. It is all bullshit.
Steve LaBonne
@Riverboat Grambler: Don’t worry, Republicans will surely work overtime to reduce your exposure to for-profit health care.
rikyrah
Mike Pence’s Other Mother 🟧🟦🟪 (@cooltxchick) posted at 9:46 AM on Fri, Nov 22, 2024:
Dr. Oz has promoted Medicare Advg and wants to expand it, in line with Project 2025´s plans to privatize Medicare & move seniors to Advantage plans. Oz also wants to move employees off their employer plans and onto Advantage plans w/a 20% flat tax to pay for it.
Which is curious considering Trump wants to get rid of taxes. Medicare Advantage plans have limited network options, is rife with fraud, frequently deny coverage for long term care and hospice, causing seniors to switch back to traditional Medicare to get the care they need end of life.
President Biden cracked down on deceptive advertising aimed at seniors, while Dr. Oz used his show to promote it.
Privatization of Medicare will only insure that companies and providers will profit, while leaving our seniors to die without proper care…
https://t.co/LhFDaCc1GF
(https://x.com/cooltxchick/status/1859986698811117791?s=03)
Barbara
@Villago Delenda Est: Ultimately, the problem we face is that we pay more, in some cases much more, per unit of health care service than anywhere else in the world. Prescription drugs and specialty physician services especially stand out. Other countries use middlemen or intermediaries — true single payer is the exception not the norm — but they tend to have just one dominant payer program, e.g., they would have ACA, Medicare, or Medicaid but not all three.
To the extent that Medicare gets around the problem, it is by setting prices per service that are consistently below what is found for commercial insurance. Maybe somewhere in the middle is fair. There is a reason that Medicare and Medicaid started contracting with health plans on a capitated basis — because costs in those programs were effectively unchecked by any true management for necessity or quality.
I don’t know what the answer is, but the essential problem is high unit cost and lack of a trusted buyer who is not incentivized to over or underutilize.
Starfish (she/her)
@Riverboat Grambler: The system is bad in all sorts of interesting ways.
When David started writing here, he was working in insurance. When he went to Ph.D. school, he is working on problems of making insurance better.
He is not analyzing the thing more holistically in that, we have this complicated multi-faceted system that is falling apart in all sorts of ways.
Today, I took my son to the doctor, and my son gets to see a doctor. If I go to the doctor, I likely get to see a nurse practitioner. I do not get to see a doctor. The nurse practitioner who may or may not be listening to me for 15 minutes when our appointment is supposed to be 30 minutes may remember or may not remember to send a prescription to the pharmacy. And it may be the wrong prescription or written up in a way that makes it more expensive.
And my insurance may have a pharmacy benefits manager called CVS Caremark that tells me that I am not allowed to fill my prescriptions at a place with competent pharmacists but at the place where they are understaffing the pharmacy and no one is going to tell me anything about medical interactions or anything.
So after lunch, I am going to drive further to the competent pharmacy to get my son’s prescription because my son is not locked into CVS Caremark pharmacy benefits manager hell.
The whole system is a nightmare, and I am seeing dentists and eye doctors wash their hands of the whole thing and just refuse whatever limited insurance cover those practices.
With the way things are going, there may come a time when physicians find the burdens of the system too onerous, they may just opt out of the system because Congress is a bunch of cowards who would not fix this bullshit and worked too hard to appease existing stakeholders.
sab
@AM in NC: I agree. I have been reading since aka Mayhew was posting on ACA in the works and now that I am on medicare he is still often very informative.
sab
@rikyrah: Undoubetedly Oz was being paid to promote medicare advantage. The number of solicitation phone calls I am getting this enrollment period is insane.
Kent
This is an area of policy that is well outside by area of expertise.
But I think Democrats should spend the next 4 years absolutely laser focused on messaging that it is TRUMP’s fault that your medical insurance and medical bills are so high.
Basically the health care version of eggs and gas are too high and the “I did that” Biden stickers that all the MAGA folks put on gas tanks.
Hang every single consumer frustration with health care around Trump and the GOP’s neck. They broke it they bought it. Don’t worry about whether such accusations are nuanced or “fair”. The GOP never does.
pluky
@rikyrah: I spent a good bit of my career as a medical pricing actuary. One thing I took from that into retirement was the strong conviction that no way, no how, was I enrolling in a Medicare ‘Advantage’ plan. The games that get played to make sure the C-suite bonuses will be paid are nauseating.
Steve LaBonne
@pluky: When I was approaching Medicare enrollment age it took me about 5 minutes of research to know that I wouldn’t touch “Advantage” with a fifty foot pole. I am not amused by the possibility that these mofos will force me into it. Thanks so much, idiot voters.