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Earlier this week, JAMA Health Forum published a new study by Lovichikova et al on Covered California’s nudges to move people mid-year from bronze, gold and platinum plans to CSR 94 plans in the summer of 2021. As part of the the American Rescue Plan, two things happened mid-2021.  First, subsidies increased dramatically so that anyone with incomes under 150% Federal Poverty Level could buy a Silver CSR 94 plan with a ~$500 to $1000 deductible with no net premium.  Secondly, anyone collecting any unemployment income for 2021 would have their income deemed to be 150% FPL.  Covered California, the California state based marketplace, reached out to their current enrollees who they knew had some unemployment income.  This randomized control trial sees what the effect of an e-mail nudge is on enrollment and use.

The emails led to a statistically significant 3.1–percentage point (95% CI, 2.6-3.6 percentage points) increase in CSR silver 94 enrollment (a 74.8% relative increase) by July 31, 2021, and a 1.3–percentage point (95% CI, 0.2-2.4 percentage points) increase (a 2.3% relative increase) in practitioner visits by December 31, 2021. The emails had no detectable effect on prescription fills, emergency department visits, or hospitalizations.

What did I get from this study?

First, people don’t pay attention to policy changes.  The switching rate without an e-mail was about 4%.  The e-mail nudges moved the switching rate to 7% or about a 75% increase in the risk of switching.  I can almost guarantee you that a lot of people left at least a substantial amount of premium on the table as 30% of the sample has enrolled in either Gold or Platinum plans.  A switch within the same insurer to their Silver CSR 94 plan would be a substantial premium saver.  Now there might be odd cases where someone had already MOOPED out in February so the change in six months of premium might not be worth the extra new cost-sharing, but that is a very rare case.  Lots of money is being left on the table.  The nudge helps but it is limited relative to cross-checking of automatic re-assignment and re-enrollment.

Secondly, actuarial value is not suppressing demand as there is very little demand:

People moved from lower actuarial value and higher deductible plans to higher actuarial value plans with substantially lower deductibles and cost-sharing:

in 2021, Covered California enrollees in a silver 94 plan paid $5 for a primary care visit, paid $3 for a generic prescription drug fill, and had an out-of-pocket maximum of $1000; by contrast, Covered California enrollees in a bronze plan paid $65 for a primary care visit, paid $18 for a generic prescription drug fill, and had an out-of-pocket maximum of $8200

Gold plans have a $35 PCP co-pay and $15 generic drug fill co-pay while Platinum plans would cost enrollees $15 to see their PCP and $5 to get a generic prescription. That is a big switch especially from Gold and Bronze plans to Silver CSR 94.

Yet there is no noticeable change in hospitalizations, ER use or prescription drugs and tiny changes in clinician use.  Cost sharing is not doing much which might be a bit weird if we approach the switching problem as an ordeal mechanism.  Ordeal mechanisms is an economics concept that says that burdens such as information gathering and compliance costs will sort the population into those who highly value a public benefit and those who don’t.  It is an allocation mechanism aiming to give a benefit to the most deserving/needy when there is substantial private information.  We would think that people who switch would have private information that their health is worse than average.  But we’re not seeing much evidence here to support selection by severity of need.

What are the policy pull-outs?

First thoughts:

A) Nudges work but not too much.

B)  Improving AV won’t change access to care that much

C)  Even among a population that had a demonstrated value of insurance, complex policy changes are complex and opaque.

I like this paper.  It asks a good question using a unique policy shock and good methods.

Nudges to low deductible low cost plans in CaliforniaPost + Comments (5)