I believe that the Catastrophic coverage eligibility expansion in Alexander-Murray is a risk adjustment play. I want to estimate what the potential risk adjustment related pricing increment could be using 2017 Healthcare.gov public data.
My data is here. I used the Healthcare.gov PUF Landscape file to identify all counties with both a Bronze and Catastrophic plan. I used the pricing for a single 40 year old non-smoker. I took the least expensive on-Exchange Bronze and Catastrophic plan by county/state dyad and calculated the difference in premium (Bronze-Catastrophic). Positive numbers means Catastrophic has a lower premium than Bronze. I did not adjust for the actuarial value of Bronze (allowable range 58%-62% AV in 2017 and Catastrophic has an AV of 57.5%) so I may be biasing the premium spread to be higher than a true apples to apples comparison.
Bronze plans are part of the Metal risk adjustment process. A portion of Bronze premiums are sent to cover the expenses of Platinum, Gold and Silver buyers. Catastrophic plans are risk adjusted only against themselves. Catastrophic dollars within a state only need to cover Catastrophic buyers.
This leads to a pricing delta which can be significant.
There are a few things to note.
1) Not every state nor every county within a state has a Catastrophic plan
2) Not every county has a Bronze plan
3) Something strange is happening in Texas and Oklahoma as BCBS-Tx and BCBS-OK Catastrophic plans are often more expensive than BCBS Bronzes in the same county.
4) Most other county/state combinations where there is a Bronze plan less expensive than the least expensive Catastrophic plan is because one insurer offers the low price Bronze but does not offer a Catastrophic plan.
However, out of the 2,362 county-state combinations with a 2017 Bronze and Catastrophic plan on Healthcare.gov, 1,847 have a lower priced Catastrophic plan than Bronze plan. Of that 1,847 counties with a less expensive Catastrophic plan, 1,170 counties see the same insurer issue the least expensive Bronze and least expensive Catastrophic plan.
Within this subset of 1,170 counties, there is an average of $73 pricing spread between these plans in these counties. I am making the strong assumption that the catastrophic and Bronze plans are sharing the same network and the same underlying administrative expense models. Most of the delta is due to the lack of risk adjustment transfers from Catastrophic to the higher AV metal bands.
This is the play that is being made in Murray-Alexander.
satby
So it looks like the best bet for me without CSR would be Bronze? I was thinking that joining that Direct PCP group at $29/ month plus a catastrophic plan would be the way to go, but in St. Joseph, IN the Bronze is cheaper.
Another Scott
Thanks very much, Richard-David. I think bottom like information like this “what is this going to cost me” is very helpful in shaping the conversation.
I’m not understanding the color coding, though. E.g. in Virginia – Red 17.19, Green 54.75. But if I zoom in and hover over particular counties, the Catastrophic plans always seem to be cheaper whether or not they’re indicated as Red or Green. E.g. Compare Fairfax and Culpeper counties.
Am I missing something, or should all of the counties in VA be green (with scaled shading)? (I would expect that Red would indicate that a Catastrophic plan is more expensive than the Bronze.)
Thanks.
[eta:] Ah, it seems to be a quirk of selecting a single state rather than seeing the country as a whole. It will always put the smallest number in Red and scale to Green for the highest number.
Cheers,
Scott.
David Anderson
@Another Scott: I’ve updated the color anchors so they are fixed to the national range and not adjusted to the local range.
@satby: E-mail me (bjdickmayhew Yahoo )
jl
I have been negligent and dilatory in not regularly reading all the posts on the CSR labyrinth, and am not sure what finance and econ is wrapped up into the phrase ‘risk adjustment play/. I’ll have time to go through recent Mayhew insurance oligarch posts later this week to see if I can put all the pieces together. But if David can point me to critical posts, I’d appreciate it.
Edit: what is worse, I read a post when I don’t really have time to digest it, tell myself that I understand it, and plunge forward, until the process of BS-ing myself that I follow everything just becomes all too transparent and ridiculous.
David Anderson
@jl
https://balloon-juice.com/2017/10/17/expanded-catastrophic-plans/:
satby
@David Anderson: I will, thanks.