Will opening the door to cheaper, skimpier marketplace plans with higher deductibles and copays attract consumers and insurers to the exchanges next year? That’s what the Trump administration is betting on.
In February, the administration proposed a rule that would take a bit of the shine off of bronze, silver, gold and platinum exchange plans by allowing them to provide less generous coverage while keeping the same metal-level designation.
But consumer advocates and insurance experts say the proposal fails on two fronts. It doesn’t address key concerns among insurers about plan design, and it might push consumers away from the exchanges because it could increase their out-of-pocket costs and reduce the amount they receive in premium tax credits.
The proposal is one of several rule changes the administration put forward to help stabilize the insurance marketplaces while Republicans work to repeal and replace the Affordable Care Act. Repeal is at least temporarily off the table following the failure of the Republicans’ replacement bill, the American Health Care Act. But insurers remain skittish about participating in the marketplaces given the continuing uncertainty and mixed signals from the administration and Congress about how they will go forward overseeing the ACA.
The proposed rule would let insurers offer plans with higher consumer out-of-pocket costs than now allowed by lowering the minimum coverage requirements, called a plan’s “actuarial value.” Currently, for example, if you buy a silver plan, the most popular choice, the plan must be designed to pay 70 percent of covered medical costs for an average consumer, while you pay the other 30 percent through your deductible, copays and coinsurance.
Because it’s difficult to design a plan that covers exactly 70 percent of medical costs, insurers have some wiggle room. Plans with actuarial values from 68 to 72 percent are considered silver plans.
The new rule would lower the floor by 2 percentage points, allowing insurers to offer silver plans that cover just 66 percent of medical costs. It would do the same for other metal-level plans as well, allowing bronze plans with actuarial values as low as 56 percent instead of the 60 percent standard, gold plans at 76 rather than 80, and platinum plans at 86 rather than 90. (The allowed upper limits wouldn’t change.)
How does this affect consumers? For one thing, the premium is likely to be lower for plans that offer less generous coverage. But the trade-off would probably be higher deductibles, copays and coinsurance. Because all plans must cover the 10 essential health benefits mandated by the ACA, insurers have few options apart from cost-sharing adjustments to alter a plan’s coverage to be more or less generous. If you’re a healthy person who doesn’t need much care maybe that seems like a decent deal, but some consumer advocates aren’t so sure.
“Young adults really care about overall cost sharing and not just premiums,” said Erin Hemlin, director of training and consumer education at Young Invincibles, an advocacy group for this demographic. According to the group’s analysis of 2017 exchange enrollment, 75 percent of 18- to 34-year-olds bought silver plans while just 20 percent bought bronze plans. Cheaper premiums might not be a lure for this group, which is highly sought after by insurers because young people tend to be healthy.
Reducing the minimum actuarial value could also shrink the amount of subsidies to help people buy insurance, advocates say. Marketplace customers with incomes up to 400 percent of the federal poverty limit (about $48,000 for one person) may qualify for tax credits to use toward the premium. But the amount of the tax credit is based in part on the cost of the premium of the second-lowest priced silver plan in the geographic area. If insurers offer some plans with actuarial values of 66 percent, it’s likely one of them will become the “benchmark” on which tax credits are based. Since the premium for that plan would generally be lower than that of a more generous policy, consumers’ tax credits would be smaller too.
“People have to spend more in premiums to get the same coverage because their tax credit is less,” said Aviva Aron-Dine, a senior fellow at the Center on Budget and Policy Priorities (CBPP), who co-authored an analysis of the impact of the proposed change. Alternatively, they could pay the same premium as before for a plan with a higher deductible and other out-of-pocket costs, she said.
Switching to a plan with a 66 percent actuarial value from one at 68 could increase the per-person deductible by $550 to $1,000, according to estimates by CBPP and Families USA.
The proposed rule change isn’t going to help make marketplace participation more attractive to insurers either, said Robert Laszewski, a health policy consultant and longtime critic of the Affordable Care Act.
The proposed actuarial value changes are just “rounding at the edges,” Laszewski said. Insurers are hampered in critical ways by other requirements in the law that limit the types of plans they can offer, he said, citing maximum out-of-pocket spending limits for consumers (currently $7,150 for an individual plan and $14,300 for a family plan), maximum deductibles (the same as the spending limits) and being prohibited from offering plans with even lower actuarial values.
“The biggest obstacles to creating far more flexible plans and particularly appealing to younger, healthier people, are in the statute that the administration can’t change,” Laszewski said.
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