• Financial burdens in the health exchanges – ctd.

    A number of you asked excellent questions in the comments on this post. Alison Galbraith, one of the authors, addresses them in this guest post. Dr. Galbraith is an assistant professor in the Department of Population Medicine at Harvard Medical School and the Harvard Pilgrim Health Care Institute, where she is also associate director of the Center for Child Health Care Studies. Her most recent work has examined health care use and experiences of families in high deductible health plans. She earned a master’s degree in public health from the University of Washington and a medical degree from the University of Rochester. She’s also a friend of mine, but we won’t hold that against her. – Aaron

    Great questions/comments that came up in response to this post about our paper on cost problems in the Massachusetts Exchange.

    We were also surprised that about a third of those in our study population who enrolled in unsubsidized Commonwealth Choice plans appeared to have incomes under 300% FPL, which would have qualified them for a subsidized Commonwealth Care plan.  Our survey didn’t have the level of detail to say for sure if a person’s income and circumstances would make them eligible for a subsidy.  But if we assume that some of this group was indeed income-eligible for subsidized plans, there might be other reasosn they ended up in unsubsidized plans.

    Based on some qualitative interviews we’ve done, it seems that some people consider their Commonwealth Choice plan an interim solution for a temporary lapse in employer-based coverage, or they wanted to continue to use a commercial carrier rather than the Medicaid managed care carriers that participate in the Commonwealth Care program.  About 8% of our respondents with incomes below 300% FPL said they had subsidies for their premiums from their employer.  And, given how complex it is to find and choose a plan, it’s possible that some people didn’t realize they could have been eligible for a subsidized plan.

    While the current premium subsidies in the Massachusetts Connector are available only to those under 300% FPL, the premium subsidies under the ACA will be more generous in that those up to 400% FPL will be eligible.  One of the comments talked about how premium subsidies and cost-sharing subsidies have different purposes and outcomes, which is a good point.  The financial burden and unexpected out-of-pocket costs we found for Connector enrollees in our study would be addressed more with cost-sharing subsidies than premium subsidies.  However, premium subsidies could help mitigate out-of-pocket cost problems for Exchange enrollees if they allow people to afford a more generous plan with less cost-sharing.

    Aaron is right that Exchanges will need to educate consumers better about available health plan options, and policymakers will need to design the Exchanges to optimize consumer decisions in this complex choice environment. Based on data on experiences choosing plans in the Massachusetts Exchange thus far,  this won’t be easy.  More recent efforts to standardize plan benefits across the metallic tiers in the Massachusetts Exchange might help consumers make apples-to-apples comparisons, and ACA  requirements for Navigators and cost calculators in Exchanges could help people understand the options and find a plan that suites their anticipated needs. We still have much to do to make the ACA Exchanges work.


    • Standardized plan benefits is the key. I’m nearly old and buy my insurance in the individual insurance market, and it’s not easy, with the differing coverages, exceptions, exclusions, co-pays, etc. I call it health insurance hell. I won’t address out-of-pocket expenses because it’s a different issue (a very real issue for me since my brother has chronic leukemia and his out-of-pocket expenses have impoverished him). It’s the absence of standardized plan benefits (apples to apples) that will be the greatest short-coming of the exchanges. Of course, it’s not an oversight but an intentional feature of a system based on “competing” private health insurance plans, “competing” being a more agreeable term than “complex”, “incomprehensible”, or “misleading”. A public option would have been one way to establish “standardized plan benefits” but it wasn’t meant to be. Minimum federal standards (i.e., essential health benefits) would have been another but the administration chose to defer to the private health insurance plans rather than adopt federal standards (another deferral to private plans). I suggest a third alternative, which is a combination of the first two: create a shadow public option. The shadow public option wouldn’t be an actual option but it would give consumers something for them to compare private insurance features. I understand that “navigators” are supposed to help consumers pick and choose the best option for them. But how do consumers pick the right navigator? Without standardized plan benefits, I fear that the public will react negatively to the exchanges, which could jeopardize the entire health care reform.

    • Thank you Aaron for getting Alison directly involved in this discussion.

      Thank you Alison for answering the questions.

      The Forest:

      From my perspective, there are some positives associated with the ACA. Mostly the positives revolve around the concept of access. However, paying significant subsidies for front-end access while not simultaneously addressing back-end affordability and quality, is toll-booth economics and is short term thinking rather than long-term planning.

      The Trees:

      “However, premium subsidies could help mitigate out-of-pocket cost problems for Exchange enrollees if they allow people to afford a more generous plan with less cost-sharing”

      How do you see this playing out? The premium subsidy at the lower end is based on a specific metallic AV plan (if I remember correctly second lowest Silver 70%). Correct me if I’m wrong but any additional coverage would be paid for at 100% by the insured (up-front). The vast majority of those in the income group we are talking about cannot do this.

      One of the risks is that sicker patients who know that their OOP costs will be high will buy into the gold/platinum plans with lower OOP costs and higher premiums because currently they are risk adjusted to provide lower total outlay. However there is a feedback loop which requires yearly adjustment to meet AV. Premiums and or OOP costs will rise and they will be even more unaffordable for sicker patients and unwanted by healthier and richer patients.

      To Robert:

      I like the idea of standardization, however I would refer to the experience with Medigap and the coming changes.

      Medigap plans have standardized benefits per letter but most people do not pick the least expensive plans or even the highest financially rated firms. They choose the most marketed plans, most often AARP/United Healthcare. This can amount to hundreds or thousands of dollars more per year for the same standardized plan, without any concrete benefit. Perhaps the exchange will make things less opaque, but for Medigap marketing matters more than substance.

      Also, the Medigap plans with first dollar coverage are under scrutiny as some feel like Medicare recipients are taking advantage of the system by not having skin in the game. Sounds familiar.

      Thankfully through Alison’s work and others, underinsurance and overt cost burden are starting to get noticed:


      Life or Debt: Underinsurance in America

    • GME, good comment, but I have to take issue with your statement “paying significant subsidies for front-end access while not simultaneously addressing back-end affordability and quality, is toll-booth economics and is short term thinking rather than long-term planning.”

      There’s a reason the ACA is 906 pages long. It has hundreds of pages dealing with quality and costs. Will all of it work? We’ll find out. But it’s in there . . .

      • Hi Sheldon,

        The disagreement perhaps is in our individual definitions of affordability and quality and similarly ( in non-markets ) what are acceptable levels of profit and if those profits are justified by the capital or labor contributions of the actors involved.

        It is not in the conventional wisdom to look deeply at this issue in this country because we have been conditioned to believe that paper economic growth is equivalent to progress. The Health System has benefited from this logic, however the Healthcare System has not.

        While the subsidies provide entry into the system, the system is woefully inadequate ( both when compared to other Western systems in dollar amounts, health metrics, and medical bankruptcies). The subsidies maintain a status quo that keeps insurer profits as a source of economic growth, without justifying the nature of those profits other than “this is the way our system is”. It also, up until recently, included most of us physicians in the annual growth party. This will continue to change as physicians are just labor in this context, and are deemed to be replaceable.

        The cost discussion you mention is mostly about growing insurer profit margins, as I don’t recall ever hearing that insurers are contemplating decreasing premiums (and lowering OOP costs) due to their heroic efforts in reducing management costs, lowering their management salaries, reducing marketing, and truly funding evidence based medicine.

        Many blame (including a Blue Cross Blue Shield ad I just saw) poorer health outcomes due to individual choice. Post hoc ergo propter hoc. Choice is diminished by inequality and as inequality widens so do choices diminish. Food quality is poor, but food profits are high. Exercise is limited, but suburban planning enforces a car culture. Preventive care reduces costs, but intervention is paid for.

        My comment is meant to discuss how economic power tends to perpetuate economic power in a self-feedback mechanism, and how if the toll is cheap but the road is shoddy, in the best case you use more money in gas, in the worse case you don’t ever get to your destination.