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On the Third Hand: Rich

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Managers of Access Health CT, Connecticut’s state-based exchange, meet my test for being good public health insurance exchange managers: They’re great about posting reports about what they’re doing, and how they’re doing.

See also: Health plan coverage gaps give hospitals sunburn

Whether you love the Patient Protection and Affordable Care Act (PPACA) exchange system or hate it, it’s a great chance to get data about how consumers think, and to see how different marketing strategies and product design strategies work.

One thing that seems clear from a recent Access Health CT board meeting packet is that consumers were much more likely to switch to a lower metal tier between 2015 and 2016 than to go up a tier.

People had a tendency to stick with the same tier, but when consumers with incomes under 250 percent of the federal poverty level (FPL) switched tiers, just 11 percent upgraded, and 17 percent downgraded.

When people with incomes from 250 percent of FPL to 399 percent of FPL switched, 13 percent upgraded and 30 percent downgraded.

When people with incomes of 400 percent of FPL or higher, who get no subsidies, switched, 15 percent upgraded and 47 percent downgraded.

On the one hand, insurance regulators have fought for decades to protect consumers against buying a pig in a poke. It’s easy for a marketing department to paint a warm picture of how wonderful a policy with a $500 annual and lifetime benefit limit will be, but someone has to make sure consumers understand what they’re buying and that they really get what they pay for.

On the other hand, I think — based on looking at those numbers and my own personal reaction to shopping on — that the current plan design rules produce plans that are much too rich at the high end, and too meager at the low end. For a plan that covers little or nothing before the enrollee reaches the deductible, the out-of-pocket cost levels are too high for anyone except for members of Congress, academics and think tank analysts who have solid, predictable salaries and platinum coverage. Regular broke people can’t afford to pay a fortune for coverage with a deductible under $6,000, and they can’t really do anything about a $6,000 medical bill than laugh at it and use it for mulch.

On the third hand, the patients who have medical problems that make a $6,000 deductible look trivial have heart-breaking stories.

On the fourth hand … cry me a river. Why should many regular people have to face a $6,000 deductible for a broken leg because a few people have heart-breaking stories? 

On the fifth hand, if we as a society are going to stick it to someone, maybe we need to shift to the kind of “donut-hole approach that everyone in the Medicare Part D prescription drug program has hated everyone so much. Set a highish, but sane, deductible. Give everyone who meets the deductible a reasonable amount of mini med coverage built into a real policy. Give everyone the kind of catastrophic coverage meant to keep photogenic patients from making grizzled members of congressional oversight committees weep. Then make the numbers work by imposing a gap in coverage, or donut hole, wherever it needs to be. Maybe, say, between $5,000 and $25,000.

The sane deductible could keep patients from crowding doctors’ offices with the sore throats.

The catastrophic coverage component could reduce New York Times headline risk.

The bills in the donut hole would be big enough and rare enough that health care providers could devote serious resources to collecting on them, and patient advocates could devote serious resources to bargaining with the providers. And the patients with the bills in the donut hole gap would be a captive audience. They’d know that they needed to spend whatever they had to spend to keep their medical coverage in place. They wouldn’t be young invincibles who see individual health coverage as an annoying scam.

See also:

On the Third Hand: Donuts

View: Deductibles are the price you pay for Obamacare


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