This might not have a direct bearing on what the insured individual has to pay.
Out of curiosity, I recently plugged some info into the exchange to see what it would cost us for family coverage per month, if we didn’t have insurance through my husband’s employer. It gave me a figure of over $1100 per month, which seems to be in the ballpark of what people claim they have to pay without subsidies. My husband will pay $152 every 2 weeks for our family coverage in 2018, which is a slight increase over this year’s costs.
Employer plans are usually heavily subsidized. Most people don’t see or realize the real costs since the employer pays much of it and the % of subsidy varies widely based on the employer.
xerty’s is arguing that Obamacare plans are more expensive and have unnatural inflated costs. Yet the actual costs of employer provided plans are a lot higher.
Of course bearing the full cost of an Obamacare plan is likely more expensive out of pocket than an employer plan where the employer pays for 75% of it.
Yes. I haven’t had to shop for insurance for many years. I paid for my own health insurance when working minimum wage/barely-above minimum wage jobs, but it seemed more affordable then.
[quote=“jerosen, post:101, topic:31”]
Do you have any data or anything to support the idea that sick people are dropping out of employer provided coverage into the exchange in any significant numbers? Or is this pure conjecture on your part?[/quote]
I remember hearing how terrible it was before Obamacare and how you’d lose your job and your work insurance as soon as you got sick for more than a few days, and then you were at the mercy of expensive COBRA and preexisting exclusions, neither of which you could afford. Here’s Elizabeth Warren telling in 2005 us how big a problem this was before Obamacare:
each year, 2 million Americans – those who file and their dependents – face the double disaster of illness and bankruptcy.
The link between jobs and health insurance is strained beyond the breaking point. A harsh fact of life in America is that illness leads to job loss, and that can mean a double kick when people lose their insurance. Promising them high-priced coverage through COBRA is meaningless if they can’t afford to pay. Comprehensive health insurance is the only real solution, not just for the poor but for middle-class Americans as well.
People who lose their health insurance through their jobs had a hard time affording coverage or even getting coverage. Thats a pretty broad truth. They’re saying 3/4 of people couldn’t afford paying their own coverage or healthcare bills. Thats most people. Most people aren’t “the most expensive 5-10%”… they’re most people.
This doesn’t mean all the most sick and most expensive are dumped in the Obamacare exchange at the cost of others.
Do you have any actual data showing that the actual costs in exchange groups are higher on average versus employer sponsored groups?
The fact that premiums are significantly lower than employer group plans seems to imply that the costs are lower. I mean there could be demographic differences that explain that but I can’t think of any. I’d expect the exchanges to have more older people on average.
But you’re stating that theres extra “most expensive 5-10%” people in the Obamacare exchanges. Overly burdening the exchanges. so why are average premiums so much lower than employer plans ?
Don’t seriously ill adults end up losing their jobs and have no choice but to go into the individual market? Unless they happen to be a dependent on someone else’s policy?
While the average single ACA premium is lower than the employer group one, $400 vs $500/mo for single roughly, there are a number of contrary factors that suggest the cost of healthcare for ACA individuals are higher:
The insurance companies have been losing money hand over fist in the ACA markets (even with some transitionary taxpayer subsidies), so the premiums we see even with the big hikes year after year are not yet reflective of the full cost of the average person’s healthcare.
Deductibles for employer group plans are about $1k, while ACA averages more like $4k. Thus the value of an ACA plan with the same premium is worse since if you incur say $2k in costs per year, that already gives back basically the whole premium difference, and higher costs are worse. OOP max numbers are also better for group plans, with about half below $3k (vs the $4k average for ACA). Alternatively, think of an employer group plan with a $1k deductible as comparable to a (expensive!) Platinum plan which runs almost $600/mo on the exchange, while the average ACA is a mediocre Silver plan.
Most (and in some areas now all) ACA plans are HMOs, while the typical group plan is a PPO (>50% PPO or similar, with only 15% HMOs). PPOs provide much greater flexibility as well as out of network coverage that is completely lacking for ACA plans.
Network quality is much better for group plans than ACA ones. For example, narrow networks are defined by having less than some fraction of hospitals or doctors within a given distance of you available to you under your plan. For group plans, around 10% were narrow, while for ACA plans it was 70%+ with over half of those being “ultra narrow”.
In short, when you figure in the costs of the higher deductibles, the worse benefits, the worse networks, and the insurance company short term losses, all of which are subsidizing the ACA premiums to keep them artificially low, it’s a surprise the Obamacare plans are as cheap as they are. In my market, every single insurance company has decided that they can’t offer a profitable PPO for any amount of money and I’ve heard examples where those that remain elsewhere run 2-3x the cost of the typical ACA plan. These might be more directly comparable to an employer group plan, which would suggest the adverse selection was indeed significant.
I’m not sure how much money insurers are losing in the exchange plans. Got any actual specific financial data on that?
I know theres lots of whining by insurers while they raise rates, but thats not real financial data. They undoubtedly lost money in the markets they pulled out of but I doubt they’re continuing to lose money they’ve stayed in for 4+ years.
As of Q2 2017 the claims were only ~77% of premiums :
If they can’t make money with 22% overhead then thats the insurers problem IMHO.
Kaiser has always said they make a profit and they’re one of the largest.
Yes average deductibles in the exchanges are a lot higher. That does make a difference. I think this would explain the difference in cost mostly. If you’re in the exchange you can get a low deductible plan for $500-600 which is about what employer plans cost.
Yes the distribution of HMO vs PPO matters too.
This makes a difference too. How much difference it makes is not known. While 70% of plans may be narrow that doesn't mean that 70% of people are in narrow plans. How many people are in narrow plans?
You make some good points. I think it all adds up to explain why Exchange plans are so much cheaper on average than employer provided plans. But your argument was that exchanges are burdened with excessive high costs. You haven’t proven that at all. Appears they’re closer to equivalent to employer provided plan costs.
And just a data point, in my market a 40 year old male would pay $582/mo for a $1000 deductible PPO gold plan which is ~40% more than the cheapest gold EPO. The low deductible PPO that my employer offers is $686.
ACA plans skew older and that makes the rates higher.
ACA plans are often smaller group population and that can make costs higher versus a very large group plans.
Seriously ill people can also end up in Medicaid. If they are seriously ill then they are unlikely to have much of any income.
Or if they have a working spouse then they may end up on their spouses employer provided plan.
Or they can continue under their employer plan while on a medical leave and COBRA.
Or, (unfortunately) the most seriously ill don’t live long and may not even outlive their employment or time off.
Seriously ill people also continue to cost employer plans significant amounts of money.
OTOH a lot of people with significant medical costs have traditionally clung to and still cling to employment and employer provided health insurance simply due to their medical costs. Health insurance is considered a significant benefit of employment for a reason.
So yes undoubtedly there are some seriously ill people who end up losing their jobs then getting on the individual market. But how many and how much does it all add up too? There are also many seriously ill people who don’t live that long. There are also seriously ill people who end up on medicaid, their spouses plan, medicare, COBRA.
Is the individual market excessively or unduly burdened by these seriously ill people dropping out of employment and then making too much for medicaid and not having a working spouse? I doubt it.
I suspect the size of the state matters too, since the risk pool is state by state, right? So California and Texas have larger individual markets than say Wyoming.
Jerosen - thanks for the thoughtful reply. On the adverse selection front, there are two factors - positive and negative. On one hand, anyone who’s generally unhealthy gets a good deal from the ACA indivdiual market and presumably will sign up. On the other hand, those who are relatively healthy may not bother since they find it a poor value (and pay a penalty, or find an excuse, or whatever). Both factors contribute to a riskier and more expensive insurance pool.
Here are some stats on the major insurers and how the Obamacare markets have treated their shareholders… poorly. Mind you the overall insurance business is quite profitable (group plans, life insurance, etc), but the obamacare underwriting business has been an unmitigated disaster for almost all the majors. They also cite unexpectedly high costs, indicating that the risk pool is indeed more toxic than they expected (or else they would have made a profit presumably). The one exception is the Medicaid companies selling similar plans to the bottom of the income pool - very narrow, cheap clinic plans that are very cheap to run and have no adverse selection since they cater to people so poor their plans are essentially free to the customer after subsidies and CSRs.
The company said it expects to lose more than $200 million in its individual business line this year, on top of nearly $700 million in losses between 2014 and 2016. Aetna withdrew from 11 of its 15 markets for 2017. It has 255,000 Obamacare policyholders this year, down from 964,000 at the end of last year.
These customers, however, continue to be costlier than the company expected, Aetna said during its earnings call earlier this month. It had to set aside an additional $110 million to cover larger-than-projected losses for this year.
For example, Health Care Services Corp. – which owns Blue Cross affiliates in Illinois, Montana, New Mexico, Oklahoma and Texas – lost $1.5 billion on its ObamaCare-compliant plans last year.
The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage through their employers.
Anthem Inc. said it is now projecting losses on its Affordable Care Act plans this year, a turnaround for a major insurer that had maintained a relatively optimistic tone about that business. Anthem said it now believed it would see a “mid-single-digit” operating margin loss on its ACA plans in 2016, due to higher-than-expected medical costs. It expects better results next year, because it is seeking substantial premium increases.
Centene - selling Medicaid style plans to poor people is good business
At least in my area, you can get access to Trinet via WeWork, a hotdesk office service company. Trinet handles lots of HR functions, including benefits, payroll, taxes, etc. they offered Aetna nationalwide plans, including HMO, PPO, POS, etc, with a seemingly good benefits profile, OON coverage for the non-HMO plans, etc. I haven’t got the actual plan pricing yet, but it sounds like it will run an extra $300-400/month to get this on top of the basic premiums, which covers the hotdesk service as well as their servicing fee. A business checking account for billing and a business of some sort (LLC or Corp) was required.
You could sign up for a small business group plan directly, but in some places those are restricted heavily (you need several non-related employees) or routed entirely to the exchange market. Going through one of these business aggregators allows you to signup for a large group plan without being a large group, although it costs to pay the intermediary.
Part of the ACA mandate is the 80/20 rule.
Insurance companies must use 80% or more of the premiums on actual health care costs, and only 20% on administrative costs.
My parents actually received a refund (about 2 months worth of premiums) this year because of this mandate.
So if the insurer is only spending 77% of the premiums on health care costs, the subscribers will be getting a refund next year.
Yes, this is another example of a well-intentioned policy in the ACA that serves to increase premiums. Suppose the typical insurance company tries to make a 10% profit for their shareholders each year and that overhead runs about 10% of premiums. Then as long as claims are 80% of premiums, they pay 80% of revenues for care, 10% for overhead, and make their 10% profit. Of course insurance is a risky business, even with large numbers of people, so year to year variations in claims with not be exactly predictable but vary around the expected value if their actuaries have done their jobs well.
The problem is that before this rule, if they had a 90% claims year (only breakeven for their profit margin after costs), that could balance out against a 70% claims year (20% profit margin). However, now whenever the low claim years show up, they have to give the customers a rebate. So instead of averaging 0% and 20% in this example to make their target 10% average profit, now they only keep 10% net of refunds in the healthier year, and can’t use it as a buffer for the 0% sicker year, and net they only make 5% profit on average. This gets worse of course when you have cases like some BCBS plans paying out 120%+ of premiums and that’s before costs, so the bad years can be quite bad.
The rational solution for insurers, therefore, is to increase premiums to make up for this refund issue. For example, here they could be sure of making 10% profit in these scenarios if they just jack up premiums 10% (assuming health outcomes are fixed; in practice higher costs will select out healthier buyers), so now they have 110% of the original revenues, net 100% after costs, and so they make 10% or 30% (cut to 20% in the latter case) and average a 15% profit. The higher the volatility of claims, the more the refund mandate costs them and the more they need to increase premiums to compensate.
And on a related topic, the Senate tax reform bill which was approved by the Senate (and off to reconciliation with the House) contained a repeal of the ACA individual mandate, i.e. The penalty for not buying Obamacare insurance if you don’t want to. Still TBD, but one of the major R defenders of this mandate is on board now (under assurances various efforts to provide coverage options will be done soon), so I think it’s very likely to go in. Repealing the mandate helps make their budget calculations look better due to the way the accounting works, so it’s in the politicians’ interest to include so they can afford other headline goodies as well as giving people more freedom to pick their healthcare.
This will make self insuring, short term policies, and various other “ineligible” approaches to health coverage more attractive since the penalties can be quite large in some cases.
You omitted that as the younger and healthier decide they don’t need to be insured, premiums for everyone else will spike, and will result in millions who desperately need insurance coverage to no longer be able to afford it.
A lot of those people weren’t buying it anyway, due to a combination of poor value and being too expensive outright, so now they’ll just not pay an extra penalty and the government general fund is a little poorer. Yes, premiums will rise, insurance companies who didn’t plan enough for this will lose money in the short term, and the unstable ACA marketplace will continue to converge on a taxpayer subsidized race to the bottom (“Medicaid for all”), while the policy makers avoid the harder questions of addressing healthcare costs (which is far more important IMO than insurance coverage rates).
Maybe this will prompt a more rational attempt to address the issues next time around, having seen the failures of Obamacare. Probably not, but one can hope. The current framework is unworkable.
A lot of those people weren’t buying it anyway, due to a combination of poor value and being too expensive outright…[/quote]
Just the opposite. Millions who were priced-out were able to purchase insurance.
Hold on to your hat.
No, the insurance companies will return to ripping-off consumers and making outrageous profits.
???
Healthcare costs are rising at a third the rate annually than they were prior to the ACA, and the previous rising national healthcare cost curve has been bent downward.