Tuesday, November 5, 2013

Fwd: qotd: Exchange plans hide your true financial exposure

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-------- Original Message --------
Subject: qotd: Exchange plans hide your true financial exposure
Date: Tue, 5 Nov 2013 10:14:28 -0800
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>

Center for American Progress Action Fund
May 2009
Coverage When It Counts
How much protection does health insurance offer and how can consumers know?
By Karen Pollitz, Eliza Bangit, Jennifer Libster, Stephanie Lewis, and
Nicole Johnston

Knowing whether insurance provides adequate coverage can be a challenge.
Health insurance policies are complex products, highly variable in their
design, and key information about how coverage works is not always
disclosed during marketing. Further, health insurance promises
protection against future, unknown events. Consumers who are healthy
today can find it difficult to anticipate future medical problems and
costs and harder still to evaluate how insurance might cover those needs.

Using simulated claims scenarios for different types of patients we
analyzed the content of coverage under a variety of health insurance
policies sold to individuals and small employers in Massachusetts and
California and estimated out-of-pocket costs for care that patients
might face.

This project estimated cost scenarios for patients with serious medical
conditions: breast cancer, heart attack, and diabetes.

Massachusetts is unique in requiring residents to have health insurance
that meets minimum creditable coverage (MCC) standards — a state
criteria for ensuring adequate coverage. As a result of this individual
mandate and minimum coverage rule, health coverage tends to be much more
standardized and comprehensive in Massachusetts compared to most other
states. MCC standards for 2009 include inpatient and outpatient hospital
and physician care, emergency services, mental health and substance
abuse treatment, and prescription drug coverage.

The Commonwealth Connector (i.e., exchange) offers plans with high,
medium, and low tiers of coverage — characterized as gold, silver, and
bronze. Policies offered by competing insurers within each tier are
supposed to be "actuarially equivalent." Policies are said to be
actuarially equivalent if, for the same population covered, they would
each pay the same share of the population's total expected medical
bills. However, for any given patient, actuarially equivalent policies
might offer different protection.

To illustrate how coverage can vary — and how challenging it might be
for consumers to appreciate the differences — we mapped the simulated
claims scenarios against specific health insurance policies.

Figure 2. Seemingly similar Massachusetts policies work differently

Plan C - Bronze
Deductible $2,000
Patient out-of-pocket costs
Breast cancer $12,907
Heart attack $8,400
Diabetes management $960

Plan G - Bronze
Deductible $2,000
Patient out-of-pocket costs
Breast cancer $7,983
Heart attack $6,237
Diabetes management $4,383

Massachusetts has made great strides toward assuring that all residents
will have basic health insurance protection, and the Commonwealth
Connector has surpassed other states in the amount and quality of
comparative health plan information provided to consumers. Yet even in
that state, gaps in coverage persist and consumers may not easily
appreciate what those gaps could cost if they get seriously ill.


Comment: These boring minutiae on benefits of two actuarially
equivalent plans offered through the Massachusetts health insurance
exchange seem like they would have little relevance compared to the
major features of the Affordable Care Act. Quite the opposite. These
numbers demonstrate that the concept of transparency in shopping for
plans in the ACA exchanges is a cruel fiction. It is impossible to know
what your out-of-pocket expenses will be for any given plan that you select.

In ACA, just as in the Massachusetts exchange, plans in the same metal
tier (bronze in the example above) must be actuarially equivalent; that
is, they must pay the same average percentage of covered expenses,
leaving the balance to be paid the patient. But the definition of what
is covered can vary, even while maintaining actuarial equivalency. Thus,
even though the plans have an annual out-of-pocket limit, that applies
only to covered services, which can vary by plan.

This study looked at expected expenses for three serious conditions and
then calculated what each plan would cover. The out-of-pocket expenses
often exceeded the plan limit because of the cost of essential services
that were not covered.

Think about this. When electing a plan you have to decide in advance
whether or not you are going to have breast cancer or develop diabetes
or have a heart attack next year. Then you have to see how much
out-of-pocket expenses you will be left with after the plan makes its

In the case of breast cancer, even though Plans C and G are actuarilly
equivalent, you would choose Plan G with out-of-pocket expenses
estimated to be $7,983 since Plan C would have out-of-pocket expenses of

But wait. Suppose you are going to develop diabetes instead. Then you
need to pick Plan C with out-of-pocket expenses of $960, since Plan G
would entail $4,383 in expenses. Or if you are going to have a heart
attack, you would save some with Plan G at $6,237 as opposed to C at $8,400.

But then consider this. These numbers were not available in the plan
information provided by the exchanges. They were not even available in
the detailed insurance contracts that you receive after you purchase a
plan. These numbers had to be calculated by policy experts who
meticulously reviewed each plan. They didn't even include costs incurred
because of care unavoidably obtained out-of-network. Further, because
the calculations are quite laborious, they did not provide them for the
hundreds or thousands of other disorders you could develop next year.
But then, really, who knows what next year holds for us?

For ACA, the calculations would be even more difficult. Although there
are ten categories of essential health benefits that must be included in
the coverage, the insurers are allowed to vary the benefits within each
of the ten categories as long as they remain actuarially equivalent.
Imagine the calculating tool that would be required to compare plan
coverage. It would challenge the Obamacare exchange computer systems in

The bottom line? Because of private health plan chicanery, it is
impossible to know what expenses you may face in the next year. But if
you develop a major disorder, there is a great risk that you will have
to pay more than the out-of-pocket limit that is posted on the exchange
plan descriptions.

For no more than our current national health expenditures, we could have
had prepaid health care with first dollar coverage for everyone. We
still can by enacting a single payer national health program - an
expanded and improved Medicare for all.

(Those attending the Boston meeting of PNHP this past weekend will
recognize the numbers presented in Figure 2 above. Our thanks to Steffie
Woolhandler and David Himmelstein for bringing them to our attention.)

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