qotd: AHIP supports catastrophic plans as option

America's Health Insurance Plans (AHIP)
June 2014
Continuing Our Commitment to Consumers: Solutions That Will Enhance
Affordability, Stability and Accessibility in the New Health Care
Marketplace

Enhancing affordability by creating a new lower premium Catastrophic
Plan option

While millions of Americans have the peace of mind that health insurance
provides, more can be done to maximize choice and affordability for
individuals and families. As a solution to bring more families into the
marketplace:

Health plans support the creation of a new, lower-premium catastrophic
plan.

Such a plan would offer consumers the option of coverage that has lower
monthly premiums but still provides the comfort of knowing that their
costs will be limited in the event of a serious illness or injury.

Under the ACA, plans offered in the marketplaces fall into several
metal-level categories, based on their "actuarial value" (AV) standard -
essentially, what percentage of health care costs the policy would cover
for a standard population. Plans are labeled as platinum (90% AV), gold
(80% AV), silver (70% AV), or bronze (60% AV). A limited number of
individuals — including individuals under the age of 30 — also have the
option to purchase a catastrophic, high-deductible plan, although it has
an actuarial value that is comparable to the bronze plan.

The new catastrophic plan would offer an AV just below the current
minimum requirement, allowing for lower premiums, but would still
include coverage of the law's mandated essential health benefits, have
no annual or lifetime benefit limits, and cover all preventive health
services with zero cost-sharing for consumers. This would allow
individuals and families eligible for premium subsidies to use that
financial assistance to purchase the new plan, an option currently
unavailable to consumers purchasing the ACA catastrophic plan.

We believe a new catastrophic plan would further the public policy goal
of affordability and call upon policymakers to expand consumer choices
by allowing this lower-premium option to be offered.

http://www.ahip.org/News/Press-Room/2014/Policy-Solutions/

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Comment by Don McCanne

One of the worst failures of the Affordable Care Act (ACA) is that, even
with subsidies, the premiums and out-of-pocket expenses are unaffordable
for far too many people. AHIP now proposes to make the premiums slightly
more affordable by offering catastrophic plans with very high
deductibles that would make accessing health care truly unaffordable for
even more people (cost sharing subsidies are available only for silver
plans, but coverage of the proposed catastrophic plans would fall even
below the lowest-level bronze plans).

Why would they do this? Could it be that they want to capture a portion
of the market of the 31 million people who will still remain uninsured
after ACA is fully implemented?

Who would actually select these plans with very high deductibles but
lower premiums? Those with very low incomes who would struggle even with
subsidized premiums might choose these plans if they consider their
subsidized premiums to be "all that they can afford." These are
individuals who would be much more likely to forgo essential health care
simply because they couldn't afford their portion of the deductibles.

Very high income individuals might select these plans to insure against
catastrophic losses while deciding to self insure against more modest
medical costs. The problem with this is that this is a form of
regressive financing of the insurance risk pools. Since average health
care costs are well beyond the means of middle income families to pay
for them, wealthier individuals need to contribute more to the
collective insurance pools (as they would in a single payer financing
system). The AHIP proposal for low-premium catastrophic plans would
allow them to contribute less than average instead.

For healthy middle-income families there is a preference for the
tradeoff of lower premiums for higher-deductibles - an observation
confirmed by behavior in the individual insurance market before the
enactment of ACA. Families that remain healthy will come out ahead, but
those families that later face significant health problems often find
that they will face severe financial hardship as well - even bankruptcy.

So the insurance industry is taking a position that they can increase
their market, that they will not have to pay for routine medical
expenses, and that they can lower their medical losses by paying only
for the comparatively few individuals with high medical expenses. Little
does it matter that they have the health coverage function backwards in
that the healthy and wealthy do very well but the sick and poor suffer.
Limiting essential protection for the most vulnerable demonstrates again
why the private insurance industry should be dismissed.

The insurance industry has been very successful in getting innovations
that benefit themselves. This release by AHIP suggests that this is the
beginning of another self-serving public campaign - this time to allow
individuals to have (in marketing terms) "the choice of purchasing only
the insurance they need" - a high-deductible catastrophic health plan.

Social solidarity takes another beating.