Monday, October 28, 2013

Thanks, Professor Ocasio!

I want to thank Willam Ocasio, Kellogg professor of management and operations at Northwestern University, for saving me some money. He read my last post about my family's Blue Cross Blue Shield of MA plan under the Affordable Care Act and suggested that I could save "a lot of money" by choosing the $500/$1000 (individual/family) deductible plan instead of the plan with no deductibles.  It turns out that he is right, but it also turns out that I am still worse off than my current Massachusetts Connector plan. 

This BCBS plan under the ACA is about $350 less per month than the no-deductible plan.  Even if I run through the $1000 in deductibles during the course of the year, I break even after three months. Inexplicably, too, the visit and imaging co-pays are less than they would be in the ACA no-deductible plan.

But now, let's compare the ACA deductible plan to my current Massachusetts BCBS plan:

So, my initial point remains valid. I am still worse off under the Affordable Care Act than I was under the Massachusetts plan. My premium has gone up $220 per month (or 15%), and I will likely spend another $1000 covering the deductibles. My total percentage increase depends on how much additional care I need past my deductibles. Paradoxically, the more I need to use medical services, the smaller my annual percentage increase.

By the way, it is not clear to me how many people will have the time and inclination (and math skills) to compare the 95 plans on the Massachusetts exchange--but I guess I'm pleased that the data are available for all to see . . . including a helpful professor from Illinois!


Pat Thomas said...

Paul if the premier of the ACA proves one thing it's that a old school human insurance agent is a most valuable resource.

The human agents perhaps should have been the 1st gateway to the program. Determining insurance needs is complicated be it auto, home, life or health.

For millions people entering the marketplace for the 1ST TIME... going to a trained agent is probably the best best-and not via web or phone.

Barry Carol said...

Whatever happened to the president’s promise of “If you like your health plan, you can keep it?” I think this broken promise will create a lot of ill will among people who had health plans they liked but that don’t meet the ACA’s benefits requirements.

Since the federal penalty, at least in the early years, is considerably lower than the Massachusetts penalty, at the margin more young healthy people could opt to go without insurance if their net cost of purchasing significantly exceeds what they were paying before. If too many of them do that, insurance premiums could increase a lot in 2015.

For those who do buy into the expensive MA market, the taxpayer’s cost for subsidies could be higher than expected since each person with income at or below 400% of the FPL will not have to pay more than 9.5% of income at most toward the insurance premium.

It would have been nice if the ACA included some meaningful efforts to mitigate cost growth including sensible tort reform and encouragement of reference pricing where it makes sense such as imaging and surgical procedures. Perhaps that could happen at the state level more easily.

Paul Levy said...

Lots of over-promising, Barry!

Anonymous said...

We purchase our plan from the MA health exchange, and aren't going to be able to stay on it past next March. So, we definitely can't "keep our current plan if we like it."

The ACA does some good things for people around the country. But, here in MA - where those issues had already been solved - some individuals and families will certainly be worse off than under the previous state-based rules.

Paul Levy said...

Barry, I just found out the answer. Under MA law, plans were priced according to the subscriber's age. Under the ACA, they must be priced according to the ages of all people covered by the plan.

Since our plan is in my wife's name and she is younger than I, once the new rating factors were in effect, our premium went up in consideration of my age.

This is all detail to confirm what you have just said: The President's comment was misleading when he said that you would be able to keep your health plan, at least so far as "keeping it" would imply to most people that you could keep it at a comparable cost.

Dennis Byron said...

You're lucky. You can afford it.

If I am reading the material right it is -- as usual -- the poor guy making $30K that gets a bad deal. (And I will be happy to stand corrected for the sake of the guy who really needs the help. Since they took my Medicare money to pay for this mess, I at least hope some poor people get helped.)

For a 60 year old getting an average (middle of the road Silver plan) $500 a month policy (for about $150 with his tax credit), it looks like he gets a physical, an annual flu shot, and maybe -- not in all plans -- a few gratis visits to a doctor for other reasons. Then he enters the "Obamacare donut hole," where you has to spend $2000 out of pocket. After that -- he is now out the $2000 plus the $1800 in premiums and any prescription costs and normal out of pocket (OOP) healthcare costs not covered by most insurance -- and he has a $1000 copay for an admitted hospital stay, $750 co-pay for outpatient procedure, $350 for an ER visit, all kinds of copays for lab work, etc. etc. There is a $6350 annual OOP limit.

Bless his RINO heart, this makes Romney look good. People on Romney's subsidized insurance this year with from $25,000 to $34,000 can get a $500 a month policy for about $100 a month on average. But unlike next year's Obamacare policy I described above, with subsidized RomneyCare this year he only has to spend $250 out of pocket -- not $2000 -- before the benefits kick in. After that -- he is now still out the $250 plus the $1200 in premiums and any prescription costs and normal out of pocket (OOP) healthcare costs not covered by most insurance -- but he only has a $200 copay for an admitted hospital stay, $150 co-pay for outpatient procedure, $50 for an ER visit, almost no copays for lab work, etc. etc. And there is a $1250 -- instead of a $6350 --annual OOP limit.

I hope I'm reading it wrong but it's like they designed the program to give their own base the worst deal?

e-Patient Dave said...

This will be long because it's a complex subject. Seems to me that if we want to evaluate the plan as a whole, we can't stop at evaluating each isolated point in the system.

(I'm no insurance expert here, so I can be out-argued by anyone who knows the geeky details; this is all my personal impression as one engaged consumer.)

A lot of people (not you) seem to be surprised that insurance (a complex, math-based business that must cover many scenarios) is complex and math-based. We who used to have a small set of good choices through an employer have sometimes had damn few choices recently, and now we have a slew; confusing and hard to compare.

Meanwhile the scope of the population being covered has changed, and probably a thousand other variables. Messy.

I'll bet that for any random set of individuals, some in the new system will find prices going up and some will find prices going down. Difficult for the losers.

Two years ago in NH I found I had *no* commercial insurance policies available, because I'd had cancer. Doesn't that just make you love the souls of the a-holes who get to say "I ain't touchin' you"? And the regulators who agree that's perfectly okay?

I shopped intensely, using all my spreadsheet skills to build scenarios - in truth, that's what anyone needs to do, to make a fully informed choice on insurance, yes? What was stunning in the end was that most of the choices were pretty much identical after $5k of actual spending. I blogged the process (and the scenarios spreadsheet) here.

I chose $10k deductible, and that was fine with me - a $495 premium. Not bad for a 61 year old ex-cancer patient! I filed almost no claims, but my premium went up 20% the next year, 10% the next. Oh well: the nature of insurance is everyone sharing costs.

This year, on there are no more pre-existing conditions, so I'm in. As I mentioned on FB last night, for the same $666 premium I can now get $2500 deductible (75% less!), or $5500 for $549 with $0 copay, or 8 other options.

So like a third world person walking into Best Buy, now I have a dazzling array of options - ten, vs the 4 I had before. How do I choose? I'm inclined to agree with Pat that a good ol' human insurance agent will be helpful!

p.s. I had almost no trouble using There were a couple of places where it asked stupid questions, and I got 3 various confirmation emails, which seemed more than necessary. But the delays I experienced on 10/1 were gone.

Barry Carol said...

E-patient Dave,

I’m glad to hear that you were able to find a health plan that works for you at a comparatively reasonable cost. However, the biggest controversy surrounding this whole issue is whether or not a sufficient number of young and healthy people will sign up for insurance or will the insurance pool consist of too many older and sicker people to make the numbers work. The industry calls the latter situation adverse selection and it’s potentially the Achilles heel of the ACA.

At the population level, young healthy people will pay significantly more in premiums than they will incur in medical claims with the surplus going to help pay for the older and sicker folks. To the extent than many of these younger people have comparatively modest income; they may feel that the cost of insurance is not worth it because it crowds out too many other things that they would prefer to spend their money on. If they can buy health insurance for $100-$150 per month after subsidies, that may be low enough for them to perceive it as a good or at least acceptable value. If it’s $200 or more, it could become problematic.

While I can appreciate the attitude among younger people that they are being forced to buy a policy that they think they don’t really need so older, often wealthier people can pay less than what their full actuarial risk would call for, I note that us older folks who no longer have children in the public school system still pay hefty property taxes to support the schools. In NJ, where I live, we have the dubious distinction of paying the highest property taxes in the country relative to the value of our homes.

My bottom line is that the proposed system of mandates, subsidies and a limit of charging older people no more than 3X what younger people are charged is reasonable. We’ll see how it plays out.

Anonymous said...

Underlying everything else - health care is much too expensive in this country.

If we were paying 8% to 12% of GDP (like the rest of the industrialized world does for universal and better care), rather than closer to 18% all of our rates would be roughly half lower.

The only process I know that can drive down health costs as opposed to maintaining them at an overly high level, is price competition.

We need accountable care organizations to manage populations successfully and compete with each other on quality and price.

Why is this so slow to develop in Massachusetts?

Barry Carol said...

Medicare patients who are assigned to ACO’s can still seek care from any provider they choose whether they are in the ACO network or not. That means that the ACO does not have total control over the continuum of care of those patients which makes it harder to control healthcare costs. Moreover, the ACO’s probably are not (yet) capable of assuming significant actuarial risk and the potential rewards under shared savings contracts to not appear to be especially large so far.