Even if you’ve been paying pretty close attention to media coverage of the ACA over the last few years, you might not know a whole lot about the ACA’s catastrophic plans. They haven’t been heavily publicized by HHS or the rest of the Obama Administration, they’re not eligible for subsidies, and they have relatively thin coverage until an insured meets the $6350 deductible. That might make them popular among people who like high deductible plans, but not a first-choice option for most people.
Catastrophic plans are not available to everyone. You can get one if you’re under 30, and you can also – technically – get one if you’re not eligible for subsidies and the other health insurance policies in your exchange cost more than 8% of your pre-tax income. For example, a family of four earning $96,000/year – just above the 400% cut off for subsidies – would be eligible for a catastrophic plan if there were no exchange plans available to them for less than $640/month ($640/month = $7680/year, which is 8% of $96,000). However, it appears that in the HHS-run exchanges, the catastrophic plan options are not showing up for enrollees over 30 yet, regardless of income and other available options. Here in Colorado, we have yet to see a catastrophic plan show up for anyone over 30 in the exchange, although we’ve seen them appear in off-exchange quotes. As with many of the other tech glitches that have plagued the exchanges for the last two months, this is likely to be fixed as time goes by, and eventually everyone who is eligible for a catastrophic should be able to enroll in one if they choose to do so.
But would people want them? Personally, I would be happy with a catastrophic plan. That’s basically what we’ve had for years. Actually it’s a little better, because catastrophic plans cover three primary care visits per year before the deductible, in addition to preventive care. For many years now, we’ve opted for HSA-qualified plans or other similar style policies that cover only preventive care before the deductible. So a catastrophic plan would be an upgrade for us, and I know that there are other families with similar preferences when it comes to their coverage.
But the reason we opt for a high deductible health insurance policy is because it’s a whole lot less expensive than more comprehensive plans. If that were not the case, I would choose a lower deductible plan. In the end, it’s all just basic math.
There have been some news stories recently about how catastrophic plans are a potential wrinkle for the ACA because they’re significantly less expensive than bronze plans, and because their insureds are in a separate risk pool. So too many people (presumably mostly young and healthy) opting for catastrophic plans could tilt the “metal” plans towards older, sicker enrollees with higher health care costs. In states where HHS is running the exchange, the lowest-cost bronze plan averages 26% higher premiums than catastrophic plans, which could draw younger people towards those less-expensive options.
And despite the oft-repeated reassurance that subsidies are available on metal plans to anyone earning between 100% an 400% of poverty level, many young Americans will find that they are not eligible for subsidies even with incomes well below 400% of poverty level. That’s because subsidy eligibility is determined based on the premium of the second lowest-cost silver plan in your exchange as a percentage of your income. If your income is between 300% and 400% of poverty level for example, you qualify for a subsidy if the second lowest-cost silver plan in your exchange is more than 9.5% of your income – the subsidy brings the premium down to this level. But for many young people in many states, the second lowest-cost silver plan is already below 9.5% of their income, without any subsidy. That’s good news, but it’s a tough sell for people who go into the process expecting a subsidy. It’s sort of like retail store marketing… people love knowing that they’re getting a deal. That’s why coupons and sales work so much better than “everyday” lower prices. Anyway, that’s a topic for another post. To make a long story short, some young adults – even with incomes below 400% of poverty – are not getting much (or in some cases, anything) in the way of subsidies simply because their premiums are already relatively low when looked at from the perspective of being less than 9.5% of their income. So the fact that catastrophic plans are not eligible for subsidies might not much of a deterrent if the premiums for the catastrophic plans are indeed significantly lower than bronze plans.
Since Colorado is running its own exchange, prices here were not included in the study that found catastrophic plans to be significantly lower-priced than bronze plans in the HHS-run exchanges. We ran quotes for a hypothetical 27 year old in Northern Colorado and looked at unsubsidized premiums for the 10 lowest-cost options in Connect for Health Colorado (the state-run exchange). Here’s how it broke down:
- Three catastrophic plans with $6350 deductibles. Average premium = $169/month.
- Four bronze plans with an average deductible of $4875. Average premium = $171/month.
- Three silver plans with an average deductible of $1917. Average premium = $196/month.
This is just one test case, and plan availability does vary across the state. But most of the state’s population is concentrated along the front range, and these plans are generally available throughout the front range corridor. As you can see, catastrophic plans here are not exactly a steal when compare with bronze plans. And a savvy shopper doesn’t need to crunch too many numbers to see that a silver plan might be an even better deal. With an average premium difference of just $25/month (silver versus bronze), you’re paying roughly $300 more per year to have a policy with a deductible that averages almost $3000 less. That means you’d have to go about ten years without much in the way of claims to come out ahead with a bronze plan.
We aren’t sure yet how catastrophic plans in the exchange are priced for people over 30 who qualify based on affordability of other options, but it appears that for young people, there’s not a lot of incentive here to choose catastrophic plans over “metal” plans. Hopefully this means that more young, healthy people will end up in the same risk pool with the rest of the population in Colorado, and concerns about destabilized risk pools will be irrelevant here.