Earlier this spring, Karen Ignagni, President and CEO of America’s Health Insurance Plans (AHIP), proposed adding another level of coverage to the currently available metal options. Some have referred to it as a “copper” plan, and it would offer lesser benefits than bronze plans, but would also come with lower price tags. Ignagni referenced the ACA provision that requires plans to cover the ten essential benefits as a major factor in driving up premiums, and I absolutely agree. But for the most part, I think that they need to be covered. The whole point of health insurance is that it should cover whatever medically necessary claims you end up having, even if it’s something you never could have anticipated. There are some essential health benefits (maternity coverage, for example – which was already mandatory in Colorado) that I don’t personally need on my own policy. But my health insurance isn’t supposed to be all about me. It’s not supposed to only cover things that I will likely or possibly need it to cover. Instead, it should cover all of the things that the whole population might need… that’s the whole point of insurance – to spread risk across as large a group as possible. My goal is to make sure that I need as little medical attention as possible for as much of my life as possible. But I still need health insurance, and I need it to cover things that I might not think I’ll ever need.
What I don’t necessarily need is a low deductible. I’ve written many times about how our family has long had high deductible health plans. We used to have an HSA-qualified plan, but we switched to an Anthem Blue Cross Blue Shield plan a few years ago that isn’t HSA-qualified (but still has a high deductible – too high to be allowed under the ACA, so we’ll have to switch to a new health plan at the end of this year).
But let’s talk more about this copper health insurance plan level. What if we left the essential health benefits intact, but allowed for a plan with higher deductibles? Some people are willing and able to self-insure the day-to-day things. I’m not just talking about our own family, but also about a large chunk of the clients we work with who are not eligible for subsidies in the exchange. People who are eligible for subsidies can pick a plan with richer benefits without paying the full cost of the plan, and that’s a great feature of Obamacare. And of course, anyone who qualifies for cost-sharing subsidies should absolutely choose a silver plan. But we work with a lot of people who aren’t eligible for subsidies at all. And since our existing clients are in the individual market, they were able to qualify for a medically underwritten plan prior to 2014. For people who were healthy enough to get a plan prior to 2014, and who do not qualify for subsidies, there is no way around the fact that their premiums are going up this year. For people in the Colorado mountains, premiums are going way up. There are plenty of factors involved, but one is certainly the lower out-of-pocket maximums required by the ACA.
Some people like the lower out-of-pocket limits. And for them, there are bronze, silver, gold and platinum plans that all have 2014 maximum out-of-pocket limits that do not exceed $6,350 for an individual or $12,700 for a family (platinum plans often have lower limits). But some people would prefer to self-insure to a higher level than that, in trade for lower premiums. Our approach to all insurance products has always been to insure against a loss that we couldn’t handle on our own, rather than insuring against every conceivable loss. And a lot of our clients have a similar philosophy.
Copper plans a good fit for people who opted for early renewal last year
Last fall, a large number of our clients (along with our own family) accepted carriers’ offers to renew existing policies late in 2013 and keep them until late in 2014. Most of these clients are not eligible for subsidies (many of the ones who are eligible for subsidies have already purchased a new, better policy), and will be paying full price for an ACA-compliant plan starting at the end of this year. Many of these people would prefer a higher deductible in trade for a lower premium. But for now, that’s not an option.
I agree with Ignagni that copper health insurance plans would be a great addition to the ACA stable. But I don’t think we should mess with the essential health benefits. Instead, I’d rather see a plan that still covers all of those benefits, but with higher initial cost-sharing. You get lower premiums, and you’re paying for healthcare yourself if your expenses are below the deductible. But if you end up needing $850,000 in medical bills, the insurance policy pays for almost everything.
I’d be the first to admit that copper health insurance plans are not for everyone. If you couldn’t afford to cover the out-of-pocket costs in the event of a claim, a high deductible policy like this would be a bad choice. But most of the people in that situation are now eligible for subsidies in the exchange, so they can purchase better plans with lower net premiums. There’s one huge, glaring exception for now: People who are in the coverage gap in red states that have refused to expand Medicaid. Unfortunately, these people cannot afford to pay full price for any health insurance policy, and they’re also not eligible for Medicaid or premium subsidies. Their only realistic option for now is to remain uninsured. And although they do qualify for a hardship exemption from the individual mandate penalty, that doesn’t help them gain access to insurance.
Creating a “copper” level health plan does nothing at all to help people in the coverage gap. These are people with household incomes under 100% of poverty level ($23,850 for a family of four). Deductibles would have to be sky-high (or benefits cut to the bone) in order to get the premiums down to an affordable level, at that would be entirely counter-productive for people who cannot afford to self-insure anything more than the smallest medical bills. For people in the coverage gap, the only realistic solution is for the remaining states to expand Medicaid as quickly as possible. Unfortunately, it’s probably going to take several years and a few elections cycles for all the states to get on board with this.
Wendell Potter addressed the addition of a copper level health insurance plan in a recent post at HealthInsurance.org, and his points are excellent. He too believes that a new plan with lesser benefits does not properly solve the problem of people in the coverage gap. But while Potter comes to the conclusion that adding a new plan with reduced benefits isn’t a good idea, I think that it could be a great idea if properly implemented. As I’ve already said, I think that the essential health benefits should be left intact. But I believe that there’s a significant market for plans with higher deductibles, marketed primarily towards people who either don’t qualify for subsidies at all or who only qualify for small subsidies. Potter notes that high-deductible plans are popular with insurers because of their profitability, and I don’t deny that. But they’re also popular with a segment of insureds, because they can be a financially rational choice for some people.
I’ve always found it interesting that the ACA’s catastrophic plans are only available to people under 30 and those with an economic hardship exemption. Realistically, a person with an economic hardship exemption – and people under 30 – are the least likely to be able to afford to cover the out-of-pocket costs on those plans. Almost nobody has purchased those plans, for a variety of reasons: the premiums are not that much lower than bronze plans, people under 30 are very likely to qualify for premium subsidies, which cannot be used for catastrophic plans, and people who qualify for economic hardship exemptions generally cannot afford the premiums anyway (people whose health plan was cancelled in December are eligible for a hardship exemption and may purchase a catastrophic plan, but many of them have been able to purchase a subsidized plan in the exchange instead).
Wouldn’t it have made much more sense to make catastrophic plans available to people of any age, offer them with higher out-of-pocket options, and market them towards people who are willing and able to self-insure against all but the truly catastrophic expenses? And we should note that the amount that qualifies as “catastrophic” is very subjective. An amount that would deplete my family’s HSA entirely would probably be considered pocket change by the wealthiest Americans. Which is why a broader range of options is a good idea – there is no one-size-fits-all.
I know that providers are uncertain about very high-deductible plans, simply because there’s a concern that people won’t be able to cover their out-of-pocket bills in the event of a large claim. I would be ok with a requirement that people purchasing such plans provide proof of assets in order to show that they would be able to pay the deductibles if necessary. Or to simplify things, we could just say that very high-deductible plans are not eligible for premium subsidies, which means they would be more popular among people with incomes too high to qualify for subsidies anyway.
In each state, each carrier has to count all of their individual policies as part of the same risk pool (and in some states, small groups are also included), including plans sold on and off the exchange. “Copper” level plans would be included in that same risk pool, and there could be a requirement that even off-exchange, a carrier could not choose to sell only copper plans in an effort to target the healthiest and wealthiest applicants. So the people who would opt for copper plans (generally healthier and probably more affluent than average) would be in the same risk pools as everyone else.
In summary, copper plans aren’t for everyone, but it would make sense to have them as an option. They would allow people the ability to choose a lower-cost health plan in trade for more exposure, but would not be a “bare bones” policy full of holes in the event of a serious claim. And among our clients who are going to be selecting ACA-compliant plans for the first time at the end of this year, copper plans would no doubt be a popular, rational choice.