Consumers could see high cost-sharing with exchange plans, analysts warn

A new report from HHS may do little to quell the heated debate over whether the health insurance exchanges will be affordable enough that millions of Americans can be persuaded to buy the plans during the six-month open enrollment period that begins next week.

Congressional Democrats cheered the Obama administration's findings as proof that Americans will face more choices, greater competition and better value when they shop for their 2014 insurance policies on the exchanges, which will launch in January.

Some healthcare policy experts, though, cautioned that consumers may not get what they expect from the lower-cost plans and may face high out-of-pocket costs.

In a statement, Rep. Henry Waxman (D-Calif.), ranking member on the House Energy and Commerce Committee, highlighted the report's findings that new competition has led to lower prices, with the average plan premium coming in about 16% lower than the nonpartisan Congressional Budget Office had estimated.

According to the report, the average premium nationally for the second-lowest, silver-tier plan will be $328 a month, which reflects a 16% drop from the CBO's projections. When tax credits are taken into account, according to the administration, 56% of uninsured Americans will be able to get coverage for less than $100 a month.

But Tom Miller, a senior fellow at the American Enterprise Institute, a right-of-center think tank, warned that sometimes the lowest-cost plans are ones that people won't want to buy.

“This is trying to model a set of assumptions, instead of reporting on real actions from real people with real prices,” Miller said. “It's a political exercise, just like a company would do this—put the best face forward before anyone looks under the hood.”

Joel Ario, the former director of the office of health insurance exchanges at HHS, said the report reinforces that premium rates on the bronze and silver plans are better than had been expected and are especially low in some states, such as Minnesota. Ario, now managing director at Manatt Health Solutions, said there are “going to be some good deals” out there for young people who don't have a lot of health needs who opt for bronze plans. But he also tempered that good news with another factor that consumers should consider.

“People consistently underestimate their cost-sharing,” Ario told Modern Healthcare. “There will probably be people buying bronze plans thinking they will not have cost-sharing, and it will be more than they thought.”

That was the conclusion in a new analysis Wednesday from Avalere Health (PDF), which examined exchange benefit designs among 22 issuers in Colorado, Connecticut, Indiana, Rhode Island, Vermont and Washington, where information is available in public rate filings. According to the report, consumers buying plans on the exchanges can expect to pay higher out-of-pocket costs in deductibles, drug coinsurance and primary-care visits. The findings showed that for an individual enrolled in a silver plan, the average annual deductible before any plan coverage begins is more than twice the average deductible in employer-sponsored coverage.

“Consumers will need to balance lower monthly premiums against the potential for unpredictable, expensive, out-of-pocket costs in plans with higher deductibles,” Caroline Pearson, vice president for Avalere Health, said in the analysis. “Furthermore, there is a risk that patients could forgo needed care when faced with high upfront deductibles.”

That sentiment was echoed by Amy Gordon, a partner with McDermott Will and Emery in Chicago, who said she thinks the report had some “skewed information” as the administration works to sell the law to consumers.

“Premium is only one piece of the pie,” Gordon said. “When you're talking about your total spend, you have to figure in your copays, deductibles, coinsurance—all of this is coming out of pocket.” Meanwhile, individuals who previously purchased individual coverage or employer coverage who move into the exchanges might find that they're limited to which providers they can see in their networks.

“Insurers are not stupid,” Gordon said. “They understand the risk involved in the first year of the exchange is so unknown. In order to minimize that risk, they're doing whatever they can to minimize costs,” she added. “The more limited the network, the better able they are to manage the cost of care.”

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said in an e-mail that AHIP is “encouraged by the data we have seen” and that health plans are doing their part to keep costs down while providing consumers with the most affordable coverage options possible.

The conventional wisdom among experts, as well as the organizations in the field working to find and educate eligible consumers, is that there won't be a massive surge of activity when open enrollment begins Oct. 1.

The real activity will happen in November and December, Jason Madrak, chief marketing officer for Access Health CT, Connecticut's health insurance exchange, said during a call organized by consumer advocacy group Families USA.

Ario agreed, predicting open enrollment will be similar to the rollout of Medicare Part D. “It will be a long, hard slog here on enrollment,” Ario said, “not an immediate kind of process.”

Follow Jessica Zigmond on Twitter: @MHjzigmond

Follow Jessica Zigmond on Twitter: @MHjzigmond