- Metallic tiers were simplified
- Cost-sharing was discontinued which resulted in “Silver Loading”
- Four major plan differences: deductible, out-of-pocket maximum, office copay and prescription benefits
- Purchase decision justification
When the Affordable Care Act (ACA) was signed into law on March 23, 2010 the health insurance industry changed overnight. The consumer was suddenly faced with a completely different landscape, with a host of new terms such as essential health benefits, medical loss ratios, guaranteed issue, community rating, subsidies, cost-sharing, all within the newly created health insurance marketplace.
One of the most significant changes involved benefit and coverage design, with plans divided into categories. Health insurance plans were assigned categories in order to allow the consumer more ease when comparing different plans and to understand the level of coverage for each of the categories. These categories were defined as metallic tiers, , Gold, Silver and Bronze.
Each metallic tier has a different actuarial value, which is the percentage of costs each plan will cover. For example, Gold plans have an actuarial value of 80%, which means the plan will cover 80% of healthcare costs, and the remaining 20% will be the responsibility of the insured. Silver plans 70% and Bronze plans 60%. Obviously as the actuarial value increases so do the premiums.
During the first two (2) open enrollment periods consumers had the full complement of plans from which to select. Beginning in the 2016 Open Enrollment period, carriers began reducing the number of metallic options. Platinum plans were eliminated because the premium cost resulted in minimal sales activity. Also, the elimination of the Platinum plans was in response to the insurance carrier exposure, especially with individuals with subsidies who had known medical conditions who would fully utilize the Platinum benefits of low deductibles and high coinsurance participation by the carrier.
By the time the 2017 Open Enrollment period was launched Texas consumers were given multiple options within the Bronze and Silver metallic tiers and limited options within the Gold tier. The change in product mix shifted the interest in Silver plans and decreased activity in Bronze plans. At the end of 2016 Open Enrollment 26% of enrollees were covered by a Bronze plan and 68% were covered by a Silver plan. By the end of the 2017 Open Enrollment Bronze enrollment had decreased to from 26% to 23% and Silver enrollment had increased from 68% to 73%.
The change in product mix was reversed with 2019 Open Enrollment. Bronze plan enrollment increased to 31% of all ACA insured members and Silver plans decreased to 62%.
The principal reason Silver enrollment decreased was due to cost-sharing and how carriers set premiums for those plans. Cost-sharing was available to consumers who make less than 250% of the federal poverty level (FPL). These individuals not only are eligible for subsidies that reduce the monthly premium cost but also financial assistance from the federal government to decrease their out-of-pocket expenses. Cost-sharing results in reductions in an individual’s deductible or their maximum out-of-pocket. However, to take advantage of cost-sharing benefits you must select a Silver plan. Cost-sharing is not available for individuals enrolling in Bronze plans or Gold plans.
Politics played a major role in the enrollment decline of Silver plans. The Trump administration made the decision to no longer fund cost-sharing; however, it was incorrectly reported in the media as ending the subsidies which lower premiums. The carriers expected cost-sharing to end and did not want to set premiums based on government funding that may not occur. Carriers responded with the practice of “Silver Loading”, which refers to the practice of insurers applying the full premium increase attributable to the loss of cost-sharing payments to Silver marketplace plans, rather than raising the premiums for all metal plans by a smaller amount. The result of higher Silver plan premiums meant that insurers received higher premium tax credits from the government. Since a consumer can use their tax credit to purchase any metal tier (except a catastrophic plan), many consumers were able to enroll in Bronze or Gold plans at a much lower premium relative to to prior years. Overnight suddenly Bronze plans were significantly cheaper than Silver plans and Gold plans were a value with richer benefits as compared to Silver plans.
Silver Loading can best be documented by comparing premium increases from 2107 to 2020 plan years by each metallic tier; Bronze, Silver and Gold. Bronze plans increased 19% and Gold plans increased 28% during the three-year period. These increases compared to a 39% increase for Silver plans.
Consumers who did not qualify for cost-sharing were faced with how to evaluate the differences and advantages between Silver plans and Bronze plans. Through counseling clients and discussing the plans and their benefits, Stateside was able to breakdown the major plan differences into four areas: (1) deductible, (2) maximum out-of-pocket, (3) office visit copay and (4) prescription benefits. By focusing on these four areas it became easier to assign a value to the benefit and determine if the plans overall value justified the premium.
A health insurance plan deductible is a predetermined amount of money that an insured member must pay before the health insurance carrier is required to make any benefit payments. The purpose of a deductible is to keep costs reasonable by shifting the initial claims expense from the carrier to the insured member. An absolute rule of health insurance is: the higher the deductible, the lower the price of health insurance coverage (premium) and inversely the lower the deductible, the higher the price of health insurance coverage (premium).
The plan deductible is the first major difference between Bronze plans and Silver plans. Bronze plans, in order to meet the 60% actuarial value as determined by the federal government, were designed with higher deductibles than Silver plans with a 70% actuarial value. The actuarial value target of Bronze plans was accomplished by establishing higher deductible levels than Silver plans. Bronze plans typically offered a $6,000 deductible while Silver plans offered lower deductibles in the range of $1,900.
Texas consumers would project what their initial medical cost would be for the policy year to determine if the additional premium for the lower deductible Silver plan could be justified. Assuming a family of four would pay $600 more in monthly premium to move from a Bronze plan to a Silver plan and reduce their deductible from $6,000 to $1,900, the additional $7,200 in annual premium expense is difficult to justify with a $4,100 reduction in deductible. Since the deductible is only one contributor to the overall cost, the justification for the higher premium does not need to be supported only by the reduction of deductible, but it would need to make a substantial contribution.
The out-of-pocket maximum is exactly what it sounds like. The out-of-pocket maximum, or stop loss, is the amount an insured member will incur before the insurance carrier will pay 100% of healthcare claims. A policy copayment typically will not be credited towards the deductible, but it can be credited to the plan’s maximum out-of-pocket. Monthly insurance premiums are not included in the out-of-pocket maximum. The out-of-pocket maximum is inclusive of the plan deductible.
For a Bronze plan with a $6,000 deductible and a $7,900 out-of-pocket maximum, the consumer will incur an additional $1,900 in medical charges once deductible has been met and before the out-of-pocket maximum is reached. The amount above deductible is consumer’s amount of coinsurance which typically reflects either a 20% share or 30% of each dollar above deductible. The balance of coinsurance, either 80% or 70%, is paid by the insurance carrier.
Consumers will evaluate the out-of-pocket maximum much in the same way as the deductible. What is the likelihood that the insured will reach a plan out-of-pocket maximum and can they justify paying a higher premium to reduce their overall exposure?
Using our family of four example, the Bronze plan would provide a $8,150 maximum out-of-pocket, and be $600 less per month than the Silver plan. However, even though the Silver plan is $600 more in monthly premium, the plan out-of-pocket maximum is the same $8,150 as the Bronze plan. If projected health insurance expense falls between the Silver plan deductible of $1,900 and the $8,150 maximum out-of-pocket, the consumer is probably better off with a Silver plan because the insurance carrier will be paying their share of the coinsurance above deductible. If the projected costs fall between $1,900 and $6,000 the insured would pay all the costs while the Silver plan would pay 70% to 80% of the costs. If expenses exceed $6,000 the Bronze plan is a better selection because the insured will only pay $1,900 to reach the maximum out-of-pocket but avoid paying $7,200 in additional premium.
Office Visit Copay Benefit
An office visit copay establishes a fixed, predetermined price for the consultation with a physician. Many consumers believe whatever services are received during the office visit are covered by the predetermined fee, which is typically either $30, $40 or $60, depending on the plan and the carrier. The office visit in almost all cases only pays the cost of the consultation and examination by the physician. Other services, such as lab, x-ray, injections or supplies are not paid by the office visit copay benefit.
For example, if a policyholder seeks medical attention for a skin condition such as poison ivy, the doctor will examine the patient and may recommend a steroid injection. The examination and consultation will be subject to the office visit copay benefit, but the steroid injection will not be included. The steroid injection will qualify for the negotiated network discount.
The benefit of the office visit copay to Texas consumers is the physician’s charge for the examination and consultation is established by the insurance carrier before the service is received. The office visit copay will apply to a general practitioner or a specialist. Instead of the office visit charge varying based on the scope of the consultation or specialist, the office visit charge will always be the same.
The predetermined charge of a plan with an office visit copay differs from a plan with no office visit copay. The average physician consultation with no insurance in Texas will cost between $125 and $150. If a policyholder has Bronze plan with no copay benefit and the physician is in-network, the office visit will be subject to the negotiated rate, which can be between $70 and $80. The office visit copay — $30, $40 or $60 depending on the carrier, plan and specialty — offers even deeper discounts than the plan without the copay benefits.
In order to justify the $4,800 to $7,200 in additional premium from a Bronze plan to a Silver plan, the family of four would need to visit physicians between 48 and 72 times to realize savings in office visits to pay the full amount of the additional premium.
As with lower deductibles and lower maximum out-of-pocket expenses, the office visit copay benefit cannot fully justify the higher premium but can be used in conjunction with the other plan benefits to make the decision to enroll in a Silver plan the smart economic decision.
The trend for prescription drug costs is continued increases for the foreseeable future. Prescription drug spending growth for 2020 is projected to increase 3.7% due to an increase in projected use, especially with the introduction of new drugs, and faster rate of price growth. Drug spending for the next ten years is projected to increase 6% annually largely as a result of projected faster growth in utilization driven by an increasing older population.
Prescription benefit cost increases are related to price increases with brand name non-specialty drugs and specialty drugs, which are in far greater use than in prior years. Typically, less than 1% of all medications are specialty drugs, those drugs now account for 48% of total projected prescription drug costs in 2020. Specialty drugs in 2020 only represented 50% of total prescription drug costs.
A prescription copay benefit is the one area on its own that can justify the more expensive Silver plan as compared to the Bronze plan. Silver plans offer a prescription copay benefit without having to meet the plan deductible, which for a Bronze plan would require the individual to have $6,850 in total medical costs, including prescriptions before the copay benefit is available.
Silver plans on the other hand offer the copay benefit without having to meet the plan deductible, which means the prescription is subject to the plan’s copay benefit. Prescription copay benefits, depending on carrier and the prescription tier, can either be $0, $10, $50, or a percentage of the retail price after deductible has been met.
Since prescriptions have become so expensive, anyone taking a maintenance drug can typically justify the Silver plan strictly on the copay benefit as compared to the retail price. An ongoing maintenance drug such as Crestor, with a retail price of approximately $170, will cover a large portion of the premium difference between a Silver and Bronze option. The justification becomes even easier when you combine the prescription benefit with either a lower deductible or lower out-of-pocket maximum offered by Silver plans.
STATESIDE CAN HELP!
Stateside Insurance Services, since 2003, has focused on providing comprehensive health insurance information, responsive customer service and expert industry knowledge for Texas consumers. Stateside has annually been recognized by health insurance carriers and the Health Insurance Marketplace as a Top Producer in Texas.
Whether the health insurance policy is for an individual, family, small business or supplemental Medicare coverage, Stateside dedicates the time, and our deep industry expertise, to ensure our clients have identified the best health insurance plan for their specific needs.
Stateside is available to answer any general questions regarding your coverage options, can provide a subsidy determination, and even assist in creating and submitting online applications for ACA compliant plans during an Open Enrollment or throughout Special Enrollment periods.
By using the Telephone Appointment System, clients can take advantage of scheduling a health insurance discussion when convenient for their schedule. During Open Enrollment phone appointment availability is expanded to include extended hours and weekends.