Thursday, September 26, 2013

I Can't Keep My Health Plan!

“If you like your doctor, you can keep your doctor. If you like your current health insurance plan you can keep it.”
    -- President Obama, New Hampshire Town Hall 2009

"Because no matter who you are, what stage of life you're in, this law is a good thing.... if you already have insurance you like, you can keep it."
    -- HHS Secretary Kathleen Sebelius, DNC 2012

"Keep your doctor, and your plan, if you like them."
    -- Minority Leader Nanci Pelosi's website, currently

Well, I wasn't going to write anything about the implementation of the ACA because my views haven't changed much since the last time I wrote about it (see here and here). New information released in the lead up to full implementation of the exchanges hasn't been too far from what was expected a year ago. And I still think the key to good health insurance market reform remains breaking the reliance on employer-provided insurance and passing reforms that promote price transparency and treat insurance as insurance, not as a health care payment plan.

However, my company is changing my health insurance options to become Affordable Care Act (ACA) compliant and I need to evaluate what choice I am going to make, so I may as well share some of that decision making process with you.

How the Affordable Care Act Affects My Insurance Plan

I have good insurance, but even my current plan is not ACA compliant! Here’s how the ACA affects my current plan:

1. “Under the Affordable Care Act, doctor, ER, and urgent care copays will now be included in the out-of-pocket maximum, and accordingly, the in-network out-of-pocket maximum will be increasing from $1,500 for individuals… to $2,650.”
2. “Similarly, to comply with the Affordable Care Act, there will now be a prescription plan in-network out-of-pocket maximum of $3,700 for individuals.” (There was previously no max.)

Here’s the cost comparison:


2013 Plan with Vision
2014 ACA Compliant Plan with Vision
Biweekly Cost to Me
$87.69
$96.05
Calendar Year Deductible
$400
$425

There are a couple of things to notice here. In order to pay for these two benefits (and pay for the increasing cost of health care), the insurance company raised costs in several ways: It directly raised the price I face by 9.5%, increased the deductible by 6.25%, and increased the out-of-pocket maximum by 77%. The employer contribution also probably went up, but I don’t see that in the information I was given. They correctly assume that when making my decision I don’t care about prices I don’t face. 

I suspect this type of thing will be experienced by many others even if they already have insurance through their employers. Luckily, the ACA-compliant version of my plan isn't drastically different from what was offered last year. Others may not be so lucky. Because of these changes, cost increases individuals face will feel larger than they actually are simply because people are forced to consume additional “benefits” that aren't very valuable to them even if the cost curve is “bending down.” 

My Choice

Given that I want to remain insured through my company, I will have two options: buy the ACA-compliant version of the current plan (open access plan or “OAP”) or (new this year) buy an alternative plan that also utilizes a health savings account (HSA). The HSA plan with Vision will have a lower premium ($88.66 biweekly) but a higher deductible ($1,750/year), higher out-of-pocket maximum ($4,000/year), and a different benefits structure. For each claim, the OAP tends to make one pay a small amount then covers the entire cost above that amount. The HSA plan usually covers a fixed percentage of the cost. For example, under the OAP, for an X-Ray I would pay $25 while under the HSA plan, I would pay 10% of the cost (as long as total expenses remain under the out-of-pocket max). 

HSAs combined with catastrophic (i.e. high deductible) insurance have some good properties stemming mainly from the fact that people have more of an incentive to pay attention to and are affected by more prices. When enough people shop around, this puts downward pressure on the cost of care overall. So they are great in theory and would be the backbone of a market-based alternative to Obamacare. Here's one view

I am young and healthy and like the idea of HSAs, so why am I hesitant to sign up for one? A few reasons:

1. The particular HSA plan I am being offered gives only a 9% break on the premium. This is only about $192 a year.

This is partly due to the minimums imposed by the ACA and partly because most of the benefits come from tax deductions from contributing to an HSA. However, I will not be contributing much, if anything, beyond the minimal employer contribution in the next 1-2 years. So the savings from switching are minimal for me right now.

2. Additional hassle of managing yet another account.

3. The account starts at $0. There is a minimal yearly employer contribution, but moderate sized health shocks will be more costly to me for the first couple years under the HSA plan than under the OAP.

4. There is significant turmoil and uncertainty in the health insurance market. Originally, HSA plans were targeted by Democrats during the drafting of the ACA. I am not convinced enough politicians have been converted on them, yet. They may be targeted again in the short term or made otherwise more disadvantageous. Will the money I or my employer contribute really remain tax free and roll-over from year to year indefinitely?

5. While HSAs could be the backbone of health insurance market reform, they are not currently the backbone of the ACA. Not very many people have them, so will the macro effects of price sensitivity by those individuals be felt? I don't think we are there yet. In order to hit a tipping point, HSA plans need to be actively promoted, not tacitly discouraged. 

6. When shopping for the best price, which price will people be looking at? The higher, fake insurance price that gets negotiated down later, or the lower cash price for those without insurance? My suspicion is that when few people have HSAs, they will be forced to shop on and pay 10% of the fake, high price because of the lack of bargaining power and relatively few people shopping around.

It's also relatively easier to switch to an HSA account in a year or two than from one, so I think I am going to swallow the ACA cost increases for now and stick with the traditional insurance.

I have a couple of weeks to decision time, so, what do you think?

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