Exchanges Are Mistakes...not Markets

[Yagents]

I still don't understand why people will buy outside the exchange, will the premiums be lower???

Premiums are not allowed to be different in order to avoid adverse selection. People who buy outside, are those with high incomes and those with something to hide. They are not eligible for subsidies and don't want a butt scope from the gov't which will happen inside the exchange where customers are subjected to an IRS check, immigration, child support, and a host of others.

 

[somarco]

Premiums are not allowed to be different in order to avoid adverse selection.

This is new information. Where did you get that?

 

[Yagents]

This is new information. Where did you get that?

I've read it many times, but here's just one item I found googling, but it can be a state to state decision, and I know CA requires it. It's the primary tool to avoid adverse selection:

Feature - The Commonwealth Fund

In order for exchanges to fulfill their intended purpose of providing choice and affordable, high-quality coverage options, protections are needed against both types of adverse selection. The Affordable Care Act contains many such protections; the law:

• requires individuals to purchase minimum health coverage beginning in 2014, ensuring that large numbers of healthy people participate in insurance markets;
• prohibits insurers both inside and outside of exchanges from rejecting or charging higher premiums based on health status or preexisting conditions (beginning 2014);
• makes premium subsidies for individuals and tax credits for small businesses available only through exchanges;
• requires health plans both inside and outside of the exchanges to cover the same defined "essential health benefits" and apply the same out-of-pocket limits;
• requires insurers with health plans inside and outside of the exchanges to combine individuals into one risk pool and small groups into another risk pool (with exceptions for grandfathered plans);6
• requires insurers of "qualified health plans" to charge the same premium for a plan inside and outside of the exchanges; and
• creates risk-adjustment programs whereby health plans outside of the exchanges compensate plans inside them if the former enroll much healthier people.

 

[somarco]

It's the primary tool to avoid adverse selection:

Premium rates have little to do with adverse selection. If someone is looking to screw the carrier they look at benefits . . . at least the part they think they understand.

As for your link and bold statement above, don't you think they are saying you must charge the same premium for the exact same plan?

From what I have heard, plans outside the exchange will be different from those inside. They will still meet "metal" guidelines but will have other differences, including a broader network.

 

[djs]

Premium rates have little to do with adverse selection. If someone is looking to screw the carrier they look at benefits . . . at least the part they think they understand.

As for your link and bold statement above, don't you think they are saying you must charge the same premium for the exact same plan?

From what I have heard, plans outside the exchange will be different from those inside. They will still meet "metal" guidelines but will have other differences, including a broader network.

If they don't understand adverse selection (and I agree with you on this), do you think they really understand 'broader' networks? Would this be considered a difference for a different premium?

The only way plans outside of the exchange will survive is if they can be less expensive than plans inside the exchange. Outside exchange plans can have some technical benefits (such as broader networks), but you can't get people to understand this, or at least not enough to make the plans viable.

It will be interesting in the next few months, since most of this is still simply guesswork and tea leaf reading.

Dan

 

[somarco]

If they don't understand adverse selection (and I agree with you on this), do you think they really understand 'broader' networks? Would this be considered a difference for a different premium?

No, but they do usually ask if "my doctor" is in the network.

We have Kaiser in Atlanta and I have had good success with them, at least for clients that got past the "HMO's are all bad" issue. Most of my KP clients have been with them for years, even those who said they would never have an HMO.

So if an exchange plan doesn't include Dr Smith, but a non-exchange plan does, they might just be willing to buy outside the exchange unless the subsidy (if they are ever funded) ever materializes.

The only way plans outside of the exchange will survive is if they can be less expensive than plans inside the exchange.

No question.

Bronze plan in the exchange is $500 (after subsidy) and non-exchange plan that has desired features but is $800 will never fly.

 

[Yagents]

Let's say you're high income (100k). You can buy a plan or just pay the penalty. You are not healthy. You have a choice to buy inside (no subsidies), or outside the exchange. That person will buy outside if cheaper for same plan. The wealthy healthy person may opt to pay the penalty.

 

[somarco]

That person will buy outside if cheaper for same plan.

If carriers are smart they won't offer same plan design on exchange vs outside.

 

[Yagents]

Happy new year's reading for the weekend. Comments on new exchange regs are located here:
Regulations.gov

 

[russelltw]

I was thinking the exchange was only for those people who qualified for a subsidy. If you don't qualify, you purchase outside the exchange. If you have access to group coverage, but want an indy policy; you by outside the exchange. I thought the exchange was only there for the subsidy. Am I wrong on that?

I was thinking pricing for a carrier would be the same for both plans (in the exchange and outside the exchange), but each carrier would structure their plans differently to meet the "metal" requirements. One may weigh heavy on drug coverage and smaller network while another carrier may offer a more limited drug coverage but have a bigger network.


In my opinion, I think we will have about 3-7 years of renewals. Sell what you can the first year and start expecting cut backs in commissions within 1-2 years. Make all you can in 2014 but have that plan B in place. Even those with significant books with Grandfathered plans, it's only a matter of time before your clients make a change and have to go to ACA plans. Plans may be attractive enough the first few years to convince GF people to switch. Those on high premium GF plans will be the first to switch. In their case, GF is a gimmick. Your plan is expensive now and does not cover everything. It has no new people coming into it to offset premiums/claims, so their plan premium will likely increase even if GF'd. They see a plan that costs similar, but offers more coverage.


For GF plans with low premium high deductibles, those will likely stay on the books longer. Then you have to worry about the carrier deciding to drop all GF plans due to expense of maintaining the computer system to have them in place. Heck, I should just wait until the carriers start floating plan ideas out by end of Q1 or middle Q2.


Need to work on my new niche - Russian nesting dolls. Somarco, you want a set?