By Jed Graham at Investor's Business Daily
Reports continue to flow in of big ObamaCare premium spikes that will hit exchanges around the country in 2017.
But if the premiums don’t shock you, the deductibles very well might. Not only are bronze deductibles rising as high as $7,150 in 2017, from a maximum of $6,850 this year, but silver deductibles of $6,000 or more are becoming commonplace. In fact, Centene (CNC), one of the most aggressive exchange competitors when it comes to pricing, is planning to roll out a new silver plan with a $7,050 deductible next year under the Ambetter name — to go along with the $6,500-deductible silver plan it’s already offering. Amazingly, Ambetter had just a $1,750 silver-plan deductible in 2014.
Silver Deductibles Cut Bronze Subsidies
The problem for exchange shoppers is that ObamaCare premium subsidies are set based on the cost of the second cheapest silver plan in each market. The effect of Centene’s sky-high-deductible strategy is to scrunch down silver-plan premiums closer to the cost of a bronze plan and shrink the government subsidies that are supposed to help make coverage affordable. If customers don’t like the cheap Ambetter silver plans on offer, they’ll have less of a subsidy to buy a bronze plan or a silver plan from a competitor.
Thanks to Centene, the subsidy available to 30-year-olds earning $30,500, just over 250% of the poverty level, will shrink from about $627 this year to $571 next year in Indianapolis, an IBD analysis finds.
Centene pursued the same hard-nosed strategy this year, selling silver plans with bronze-like deductibles of $5,500 and $6,500 in Miami, Atlanta and Jackson, Miss. While its cheap silver plans have helped the company boost enrollment, it’s no coincidence that those three markets are the most expensive major markets on HealthCare.gov for buying subsidized bronze plans.
While Centene filings have only been made public for Indiana, Ambetter plan designs in the Hoosier State mirror those in Florida, Georgia, Mississippi and Washington state this year, so those states and others also may see $7,050 silver deductibles in 2017.
As IBD noted recently, Blue Cross of Idaho plans to offer a $6,850-deductible silver plan in 2017, which would make a pregnant woman pay $7,010 for delivery of her baby. Blue Cross of Idaho’s highest silver-plan deductible this year is $4,000. But after hiking premiums about 22% last year and being underpriced by competitors, the company may be turning to a much higher deductible as a way to hold down premium price hikes for 2017.
The story for Centene is much different. The company, which expanded from Medicaid managed care into the individual commercial insurance market with the launch of ObamaCare, is one of the few insurers making solid profits on the exchange. Although other insurers in Indiana are seeking double-digit price hikes, and Anthem (ANTM) has requested a 30% increase, Centene has proposed a 5.3% rate cut.
Aetna (AET), which saw its ObamaCare enrollment shrink from a year ago in the first quarter, filed to begin offering exchange coverage in parts of Indiana and will apparently start with the lowest-cost bronze plan on the market, just 3.6% higher than this year’s cheapest bronze plan. Yet because of the smaller subsidy, the after-subsidy cost of the cheapest bronze plan will rise 7.6%.
Aetna’s lowest-cost silver plan, by the way, will carry a $6,075 deductible, though the maximum out-of-pocket spending on medical services also will be capped at $6,075, below ObamaCare’s $7,150 maximum for 2017.
Some Benefits Covered
While the high silver-plan deductibles can leave people on the hook for huge expenses before insurers pay much in the way of benefits, they’re not as bad as they sound, because some benefits are provided before the deductible is met. Aetna’s plan charges $10 per primary care visit (excluding x-rays), $10 for laboratory tests and $5 for generics, but plan members are on their own for most big-ticket items.
Before Ambetter’s $7,050 deductible is met, members can pay $30 for a primary-care visit and $60 for a specialist; $15 for generics; $50 for preferred brand drugs; $100 for urgent care; $30 for prenatal and postnatal care; and $60 for diabetes management. But that still leaves huge holes for surgery, MRIs, specialty drugs; hospitalization and more.
Another important consideration is that the full deductibles only apply to individuals and families earning more than 250% of the poverty level. Those with lower incomes get extra cost-sharing subsidies — the subsidies that a federal judge just ruled have been funded without authorization and in violation of the Constitution.
But those subsidies are pretty meager for people earning between 200% and 250% of the poverty level. For this modest-income group, Aetna’s $6,075 deductible is only reduced to $4,875, while Centene’s $7,050 deductible is reduced to $5,250.
Centene’s high deductibles may be one reason that the company, unlike UnitedHealth (UNH), has said it didn’t experience any problems with people signing up for coverage midyear and running up big bills. People with urgent health needs are more likely to pay up for plan that limits out-of-pocket costs and provides a broad network of hospitals.
ObamaCare was supposed to balance risk among all insurers by transferring funds from carriers which attract low-cost customers to those that are a magnet for the sick, but risk-adjustment hasn’t worked as intended for a variety of reasons, including the failure to consider customer use of prescription drugs in weighing an insurer’s risk. Now the Obama administration is focused onmaking risk-adjustment work better, with uncertain implications for insurers’ profitability.