Insurers Propose Adding a Copper Plan to the Health Insurance Marketplace

health-insuranceAHIP, the trade association for insurers and some Members of Congress are proposing to allow consumers another insurance option in the health insurance Marketplaces. The proposed Copper Plans would pay half of medical expenses (actuarial value of 50%), compared to 60% for the Bronze Plans and 70% for the benchmark Silver Plans. My only concern about adding another tiered plan is that still does not provide insurers with enough flexibility. Insurers need the flexibility to experiment with value-based insurance design, Health Savings Accounts, selective-contracting (i.e. narrow networks) and cost-sharing arrangements not currently allowed under the PPACA. But, the busybodies who think they know what’s in consumers’ best interests are critical of the proposal. According to Kaiser Health News:

Insurers and some U.S. senators have proposed offering cheaper, skimpier “copper” plans on the health insurance marketplaces to encourage uninsured stragglers to buy. But consumer advocates and some policy experts say that focusing on reducing costs on the front end exposes consumers to unacceptably high out-of-pocket costs if they get sick. The trade-off, they say, may not be worth it.

This reminds me of an observation I began to notice years ago; so-called Consumer Advocates rarely trust consumers to make their own decisions — and generally take positions that are decidedly anti-consumer. But, I digress.

Many of the experts interviewed for Kaiser’s article predicted such a plan would have a hard time attracting customers. They may be right. For instance, the Kaiser Family Foundation calculates that a Copper Plan would require a deductible of $9,000, which would not be allowed under current law. In years past, insurers found the uninsured were not particularly enamored with low-cost health plans that had deductibles so high they were of little benefit. What consumers did (often) like were plans that were low-cost, less comprehensive but allowed some first dollar benefits. For instance, a limited benefit (3-share) plan was put in place for moderate-income families after TennCare was scaled back in 2005. The new plan, CoverTN, featured a maximum benefit of only $25,000, but also provided for a number of physician visits and generic drugs with little cost-sharing. The plans were quite popular; nine months into implementation less than a handful of the 15,000 enrollees had exceeded their maximum benefit (we wrote about it here). Indeed, Milliman estimated 98% of enrollees would not experience medical problems that exceeded their maximum benefit. Enrollees were willing to trade some of the protections against risks unlikely to occur (like getting run over by a bus) for protections against events that were likely to occur (catching the flu). Most people expect to visit the doctor a few times per year and possibly fill a prescription or two, but not enter the hospital for something serious.

There is no perfect health plan design that would meet the needs of all consumers. That’s why insurers need flexibility to experiment with plan design. A Copper Plan may be a good place to start, but it should not stop there. What some consumers want may be a Tin Plan, a Lead Plan or any number of variations in between.

Comments (23)

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  1. Buster says:

    What some consumers want may be a Tin Plan, a Lead Plan or any number of variations in between.

    The next time I’m admitted to a hospital, I plan to tell the admissions clerk that I have a “Lead Plan.” When she says “what’s that?” I will explain my plan will pay all claims in silver dollars minted out of lead! If she requires me to pay a deposit up front, I’ll pay her with Monopoly money!

    • Dale says:

      Plead ignorance and pay your bills in the metal that your plan is tiered under.

      Actually, I am sure there already is some sentence in ObamaCare addressing that.

    • John R. Graham says:

      My major problem is with the name! The current plans (bronze, silver, gold, platinum) consist of one alloy and three elements. The actual metals increase in value as the plans cover more costs.

      Bronze is an alloy of copper and tin. Tin is cheaper than copper. Therefore, a given mass of bronze is cheaper than the same mass of copper, right?

      So, the current portfolio should be called: Copper, silver, gold, platinum. And the new (50%) plan should be bronze!

      Of course, I am no metallurgist, so please correct me if I’m wrong.

  2. Linda Gorman says:

    How about we go back to people purchasing the plans that they want, not the plans that the government says they must have?

  3. Jay says:

    “What some consumers want may be a Tin Plan, a Lead Plan or any number of variations in between.”

    There aren’t enough precious metals to cover all of the tiered plans to make ObamaCare successful!

  4. Walter Q. says:

    “…so-called Consumer Advocates rarely trust consumers to make their own decisions”

    If only “consumer advocates” would listen to consumers, then maybe we would get somewhere in finding the types of plans they want. There is such a thing called consumer power, believe it or not.

  5. Matthew says:

    “Enrollees were willing to trade some of the protections against risks unlikely to occur (like getting run over by a bus) for protections against events that were likely to occur (catching the flu).”

    Plans like this, that do not cover catastrophic events, would be great alternatives for individuals who do not want to pay high premiums, and are willing to take on more risk to do so.

    • Thomas says:

      Perhaps younger individuals would be more accepting of cheaper plans that are less inclusive, instead of all the mandates that ObamaCare sets.

  6. Frank says:

    Such an idea should have no problem getting support because it seems intuitive. As long as people have the option to choose to pay high deductibles, rather than being forced into it by issues like pre-existing conditions, then so be it.

  7. John Fembup says:

    “The proposed Copper Plans would pay half of medical expenses (actuarial value of 50%)”

    Pay half, huh?

    Ironic isn’t it how the federales jumped thru hoops to require full coverage of a super-comprehensive menu of “basic services” – including services HHS deemed basic and thus necessary even though not mentioned in ACA itself – while at the same time limiting the coinsurance on everything else. And the latest proposed limit is “pay half”.

    Ironic too that the Platinum, Gold, and Silver plans are proving not so “affordable” after all, so that an even baser metal, Copper, is now proposed as the answer not only to the unaffordable ACA options, but also the answer to the “junk insurance” we suffered with before ACA.

    What a tangled web we weave, when first we practice to deceive.

  8. Jimbino says:

    Instead of a series of postings about the relative merit of all the ACA plans, why don’t you just research and publish data on the “Expected Return on the Premium Dollar” for all the various ACA plans, for various subscribers ranging from young single men to families with a pregnant woman?

    That would be real information we could all use, and would contribute to the Death Spiral for Obamacare once young single men figured out they need to drop out of ACA altogether.

  9. Steve says:

    This article highlights precisely how government bureaucrats hate true market competition. They should have NO problems with another option for consumers, and should not oppose consumers having unlimited options when it comes to purchasing (IF they so choose, of course) the health insurance of their choice.

    Consumers ought to decide, not some government bureaucrat in Washington. The idea of some magical “minimum coverage” is dubious, and the notion that progressives are smart enough to what such coverage would be is downright insulting.

  10. Erik says:

    AHIP is the United HealthCare Lobby arm. UHC has the worst customer service and highest claim denials of all insurers.

    I would not take advice from AHIP it would make one seem uninformed.

  11. Bob Hertz says:

    I have been in favor of “mini-med” or limited benefit health insurance plans for years.

    The difference is that I would combine them with automatic, catastrophic Medicare for anyone.

    Let individuals carry $25,000 of health insurance.

    If they have a large claim, Medicare can cut the large claim down to size and then pay the overage with public funds.

    Say that 50 million persons under age 65 had limited benefit health insurance.

    About 1 million of them would have a large claim each yaar. If the large claim was $25,000 more than the cap on their personal policy, Medicare would pay the difference.

    If the large claim was $200,000 over the person’s limit, I personally would like to see Medicare chop the claim back down to $25,000. Virtually all the large claims that I have read through involve grotesque price gouging by drugs and vast overcharges by hospitals for a relatively few days of care.

  12. eric novack says:

    Devon- but if you do not protect the right of people to spend their own money as they choose, and all providers to accept direct payment — you are not really increasing choices for people in a meaningful way.

    Increasing plan choices by minimizing up front costs and creating unachievable out of pocket requirements (that will be totally underplayed during selling the policy), then trapping people ‘inside’ those plans — is the insurance equivalent of the old ‘roach motel’ (you can check in, but you can’t check out)

    • Devon Herrick says:

      I agree that relying solely on high-deductibles to reduce medical spending is too simplistic. (See my comment to Bob and Don below.)

      The original design of Medicare Part D had relatively low deductibles (~$250) and paid 75% of the next $2,000 in drug spending after the deductible was met. Because of this design, relatively healthy seniors found the plans to be beneficial — as did seniors on many drugs. But there was also a $3,000 “Donut Hole” where seniors were required to pay all drug spending out of pocket for expenditures between $2,250 and something like $5,250. Once this threshold was met, 95% of drug spending was covered by Medicare. Because there was this coverage gap, premiums were affordable. Thus, healthy seniors would enroll, while sick seniors had affordable coverage. Seniors whose annual spending fell in the middle of the donut hole still did fairly well.

      Yet, had early designers decided Medicare Part D should have a, say, $2,000 deductible, healthy seniors would not have enrolled — only sick seniors. The program would possibly have become insolvent. At the very least, it would not have helped many people.

      My point is that it is possible to design less comprehensive plans that are affordable and offer coverage that is beneficial to a broad range of people with different health needs.

      • John R. Graham says:

        Maybe Dr. Novack is suggesting that the tax credits should also be eligible to be deposited in an HSA, or something like that, instead of having to go to an insurer?

  13. Don Levit says:

    Your idea of combining limited benefit plans with catastrophic insurance will be a reality soon
    National Prosperity Life and Health looks for approval for our limited benefits policy in the next two weeks
    We provide first dollar coverage at no deductible
    Initially available for self funded employers of 200 employees or more the goal is to reduce the employer’s risk on the front end similar to a catastrophic insurer doing so on the back end
    We operate like a defined contribution retirement
    Plan in that benefits build until a claim is made after which his medical benefits thru NPLH reduce and the employer’s liability increases
    For the vast majority of people their patented Health Matching Insurance benefits are growing faster than their claims building each year with no further premiums due on their present balance
    These increasing HMI benefits increases the exposure for NPLH and reduces the exposure for the employer
    With lower risk lower reserves are needed thus freeing up employer dollars for other business uses
    This lower employer risk means savings of premiums by 60-80 percent over time
    Milliman has worked with is for three years crafting out unique design and has been helpful in explaining the numbers to the TDI accelerating the approval process
    Don Levit
    Treasurer of NLPH

  14. Devon Herrick says:

    Bob and Don,

    As you know the idea of a national stop loss program dates back to the Nixon Administration. There are some merits to the idea, but also some concerns. As far as an entitlement that all Americans get universal coverage for all medical bills over, say, $50,000, my fear is that an increasing number of procedures would begin costing more than $50,000. (Senator John Kerry’s Presidential campaign proposal back in 2004 called for national health insurance where 75% of all bills over $50,000 per reinsured by the government.)
    At the very least Medicare should move to a program where coverage doesn’t kick in until a certain threshold has been met. It could involve a deductible as low as $5,000, coupled with a mandatory 4% payroll deduction that funds an annuity allowing seniors to pay for their day-to-day medical needs. NCPA’s senior fellows at Texas A&M modeled this a few years ago and we’ve had some work done by Milliman as well.
    I also like the idea of different cost sharing depending on the level of spending. People used to denigrate the so-called Donut Hole in Medicare Part D. I always thought it was a great idea because it provided something for everyone. Seniors in good health could benefit; but so could seniors on a laundry list of drugs. Because it was designed to benefit a wide range of seniors, it didn’t suffer adverse selection and the premiums were affordable.
    There are many strategies to empower patients to be better consumers besides deductibles. WellPoint and CalPERS showed how joint replacement could be reimbursed at lower costs with the appropriate incentives.

    • Don Levit says:

      I agree if you make the stop-loss at a certain point, that more procedures will gravitate to that stop-loss, if the stop-loss premiums are paid by the government.
      As medical inflation takes hold, however, more procedures will naturally meet a fixed stop-loss level.
      That is why our underlying coverage can be used to keep the stop-losss premiums level, by raising the attachment point, because there is underlying coverage below the attachment point.
      Don Levit

  15. Bart I. says:

    I can’t believe anyone would think we need five tiers that still only address a single attribute of health coverage. What about the size of the network, or level of coverage for different categories of medical issues, or minor things like max-out-of-pocket?

    These people have a lot in common with the alchemists of old.