InfoStat | 12-12-2013

Deductibles, Out-Of-Pocket Costs, and the Affordable Care Act



The American health insurance market is being transformed under the Affordable Care Act. With respect to individually purchased insurance in 2014, consumers will encounter health plans that are fundamentally differentiated by the percentage of medical costs they cover (i.e. their actuarial value). In the 2013 pre-reform market, the breadth of insurance benefits had been one of the main factors differentiating health plans.

Discussions of out-of-pocket costs for Affordable Care Act plans can be confusing for consumers and analysts alike because there are several dimensions to the topic of medical expense cost-sharing. First, the Essential Health Benefits requirement under the Affordable Care Act results in 2014 plans1 with wider insurance coverage than the pre-reform market being replaced. Less than 2% of pre-reform plans had as many insurance coverage categories as the Affordable Care Act Plans.2 Consequently, a consumer could pay a copayment or coinsurance fee in 2014 where he or she may have paid full price in 2013. However, the greatest benefit expansion for these 2014 health plans are in medical services that do not apply equally to the public (e.g. maternity care, mental health services, substance use disorder services).3

Deductibles & Other Medical Expense Cost-Sharing

The four new Affordable Care Act metal plans are defined by the percentage of medical expenses they cover. Bronze plans cover 60% of covered medical expenses for a typical enrollee population, silver plans 70%, gold plans 80%, and platinum plans 90%. Below are the average out-of-pocket costs for medical services for each metal plan category. Averages4 are based on government data for qualified health plans sold on exchanges in 34 states.



Cost-sharing for silver plans available to people making up to 250% of the Federal Poverty Level (FPL) was not included in the averages due to the special eligibility requirements for these plans.




Observations on Deductibles

The entry-level bronze plan had a deductible 42% higher ($5,081) than the $3,589 deductible average for the 2013 pre-reform market.5 In contrast, the top-tier platinum plan had an average deductible ($347) that was 90% less than the deductible average for the 2013 pre-reform market.

When charting the average deductibles from metal tiers, the decrease in deductible amount did not follow the increase in covered medical expenses (as represented by the metal tier). The below chart illustrates the steep reduction in deductible that is in excess of the change in metal plan actuarial value.



$0 deductible plans

Regardless of the average deductible amounts recorded for the different metal plans, some health plans examined in this study had $0 deductibles. These $0 deductible health plans were most prevalent among platinum plans and statistically absent among bronze plans.

For individual enrollees in Affordable Care Plans, HealthPocket found:

  • 0% of all Bronze plans had a zero deductible
  • 3.18% of all Silver plans had a zero deductible
  • 5.78% of all Gold plans had a zero deductible
  • 41.35% of all Platinum plans had a zero deductible
  • 4.67% of all Bronze, Silver, Gold, or Platinum plans had a zero deductible

For family plans, HealthPocket found:

  • 0% of all Bronze plans had a zero deductible
  • 3.05% of all Silver plans had a zero deductible
  • 5.82% of all Gold plans had a zero deductible
  • 41.35% of all Platinum plans had a zero deductible
  • 4.66% of all Bronze, Silver, Gold, or Platinum plans had a zero deductible

Caps on Annual Out-of-Pocket Costs

By law, all Affordable Care Act health plans must have caps on annual out-of-pocket costs. While this was also the case for the majority of pre-reform health plans, 4% of the pre-reform plans had no caps on out-of-pocket costs.6 The differences among the metal plan caps were less dramatic than was the case for deductibles but still did not have consistent progression from bronze to platinum plan that followed their respective actuarial values.

  • Bronze Plan: $6,267 for an individual / $12,569 for a family
  • Silver Plan: $5,730 for an individual / $11,495 for a family
  • Gold Plan: $4,081 for an individual / $8,649 for a family
  • Platinum Plan: $1,855 for an individual / $3,710 for a family

It is important to note that caps on out-of-pocket expenses apply to covered medical services from in-network healthcare providers. Receiving non-emergency care outside of a health plan’s network can result in higher out-of-pocket costs and no annual cap protection.

Conclusion

Consumers should consider out-of-pocket costs for their expected healthcare usage alongside premiums when comparing the new Affordable Care Act health plans. For those people who use medical services more frequently, the lowest premium plan may not result in the lowest expenditures for healthcare during a year. Those people who are healthy and rarely see a doctor, in contrast, can rely more on premium comparisons among the entry-level bronze plan assuming they are satisfied with these plans’ healthcare provider networks.

For people who have need of a specific doctor or hospital, it is important to note that the annual out-of-pocket expense protections only apply to covered medical services delivered by in-network healthcare providers. Accordingly, these consumers should confirm their doctor or hospital network participation prior to enrolling in a new health plan. Given the increased use of “narrow networks” that include fewer healthcare providers, these consumers should be careful not to assume that all healthcare providers in their area are accepted by the health plans available in that region.

METHODOLOGY

Out-of-pocket costs for 2014 Affordable Care Act health plans was based on the Qualified Health Plan (QHP) Landscape files for 34 federally-facilitated marketplaces, state-partnership marketplaces, and state-based marketplaces using the federal application system. Bronze, silver, gold, and platinum health plan data was used, covering multiple rating regions within the 34 states covered by the landscape file. Plans that lacked cost-sharing data were not included within the study. Catastrophic plans, dental plans, and small business plans were not included within the scope of this study. The Qualified Health Plan (QHP) Landscape files were downloaded by HealthPocket from the Centers for Medicare & Medicaid Services on December 1, 2013.

All plans investigated in this study belong to the individual & family insurance market. Medicare, Medicaid, short-term health insurance, and group health insurance plans were not analyzed as part of this study.

Industry standard rounding methods were utilized.

No weighting by health plan enrollment was performed.


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AUTHORS

This analysis was written by Kev Coleman, Head of Research & Data at HealthPocket, with data analysis performed by Jesse Geneson, data researcher at HealthPocket. Correspondence regarding this study can be directed to Mr. Coleman at kevin.coleman@healthpocket.com.

Feedback and questions are welcome but, given the volume of email, personal responses may not be feasible.

Kev Coleman on Google+
Jesse Geneson on Google+


SOURCES

1 Nongrandfathered 2014 bronze, silver, gold, and platinum health plans sold in the individual market are the health plans referenced.
2 Kev Coleman. “Almost No Existing Health Plans Meet New ACA Essential Health Benefit Standards” HealthPocket.com. (March 7, 2013). http://www.healthpocket.com/healthcare-research/infostat/few-existing-health-plans-meet-new-aca-essential-health-benefit-standards/
3 For a detailed list of coverage differences between the pre-reform 2013 market and the 2014 Affordable Care Act health plan market, see Kev Coleman. “Almost No Existing Health Plans Meet New ACA Essential Health Benefit Standards” HealthPocket.com. (March 7, 2013). http://www.healthpocket.com/healthcare-research/infostat/few-existing-health-plans-meet-new-aca-essential-health-benefit-standards/
4 When a cost-sharing category (e.g doctor visit) had plans the offered a flat fee copayment or a coinsurance fee, the cost-sharing form that was most prevalent was used for the average.
5 The average deductible from the 2013 pre-reform market for individually purchased health insurance is documented in the following study. Kev Coleman. “Welcome to Obamacare’s Bronze Age.” HealthPocket.com. (June 18, 2013). http://www.healthpocket.com/healthcare-research/infostat/obamacare-bronze-plan-study/
6 Kev Coleman. “1 in 3 Health Plans’ Out-of-Pocket Costs Fail ACA Standards” HealthPocket.com (February 14, 2013). http://www.healthpocket.com/healthcare-research/infostat/1-3-health-plans-out-of-pocket-costs-fail-aca-standards/

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