During the first Obamacare open enrollment period, several high-profile insurance companies such as Aetna and United Healthcare chose to sell plans off-exchange rather than on-exchange in many states. Based on higher-than-expected enrollment numbers reported by health insurance marketplaces (federal and state exchanges) in 2014 and positive projections for 2015,1 some of these off-exchange insurers are planning to participate in exchanges.
In order to anticipate potential implications for consumers when more off-exchange carriers start selling plans on the exchanges, HealthPocket compared the lowest cost bronze, silver, and gold plans2 for four of the most notable off-exchange insurance companies to the lowest cost bronze, silver, and gold exchange plans. Given that the off-exchange insurance companies do not offer individual health plans in every state, HealthPocket examined 39 states where the selected off-exchange companies had a market presence. The premium comparisons assumed a 40 year-old nonsmoker3 purchasing a health plan with an effective date of July 1, 2014. The four major off-exchange insurance companies used were United Healthcare, Aetna, Cigna, and Assurant.
Before presenting the results, it is important to clarify the similarities and differences between exchange and off-exchange health plans. Plans sold off-exchange must offer the same essential health benefits as plans sold on the exchanges, but the primary difference between buying plans on- or off-exchange is that only on-exchange plans are eligible for government subsidies. These subsidies, however, are only available to certain income groups and then only if their monthly insurance premium exceeds a predetermined portion of their income. Cost-sharing reduction plans are also only available on exchange for low-income individuals. On-exchange health plans may also exhibit differences in cases where there are additional insurance rules that apply to health plans sold on a specific state exchange.
As noted earlier, the major off-exchange health plans were not necessarily offered in every state. Aetna sold individual and family health insurance plans on only seven states’ exchanges,4 while Cigna sold plans on the exchanges in five states.5 Both companies offered plans off of the exchanges in several other states. Assurant offered bronze plans off-exchange in all cities investigated, including all of the cities in which United Healthcare, Aetna, and Cigna offered plans. United Healthcare, Aetna, and Cigna offered bronze plans in 10, 12, and 8 cities respectively.
On average the least expensive bronze plans offered by the four off-exchange insurers were 45% more expensive than the least expensive bronze plans offered on the exchanges. The table below displays the lowest bronze plan premiums and corresponding deductibles for each city in which at least one of the off-exchange carriers offered bronze plans.
The exchanges had the cheapest bronze plan in 36 out of 39 cities. Among the bronze plans offered by United Healthcare, Aetna, and Cigna, none were less expensive than the cheapest on-exchange bronze plans in their respective cities. However Assurant’s least expensive bronze plans were cheaper than the exchanges in three cities: Little Rock, AR, Bridgeport, CT, and Cheyenne, WY. On average the least expensive Assurant bronze plan was 41% more expensive than the least expensive on-exchange bronze plan. For United Healthcare, Aetna, and Cigna, the corresponding percentages were 58%, 38%, and 42% respectively. Moreover the average deductible for the least expensive bronze plan among the four carriers was 6% higher than the average deductible for the least expensive bronze plan on the exchanges.
As with bronze plans, Assurant offered silver plans in all 39 cities, while United Healthcare, Aetna, and Cigna offered plans in 10, 11, and 8 cities respectively. On average the least expensive silver plans offered by the four off-exchange insurers were 39% more expensive than the least expensive silver plans offered on the exchanges.
The exchanges had the cheapest silver plan in 35 out of 39 cities. Among the silver plans offered by United Healthcare and Cigna, none were less expensive than the least expensive exchange silver plans in their respective cities. However Aetna’s least expensive silver plan in Bridgeport, CT was cheaper than the least expensive silver plan on the CT state exchange for Bridgeport. Moreover Assurant’s least expensive silver plans were cheaper than the exchanges in four cities: Anchorage, AK, Little Rock, AR, Bridgeport, CT, and Cheyenne, WY.
On average the cheapest Assurant silver plan was 35% more expensive than the cheapest exchange silver plan. For United Healthcare, Aetna, and Cigna, the corresponding percentages were 50%, 39%, and 32% respectively. However the average deductible for the least expensive silver plan among the four carriers was 7% lower than the average deductible for the least expensive silver plan on the exchanges. In particular Assurant’s average deductible for the cheapest silver plan was 60% lower than the average deductible for the cheapest silver plan on the exchanges.
In the most populous cities in each state, both Aetna and Cigna only offered bronze and silver plans. United Healthcare offered gold plans in ten cities and Assurant offered gold plans in all cities investigated. The cheapest United Healthcare gold plan was 41% more expensive on average than the cheapest exchange gold plan, while the cheapest Assurant gold plan was 39% more expensive.
The exchanges had the cheapest gold plans in 35 out of 39 cities. Little Rock, AK was the only city in which United Healthcare’s cheapest gold plan was less expensive than the cheapest gold plan on exchange. However Assurant had cheaper gold plans than the exchanges in the same four cities in which it had cheaper silver plans. Moreover the average deductible for the cheapest Assurant gold plan was 36% more expensive than the average deductible for the cheapest exchange gold plan, while the average deductible for the cheapest United Healthcare gold plan was 30% less expensive than the average deductible for the cheapest exchange gold plan.
Overall the least expensive metal plans from United Healthcare, Aetna, Cigna, and Assurant were significantly more expensive than the least expensive metal plans available on state exchanges. Across the bronze, silver, and gold metal tiers, the least expensive plans offered by the four off-exchange carriers were over 40% more expensive on average than the least expensive plans on the exchanges.6 This suggests that if these carriers entered new exchanges in 2015, then they would not usually be competitive with the cheapest on-exchange plans unless they substantially lowered their current premiums. It is important to note that these premium costs do not factor premium subsidies, which are only available for on-exchange metal plans. During the first open enrollment period, 85% of people choosing a plan on an exchange had some form of financial assistance, such as premium subsidies or subsidized cost-sharing.7
One possible explanation for the on-exchange plans having cheaper premiums than the four off-exchange companies’ plans is that the exchange websites, which displayed all of the on-exchange plans in each county or zip code, promoted premium comparisons among on-exchange plans, thus influencing the plans to be more price competitive. Since the premium cost is one of the first things that a consumer would check for a health plan, on-exchange insurers may have chosen to have lower premium costs so that their plans would look more competitive compared to the other plans available on exchanges. While there are web sites such as HealthPocket that compare both on-exchange and off-exchange premiums together, off-exchange insurance companies may have believed there would be lesser consumer awareness of these sites. Off-exchange insurers may also have spent more money than on-exchange insurers for marketing costs, which would be reflected in higher premium prices. Additionally, networks for some on-exchange plans may have been narrowed to achieve lower premium costs.
Although the exchanges generally sold metal plans with cheaper premiums than the off-exchange carriers, it is entirely possible that some of the more expensive plans from the off-exchange carriers were a better value for typical consumers than the on-exchange plans. For consumers that anticipate no healthcare usage, the premium is the only relevant cost for their health plan. However for all other consumers, lower deductibles and lower coinsurance can make up for the cost of a higher premium. Even if one plan has more expensive premiums and cost-sharing than another plan, it is possible for the first plan to be more attractive to consumers if it has a broader network of providers. Before selecting a plan, consumers that wish to continue visiting their current healthcare provider should always check if their provider accepts the new plan.
For the few cities in which the off-exchange carriers did offer metal plans with lower premiums than the exchanges, entry of the off-exchange carriers into the city’s public exchange could lead to increased competition with respect to premium costs. However the entry of these carriers could also lead to lower premium subsidies. Premium subsidies are based on the premium cost of the benchmark silver plan (the second least expensive silver plan in each rating area), and in particular premium subsidies are lower if the benchmark silver plan’s premium cost is lower. Thus former off-exchange carriers offering cheaper on-exchange silver plans in a rating area could decrease premium subsidies for consumers in the rating area.
Premium and deductible costs for the least expensive bronze, silver, and gold plans in the most populous city in each state were quoted on June 2, 2014 for a 40-year-old non-smoker purchasing a plan with effective date July 1, 2014. Costs for on-exchange plans are based on data from healthcare.gov and state-based marketplaces, while costs for United Healthcare, Aetna, Cigna, and Assurant were quoted from those carriers’ websites. Only the 39 cities with data for on-exchange plans and at least one of the four carriers were included in the analysis. Platinum plans were not included in the analysis since their availability was significantly less than the availability of plans in the three other metal tiers.
This analysis was written by Jesse Geneson, data researcher at HealthPocket, and Kev Coleman, Head of Research & Data at HealthPocket, with data analysis by Katherine Bian. Correspondence regarding this study can be directed to Mr. Geneson at firstname.lastname@example.org.
1 8 million people signed up for coverage through the exchanges in 2014, and enrollment in 2015 is projected to be around 13 million. Reed Abelson. Insurers Once on the Fence Plan to Join Health Exchanges in ’15. (May 25, 2014) http://www.nytimes.com/2014/05/26/your-money/health-insurance/insurers-once-on-the-fence-plan-to-join-health-exchanges-in-15.html?_r=1
2 During the open enrollment period from October 1, 2013 to March 31, 2014 (including the special enrollment periods through April 19, 2014), 65% of enrollees chose a silver plan, 20% chose a bronze plan, and 9% chose a gold plan. Only 5% chose a platinum plan and 2% chose a catastrophic plan. Health Insurance Marketplace: Summary Enrollment Report for the Initial Annual Enrollment Period. http://aspe.hhs.gov/sites/default/files/pdf/76876/ib_2014Apr_enrollment.pdf
3 The most populous city in each state was used as the assumed residence of the enrollee. Cities were not included if they lacked data about exchange plans, or if none of the four off-exchange insurers sold plans in those cities.
4 Health Insurance Exchange/Marketplace – Plans & Services | Aetna. http://www.aetna.com/individuals-families/health-insurance-exchange.html
5 Reed Abelson. Insurers Once on the Fence Plan to Join Health Exchanges in ’15.
6 The average percentages for bronze and silver plans included all four carriers, while the percentage for gold plans included only United Healthcare and Assurant, since Cigna and Aetna did not offer gold plans in the cities investigated.
7 Health Insurance Marketplace: Summary Enrollment Report for the Initial Annual Enrollment Period.
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