MORE than two months after Barack Obama’s health exchanges opened, most are working, up to a point. Shoppers onHealthcare.gov, the federal website for 36 states, can now compare insurance with greater ease. Some, however, do not like what they find.
They have two complaints. First, many health plans offered on the exchanges come with high co-payments and deductibles (the money a patient must spend before his insurance kicks in). Second, many plans offer only a narrow choice of doctors and hospitals. Unlike the software gremlins that have made the exchanges so hard to use, these features were intended.
Obamacare’s design all but guaranteed limited choice and high out-of-pocket expenses. The insurance sold on the exchanges must comply with many rules: plans must cover a long list of “essential health benefits”, must not charge more to sick patients and must have a set “actuarial value”. (An actuarial value of 60% means that, for an average person, the health plan will cover 60% of health costs. The patient will have to cover the rest from his own pocket.) Obamacare plans are classified as bronze (60% actuarial value), silver (70%), gold (80%) or platinum (90%).
These standards make it easier to compare one plan with another. But they also give insurers relatively little room to differentiate their products. To compete on sticker price, they have to cut costs. They typically do this by restricting choice. Out-of-pocket costs are limited by Obamacare's actuarial rules—patients who buy bronze plans, by definition, can expect to pay for more care with cash. But insurers can also compete by trying different assortments of co-pays and deductibles.
A limited network of doctors is not inherently bad. McKinsey and Company, a consultancy, reported in October that nearly 60% of health plans on the exchanges have elements of “managed care”, a technique used by health-maintenance organisations (HMOs) in the 1990s that involves paying for care at only some clinics, rather than wherever the patient likes. Many such plans have proven effective at curbing costs, even if they are not always popular. They are common among customers of Medicare Advantage (private health insurance for the elderly). They may catch on among younger shoppers, too.
High deductibles also have merits. Democrats are keen to attract healthy people to the exchanges, to balance the cost of insuring the sick. The young and fit are more likely to sign up for insurance if premiums are low and deductibles are high. Because they have few health problems, they probably will not end up paying out much, though they could pay a high deductible if they suffer an unexpected catastrophe.
However there are drawbacks, particularly for the sick and the poor. Obamacare limits out-of-pocket spending, with caps on a sliding scale based on income. Even so, individuals with chronic ailments will likely shell out thousands of dollars, according to Avalere Health, a consultancy. A man earning just $23,000 will have to pay $5,200 in deductibles and co-pays before reaching Obamacare’s cap on out-of-pocket costs. That is a whopping one-quarter of his income.
In the long term, this may prompt Democrats to rethink the rules for the exchanges. In the short term, shoppers have only a few days left to decide what to buy. If they want insurance to begin in January, they must sign up by December 23rd.
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