Health Insurance Marketplaces Need More Silver Health Plans with Affordable Upfront Cost-Sharing Amounts for Consumers

The Affordable Care Act has made health coverage more affordable for millions of lower- and moderate-income consumers by offering premium tax credits that lower the monthly cost of coverage. However, it takes more than an insurance card to make health care accessible to consumers. If the out-of-pocket costs that health plans require (deductibles, copayments, and other cost-sharing) are too high, consumers can’t afford to pay for their health care services. The marketplace plays a critical role in keeping these upfront costs low. In this post, we recommend that marketplaces require or encourage insurers to offer affordable plans that also have affordable upfront cost-sharing amounts for consumers so that they can afford routine and minor care.

Silver plans, the most popular of the four health plan coverage levels in the marketplace, are generally an affordable plan option for lower- and moderate-income consumers. This is because the size of the premium tax credits that low- and moderate-income consumers receive is designed to keep the cost of a silver plan affordable.

However, an analysis from the consulting firm Avalere suggests that, in many marketplaces, most silver plans have high deductibles that could make health care services unaffordable for this population.

Next week, Families USA will release an issue brief that highlights examples of silver plans around the country that break this pattern and offer more affordable upfront cost-sharing amounts for consumers. The brief will also provide strategies that advocates, policymakers, and others can use to promote these types of health plans in their marketplaces.

Silver health plans are the most popular among lower- and moderate-income consumers

As of March 1, 2014, 76 percent of consumers who had enrolled in a federally facilitated marketplace plan with premium tax credits had chosen a silver plan. While silver plans cannot offer the most generous protection from medical costs, they may be the most generous plans that many lower- and moderate-income consumers can afford (since premium tax credits are designed to ensure that the cost of a silver plan is affordable).

Requirements of silver plans include

• By design, silver plans are required to cover 70 percent of consumers’ health care expenses, on average.
• Consumers are responsible for paying an average of 30 percent of their medical expenses through deductibles, copayments, and other cost-sharing amounts.
• Silver plans offer more generous coverage than the cheaper bronze plans.
• Compared to more expensive gold and platinum plans, silver plans have steeper out-of-pocket costs for consumers.

Many silver marketplace health plans have high deductibles

Avalere’s analysis found that the average deductible for silver plans is more than $2,500. Such high deductibles could keep necessary care unaffordable for many lower- and moderate-income families. Research consistently shows that even nominal cost-sharing for care can lead consumers—particularly those with lower incomes—to delay seeking necessary care.

Spreading out the cost: How health insurers can design silver plans with lower upfront cost-sharing amounts for consumers

Although the Affordable Care Act does not permit insurers to design silver plans that cover more than an average of 70 percent of consumers’ health care expenses, insurers can design silver plans with lower upfront cost-sharing amounts for consumers, compared to high deductible plans.

Health insurers have flexibility in how they design the cost-sharing for their silver plans. They can choose to design plans that spread consumers’ costs out through copayments and co-insurance instead of front-loading the costs through a high deductible. Insurers can also exempt certain services from a deductible and instead charge more modest copayments for that care.

These types of plan designs can make health care much more affordable for consumers with limited or modest incomes who may be unable to afford the full cost of even a doctor’s visit out-of-pocket.

Recent research suggests that insurers are not taking advantage of this flexibility

Avalere’s estimate of the average deductible for silver plans suggests that many insurers are not taking advantage of this flexibility. This is a troubling finding for low- and moderate-income consumers.

This finding concerns us because, even though the Affordable Care Act provides extra financial assistance to help lower-income consumers (those who earn up to 250 percent of poverty) pay less in out-of-pocket costs for a silver plan, that assistance is limited.

• Consumers below 200 percent of the poverty level get financial help to lower the upfront costs they must pay (for example, deductibles and coinsurance).
• But consumers who earn between 200 and 250 percent of poverty don’t get help to lower those upfront costs, so they are more vulnerable to high deductibles. (They do, however receive help to lower their plans’ out-of-pocket limit—the maximum amount a consumer is required to spend on health care in a year).
• And for consumers who earn more than 250 percent of poverty, there is no help to lower the out-of-pocket costs of care at all.

Health insurance marketplaces need more silver plans with affordable upfront cost-sharing

Given the negative impact of high deductibles on lower- and moderate-income consumers’ ability to access health care, along with the lack of assistance with upfront cost-sharing for most of these consumers, it is critical that more marketplaces offer at least some silver health plan options with affordable upfront cost-sharing for routine and minor services.

Silver plans with lower upfront cost-sharing amounts could attract healthier, younger consumers to the health insurance marketplace

Providing more silver plan options with lower upfront cost-sharing amounts for at least minor and routine health care could also attract a greater number of younger and healthier consumers to the marketplace. If the only affordable plans have upfront deductibles that are too high, some younger consumers may decide not to buy health insurance at all because they do not expect the health plan to help pay for any of the health care expenses they incur over the year. These consumers may not want the most generous and expensive plans available, but they likely still want a plan that offers them a good value in exchange for their monthly premium.

New Families USA research will show how to design silver plans with lower upfront cost-sharing

Next week, Families USA will release an issue brief, How to Design Silver Health Insurance Plans with Affordable Out-of-Pocket Costs for Consumers, which features original research on how to design silver plans with more affordable upfront cost-sharing. It will include 11 examples of existing silver plan designs from marketplaces around the country that keep upfront cost-sharing for at least routine and minor care more affordable compared to high deductible plans. These examples can be models for silver plan designs that other marketplaces can require or encourage insurers to offer. The brief will also discuss policy and advocacy strategies that officials, advocates, and other stakeholders can use to promote silver plan offerings with more affordable upfront cost-sharing amounts in their marketplaces.

Cost-sharing in marketplace plans: Share your perspective

How are health care consumers faring in your marketplace? How would you make cost-sharing designs more consumer-friendly? Please share your ideas with us on Facebook or on Twitter. You can also email Lydia Mitts at lmitts@familiesusa.org.

And look for our new issue brief in the coming week!