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Designing Silver Health Plans with Affordable Out-of-Pocket Costs for Lower- and Moderate-Income Consumers

By admin | May 22, 2015

 

Families USA

May 2014

Silver plans have an actuarial value of 70 percent, meaning that they are required to cover 70 percent of people’s health care costs (on average).

Insurers have some flexibility in how they design plans to meet the actuarial value requirements for silver plans. However, analyses of current marketplace plans suggests that the majority of silver plans have high deductibles.

When we say that silver plans must meet an actuarial value of 70 percent, we mean that a silver plan’s cost-sharing must be designed so that the plan pays for, on average, 70 percent of people’s medical expenses in a year. Consumers are expected to pay 30 percent of the cost of care out of pocket (on average) through deductibles, copayments, and co-insurance.

Because silver plans must stay within the bounds of a 70 percent actuarial value, they can never completely protect consumers from having to pay higher out-of-pocket costs if they need expensive care.

Insurers must make trade-offs when deciding how to distribute the cost-sharing in their silver plans to meet the required 70 percent actuarial value. Silver plans that set higher deductibles are able to charge relatively lower copayments for care received after a consumer meets the deductible. On the other hand, silver plans that set low deductibles, or that exempt coverage for certain services from the deductible and instead charge copayments for those exempted services, may have to charge relatively higher copayments or co- insurance for other health care services.

Actuarial value considers only the costs of covered services that are delivered by in-network health care providers. A plan’s actuarial value does not consider out-of-pocket costs that consumers must pay if they need services that are not included in the plan’s covered benefits or if they receive care out of network.

Trade-Offs in Plan Design

The featured plan designs show that, because silver plans must meet specific actuarial value requirements, the plans are limited in how low they can keep cost- sharing overall. This is evident in the trade-offs that these plan designs make: Since the plans keep cost-sharing for some services more affordable, the plans must charge relatively higher cost-sharing for other services.

Many of the plan designs with affordable cost-sharing for routine and minor care charge higher cost-sharing for more expensive services, such as inpatient and emergency care, outpatient surgeries, imaging, and specialty drugs.

When silver plans have relatively affordable cost-sharing, consumers with greater health care needs will likely still face high out- of-pocket costs. For example, consumers who need expensive medications or more complex care (such as surgery) will still have to pay high out-of-pocket costs in many of these plans until they reach their out-of- pocket spending limit.

Potentially Problematic Cost-Sharing Designs

*  Three-Tiered Provider Networks

*  Four-Tiered Drug Formularies

*  Potentially Discriminatory Cost-Sharing for Select Treatments

Conclusion

The findings of our analysis prove that it is possible to design silver plans that don’t have high deductibles and that do have more affordable copayments, at least for routine care and care for minor health problems. Putting policies in place that require or encourage insurers to offer these types of plans in the marketplace will help make sure that lower- and moderate-income consumers can afford routine care.

By design, silver plans cannot necessarily shield consumers who need expensive care from high out- of-pocket costs. That is why, over the longer term, efforts to get marketplaces to offer more diverse silver plans must be part of a larger initiative to identify and implement state and federal solutions that will prevent lower- and moderate-income consumers from being underinsured. Examples of such solutions include policies to ensure that this population receiving greater financial assistance to help them afford more comprehensive coverage, or policies to expand cost-sharing assistance to more moderate-income consumers.

http://familiesusa.org/sites/default/files/product_documents/ACT_Assessing%20Alternatives%20Silver%20Plans%20Designs%20Brief_final_web2.pdf

 

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