Jaan Sidorov hosted this week’s Health Wonk Review at his most excellent Disease Management Care Blog – be sure to check it out if you haven’t already. One particularly interesting post in this edition comes from Hank Stern, writing about how one of the widely-criticized flaws in the HHS-run exchanges was actually an intentional part of the design. The federal exchange sites were set up so that users had to create an account and enter their subsidy calculation information before being able to see quotes and compare plans. The idea was that applicants would only see subsidized premiums instead of “retail” rates. And although this design has been part of the problem with site overload, Hank notes that it was probably intentional – HHS would prefer that people see the subsidized rates instead of the full premiums.
Of course, that’s understandable. If you’re going to be giving subsidies that can amount to thousands of dollars a year, it makes sense that you’d want to show people the subsidy benefit as quickly as possible. But I believe that one of the problems with our healthcare system is how insulated so many Americans are from the actual cost of both health insurance and healthcare. If you have employer-sponsored health insurance, there’s a decent chance that you don’t actually know how much your health insurance costs. And if you have health insurance at all, there’s a decent chance that you’re not aware of how much your healthcare costs either, unless you’re fond of reading EOBs. They certainly don’t provide you with an itemized price list at the receptionist’s desk while they’re photocopying your health insurance card.
When it comes to health insurance premiums, people who buy their own coverage often think that it’s more expensive than group coverage, simply because group coverage is usually heavily subsidized by the employer and employees aren’t always aware of the actual amounts involved. If I had a nickle for every time that I’ve heard someone say that they wished people buying individual health insurance could get “group rates”… I’d have a lot of nickles. Individual health insurance has historically been about half the price of relatively similar group insurance, but this misperception persists because employers usually fund a good portion of their employees’ health insurance premiums. Now that individual health insurance is becoming guaranteed issue and covering benefits like maternity that have long been mandated in the group market, it stands to reason that individual health insurance will no longer be significantly less expensive than group premiums. But because the group market insulates people from the actual cost of their coverage, people perceive the 2014 “retail” individual rates as outrageously high. If we compare them with group premiums though, there’re definitely in the same ballpark.
In my ideal world, everyone would know exactly how much their health insurance costs – including the portion that is paid by the employer – and healthcare costs would be much more transparent and readily accessible to patients and potential patients. I like the idea of showing enrollees what their subsidized premiums will be, as early in the application process as possible. But they should also see – very prominently displayed – exactly what the actual cost of their health insurance is. More information and transparency ultimately helps all of us. We can’t compare apples to apples if we don’t have all of the facts.
Maybe a compromise is needed? Perhaps the exchange site could ask just a few very basic questions (How many people in your family? What’s your annual household income? Do you have access to employer-sponsored insurance?), and then launch into the plan comparison right away. Then the site could display actual rates as well as an approximation of subsidized rates, with a disclaimer noting that the final subsidy amount can’t be calculated until you go through the whole application process.
If applicants qualify for a subsidy, they should be able to see that quickly and with reasonable accuracy. But it’s in nobody’s best interest to shield the public from the actual cost of health insurance.
