Health Plans Experimenting With New Benefit Designs to Give Value

Health Insurance Report™ helps you track and analyze legal, legislative, and regulatory developments affecting the health-insurance industry throughout implementation of the Affordable Care Act...

By Sara Hansard

Aug. 15 - Health insurers offering plans in the Affordable Care Act marketplaces are experimenting with new types of benefit designs aimed at giving consumers some value before subjecting them to deductibles or other cost-sharing requirements. But the benefit designs may confuse many consumers.

Plans with high deductibles or other cost-sharing requirements have long been staples in the nongroup health insurance market. But in the ACA marketplaces, there are some differences to which consumers need to pay attention, Gary Claxton, a vice president of the Kaiser Family Foundation (KFF), told Bloomberg BNA. Claxton is also director of the KFF's Health Care Marketplace Project and co-director of its Program for the Study of Health Reform and Private Insurance.

Some plans, dubbed "doughnut hole" plans, require copayments before deductibles are met and coinsurance payments afterward, Claxton said. The KFF is to release a study soon about cost-sharing requirements in the 2014 plans sold through the ACA federally facilitated marketplace. The study focuses on the silver and bronze tiers, which have the highest cost-sharing requirements of the four tiers in the ACA marketplaces. Most ACA consumers are buying plans in those two tiers.

Doughnut hole plans will "cover three office visits; then you have to meet your deductible," Claxton said. "It's like one of those little teaser appetizer things when you walk into a restaurant. Plus you might be paying a $20 or $30 copay for those office visits." That is a feature in some BlueCross BlueShield plans, in particular, he said.

For example, some of Blue Cross and Blue Shield of Nebraska's BlueEssentials Plus plans offer two office visits per person per year with an in-network primary care physician with $60 copayments per visit, after which deductibles and coinsurance apply, according to the benefits brochure . The company didn't respond to a query from Bloomberg BNA for a comment.

Clare Krusing, spokeswoman for America's Health Insurance Plans, told Bloomberg BNA in an e-mail: "Health plans recognize that consumers have diverse health and financial needs and provide a wide range of coverage options so that consumers can choose the policy that is right for them."

Separate Deductibles for Drugs, Hospital Stays

Some plans require separate deductibles for drugs, or separate copayments for hospitalizations, which can be significant, Claxton said. Some of the ACA plans have "a low deductible but pretty high copays on every service."

Some plans at the bronze level have "virtually no deductible, but then they have a copay of $500 per hospitalization," Claxton said. Copayments may be as high as $1,000 a day for the first three days of a hospitalization, and copayments for surgeons' fees may also apply, he said.

Cigna Health and Life Insurance Co.'s myCigna Copay Assure Suite in Florida offers a range of copayments, including $2,000 per day for in-network hospital stays with no coinsurance for its silver tier plan, according to the plan brochure . "With no deductible to meet and fixed out-of-pocket costs when you seek care, these plans provide the most predictable expenses," the brochure says.

The relatively low actuarial values of the ACA plans are a key factor behind the new designs, Claxton said. Most employer plans have typically covered an average of about 80 percent of claims, he said. The ACA plans cover 60 percent for the bronze tier, 70 percent for the silver tier, 80 percent for the gold tier and 90 percent for the platinum tier.

Generally people who have health problems will choose gold or platinum tier plans, Claxton said. Sixty-five percent of the 8 million people who selected plans for 2014 in either the federally facilitated marketplace or the state-based marketplaces chose silver plans and 20 percent selected bronze plans, according to a report issued May 1 by the Department of Health and Human Services.

Lower Actuarial Value, Higher Cost Sharing

"Lower actuarial value means higher cost sharing," Claxton said. "I think they're trying to find things that make them attractive," he said of the plans. "If you give someone a couple of office visits before the deductible, they'll feel like they got something out of the plan."

 "The primary goal is to keep premiums as low as possible because that is the primary metric that people will use to select a plan," Dan Mendelson, chief executive officer of health-care advisory firm Avalere Health Inc., told Bloomberg BNA.

The ACA plans have "unusual designs in that deductibles are not usually split like this," Mendelson said. "The plans are interested in ensuring that the patient sees costs across all different modalities," he said. That is resulting in separate deductibles for drugs, hospitalizations and physician care. "The idea is maybe there will be more of a deterrent for more people if the deductible is split among the different service modalities."

The ACA "is encouraging plans to experiment with the form of the benefit design," Mendelson said. "That was amply demonstrated by first-year offerings, which had high deductibles, very narrow networks and very aggressive tiering in the pharmaceutical space. Those designs were really not common at all, and now it's the dominant form in the exchange."

Ideally, health plan designs should deter unnecessary utilization and encourage patients to do what they need to take care of themselves, Mendelson said. "It's an open question to me as to whether this accomplishes that or is just merely more complex," he said.

Experimenting for Affordability

Insurers are experimenting with many cost-sharing designs to keep plans affordable in the marketplace, as well as in the employer-sponsored market and non-ACA individual market, Lynn Quincy, senior health policy analyst for Consumers Union, told Bloomberg BNA.

 "The idea, unfortunately, is to shift more of the cost to consumers," Quincy said. Some designs, "like doughnut holes, are pretty difficult for consumers to understand," she said.

Regulators should "ensure that there's meaningful differences in plans being offered," Quincy said. There should also be more consumer testing to demonstrate that consumers understand their plan benefits, she said. "We can't be giving them complex contracts that they don't understand."

It's questionable whether complex designs are "really the best way to keep premiums lower," Quincy said. "We could do more on the back end. How much are providers charging?"

Different ways of paying providers and offering narrow networks with high-quality providers may be more effective ways of controlling costs, Quincy said. "Consumers are kind of the weakest voice. I suspect that is not the best way to keep costs down."

'Limited Set of Levers.'

"There's a limited set of levers they can use under the current ACA framework to adjust benefit design, but this is one of the levers that they have," Sabrina Corlette, research professor and director of health insurance studies at the Georgetown University Health Policy Institute, told Bloomberg BNA, referring to the new types of benefit designs.

Although the ACA requires specified preventive services to be provided without cost sharing, "there may be certain primary care services you can get pre-deductible" that aren't required by the ACA, Corlette said.

But the plan differences create challenges for consumers to compare plans and understand what they're buying, Corlette said. "You may have two plans side by side that look like they have the same deductible. But one plan covers primary care services pre-deductible and the other plan, it's more of a traditional type where you have to pay everything out of pocket until the deductible is met."

For many consumers, it's helpful to have primary care services available before the deductible, Corlette said. Such differences "often have a really big pocketbook impact for the consumer, but as a shopper it can be really difficult to figure that out," she said. Even with the "summary of benefits and coverage," standardized information pamphlets that plans are required to provide under the ACA, "it's not always clear."

Many consumer advocates argue for standardized benefit designs, Corlette said. "The more you deviate from the norm, the harder it is to figure out what's best for a particular family or person to buy."

Problems With Coinsurance

Some groups are alarmed at some of the new plan designs. "Why can some plans charge a copay of $10, $20, $50, while other plans charge 40 percent, 50 percent coinsurance, which could end up being over $1,000 a month?" Carl Schmid, deputy executive director of the AIDS Institute, told Bloomberg BNA.

"We have lots of problems with coinsurance," Schmid said. "It doesn't tell you how much it is. Is it 40 percent of $1,000 or 40 percent of $100?" In some cases people haven't picked up drugs for HIV treatment because they don't realize that they owe a large bill until they go to get the drug at the pharmacy, he said.

The AIDS Institute and the National Health Law Program filed an administrative complaint with the Health and Human Services Office for Civil Rights May 29, alleging that four Florida insurers, CoventryOne, Cigna, Humana and Preferred Medical, are violating the ACA and federal civil rights laws by structuring their prescription drug policies in a way that discourages people with HIV/AIDS from selecting their plans.

Plans offered by the insurers in the ACA marketplace placed HIV drugs in a tier requiring the highest cost sharing, and they have 40 percent or 50 percent patient coinsurance fees, according to a PowerPoint presentation from the AIDS Institute and the National Health Law Program. "Other plans in the individual market in the state of Florida are not doing that," Schmid said.

The plans often have separate deductibles for drugs and coinsurance requirements for doctor's visits, which aren't typically required in the employer health plan market, Schmid said. "This lack of transparency is really key," he said. "We're not seeing a big difference in premiums." But "you don't know how much 50 percent of a drug is going to be until you pick it up."

A May 13 analysis by actuarial consulting firm Milliman Inc. for the Pharmaceutical Research and Manufacturers of America, comparing silver tier plans to employer sponsored plans, found that marketplace plans require combined medical and drug deductibles 46 percent of the time, compared with 12 percent of the time in employer-sponsored plans. "Our concern is that's going to creep into the employer-sponsored market as well," Schmid said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com