Wednesday, November 18, 2009

Forcing People to Buy Crappy Insurance

On page 112, we get to some serious bad news. My big fear was that Harry Reid would stay below the $900 billion by watering down the minimum benefits package. This would let the CBO continue to say that however many people are "insured" but not really get into the details of the quality of their coverage. I think I was right:

13 (A) BRONZE LEVEL.—A plan in the bronze
14 level shall provide a level of coverage that is de
15 signed to provide benefits that are actuarially
16 equivalent to 60 percent of the full actuarial
17 value of the benefits
provided under the plan.

This is the point where I snarkily suggest that pro-reform conservatives, who seem to be coalescing around "universal catastrophic insurance" as the latest phantom alternative health reform, should start supporting the current bill. As written, the Bronze plans will be, if not universal, certainly a popular form of individual catastrophic insurance with some first-dollar coverage for certain pre-existing conditions preventative care tacked on. Insurance with a 60% actuarial value is worse than the insurance offered by over 99% of employer-based plans (search for "exhibit 2"). And, of course, people are notoriously optimistic when it comes to assessing their own risk exposure; lots of folks will opt for these crummy bronze plans, not set aside much savings, and hope they don't get sick.

In Massachusetts, 42% of the total population in the Connector, and 58% who don't choose the Young Invincible plans, end up purchasing Bronze insurance. That's a lot of folks who will end up with very high deductibles and co-payments. In theory this is supposed to give people incentive to choose low-cost treatment options. But of course we're not all MDs who are well equipped to determine the optimal course of treatment in many cases, so we just end up cutting back on health care across the board, rather than keeping the "good" health care and throwing out the "bad" health care.

This is, in my view, a suboptimal solution. Subsidies are supposed to help with this, but that just feels backwards to me. Why make people buy weak insurance, then subsidize their deductible, rather than just subsidize the purchase of better insurance? I think they really ought to either make bronze plans really unattractive to all but the cheapest of the cheap, or otherwise set the minimum level of coverage closer at 70% or even higher (I think Rockefeller wanted it at 73%, which sounds good to me).
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