New data expose mysterious world of off-exchange health plans

By Harris Meyer
October 24, 2016 - Modern Healthcare

Average premiums and deductibles for individual and small-group health plans on the Affordable Care Act exchanges in 2016 were nearly 13% cheaper than for plans sold off the exchanges, according to new data from the Robert Wood Johnson Foundation.

The data set, compiled from information purchased from Vericred, a New York City-based data company serving the health insurance industry, provides the most detailed look yet at how the ACA marketplace compares with the off-exchange market, about which much less is known. HHS recently estimated that 6.9 million Americans have individual-market plans they bought outside the ACA exchanges, compared with 10.4 million who have exchange plans. Most off-exchange plans have to comply with the same ACA benefit and guaranteed issue rules as exchange plans.

The data could help policymakers, insurers, researchers and consumers better understand the full range of options available in the individual and small-group markets. It also could assist federal and state policymakers stabilize the struggling Obamacare individual markets, which are experiencing rising premiums, exiting insurers, and decreasing competition and consumer choice.

The average silver plan premium on the exchanges across the country was $279 versus $314 for similar plans sold off the exchanges. In the individual insurance market alone, the average rate for a silver plan for a 27-year-old on the exchanges was $283 versus $320 off the exchanges. The rate differences could result from a number of factors, including network size and deductible and cost-sharing levels.

In the individual exchange market, silver plans were by far the most common type of product offered—64.9% versus 16.2% bronze and 12.3% gold. There was greater variety off the exchanges, where 33.7% of plans offered were silver, 33.1% were bronze, and 21.6% were gold.

There also were significant differences in network types offered on and off the exchanges in 2016, according to the RWJF data. HMO and exclusive provider organization (EPO) products were far and away the most common products on the exchanges, making up 63.4% of plans offered compared with 37.1% for preferred provider organization (PPO) and point-of-service (POS) plans. Off the exchanges, PPO and POS plans were more common, making up 49.9% of plans offered, the same percentage as HMO and EPO plans.



Katherine Hempstead, who directs the Robert Wood Johnson Foundation's work on health coverage, said the data will prove valuable in helping everyone think about the individual market as a whole. “It's important for us to understand how the off-exchange market helps or hinders the exchange market, and whether any improvement is feasible to organize the two components and make it easier for consumers to see what's available,” she said.

A number of insurers such as Aetna are exiting the exchanges in some states while continuing to sell off-exchange products in those same markets. An Aetna spokesman declined to discuss details of the company's off-exchange business. But he said Aetna is maintaining an off-exchange presence to preserve its option under federal law to re-enter the exchange markets after 2017 “should there be meaningful exchange-related policy improvements.”

A Commonwealth Fund study in June projected that insurers selling only off the exchanges in 2016 spent more on administration and profits and had higher premium increases compared with insurers that sell mostly on the exchanges.

The new RWJF data set includes comprehensive information on all individual and small-group plans offered nationally, including carrier, location, premium, metal tier, type of plan, and deductible and copayment levels. But it does not include information on number of plans sold or any information about the people buying these plans, such as age, income, or health status. While some observers have speculated that people buying coverage outside the exchanges are healthier and wealthier than exchange customers, the data don't answer such questions.

“I hear insurers say the markets are more similar than different, and I think insurers have lost money in the off-exchange market,” Hempstead said.

Experts say there are a variety of reasons why consumers buy coverage outside the exchanges, where they cannot receive an ACA premium subsidy or cost-sharing reduction. The Obama administration and many experts say most people in the individual market would be better off buying coverage on the exchanges because most qualify for subsidies. In contrast, some conservative analysts favor allowing premium subsidies for coverage purchased outside the exchanges.

One reason some consumers go off the exchanges is that they find it simpler to buy a plan directly from an insurer or through a broker if they think they don't qualify for a subsidy. “It's easier to move through the process off the exchange, so convenience is a factor,” said Joel Ario, managing director of Manatt Health Solutions, who helped establish the federal exchange as an Obama administration official.

Some customers avoid the exchanges because they are politically opposed to Obamacare, said Nate Purpura, vice president of communications for ehealth, an online broker. About half the 261,000 individual plans ehealth sold from October through March were through the exchanges and about half were off the exchanges.

Consumers looking for a broader provider network or access to their regular physician or hospital may have an easier time finding such a plan off the exchange, since PPO and POS plans are more prevalent outside the exchanges, Hempstead said. Some may be relatively affluent people who are buying coverage for adult children or other family members with disabilities or chronic conditions and who want a plan that gives them access to specialized providers.

Then there are lower-income consumers who don't realize they can only obtain a premium tax credit through the ACA exchanges and unwittingly forego that opportunity by buying an off-exchange plan. HHS estimated this month that 2.5 million consumers who bought plans off the exchange would be eligible for a subsidy. That includes 1.1 million people with incomes below 250% of the federal poverty level, which qualifies them for additional cost-sharing subsidies. Another 1.9 million people who bought off-exchange plans have incomes low enough to qualify for Medicaid.On top of that, only 52% of uninsured adults were even aware that financial assistance is available through the ACA exchanges, a recent Commonwealth Fund survey found. “There's a huge question about the information status of people buying off the exchanges,” said Tim Jost, an emeritus law professor at Washington and Lee University who is an ACA expert.

In addition, Jost added, some brokers may be steering customers to off-exchange plans because those plans are more likely to pay a broker fee than exchange plans, which increasingly do not.

Middle-class consumers who don't qualify for subsidies may buy outside the exchanges because they are misled or confused. Michael Anderson, a retired police officer in Scottsdale, Ariz., said he went on what he thought was the HealthCare.gov federal website to shop for exchange coverage after he recently retired. But he apparently clicked on copycat commercial site and got inundated with bogus offers. He ended up buying a private off-exchange plan through ehealth. The premium, however, is going up sharply for 2017. So he intends to visit the real HealthCare.gov site in November to see what's available for him and his wife.

“It was the first time I was buying health insurance on my own, and the whole process was very frustrating,” Anderson said.

Some experts favor merging the exchange and off-exchange individual markets—which Vermont and Washington, D.C. already have done—to help stabilize the ACA marketplaces and make it easier for consumers to shop and compare premiums, benefits and provider networks across all available individual-market products. Insurers strongly oppose this approach.

“If you set up an environment where customers get to compare all prices and products in one place, that creates true competition and means better prices, and it can actually reward insurers that provide the best products,” said Mila Kofman, executive director of the D.C. exchange.

Ario said the new RWJF data raise more questions than they answer about what's happening in the murky off-exchange market and how it affects the ACA exchanges. Much more needs to be known to guide policy and improve the functioning of the entire individual market, and the data set is a good start.

“Ultimately, it's good for people to have lots of choices for subsidized and unsubsidized products,” he said. “Consumers should have the same level of transparency about both markets.”