If ever there was a sign that many individual health insurance plans leave something to be desired, it surfaced this week in a study published in Health Affairs. The study found that more than half of the 14 million Americans who buy coverage directly from insurance companies wind up in health plans that fail to meet standards for essential benefits set by the Affordable Care Act. The analysis, by a team of researchers at the National Opinion Research Center at the University of Chicago and the benefits firm Towers Watson, also showed that most people who are insured through employers have more comprehensive benefits and pay a smaller share of the cost.
Under the act, which is now under review by the U.S. Supreme Court, people will be able to buy insurance through state-run marketplaces known as exchanges starting in 2014. All plans sold in the exchanges will be required to provide coverage for the healthcare services the law deems “essential benefits”: preventive care, hospitalization, outpatient surgery, emergency and urgent care, maternity care, prescription drugs, rehabilitation services, medical equipment and devices, mental health coverage, substance abuse treatment and certain eye and dental services for children. The law also divides plans up into four tiers based on their so-called actuarial value, which reflects the financial protection a plan provides against unpredictable medical costs. A plan with an actuarial value of 75 percent covers three-fourths of the policy holder’s medical bills, and the person pays the rest out-of-pocket through deductibles, coinsurance, co-pays or other cost-sharing arrangements, the authors say.
Jon Gabel of the University of Chicago and his colleagues report that the average actuarial value of individual plans in 2010 was 60 percent, compared with 83 percent for group plans. Nearly two-thirds of people enrolled in group plans were in either the top-value “platinum” tier (90 percent actuarial value or higher) or the “gold” tier (80 percent to 90 percent actuarial value), Gabel’s team writes. Just 2 percent of people with individual insurance were in gold plans, and there were no platinum plans in the individual market. Fifty-one percent of those with individual insurance were in what the authors dubbed “tin” plans, with actuarial values below the 60-percent mark.
Average out-of-pocket household spending in the individual plans was $4,127. In group plans, it was much lower, $1,765. “The highest spenders in tin-tier individual plans—including very sick people who incur huge medical bills—had more than $27,000 in out of pocket spending,” the authors state.
Gabel and his team drew their conclusions from an analysis of data from the Kaiser Family Foundation/Health Research and Educational Trust 2010 Employer Health Benefit Study, from insurance carriers in five states, California, Florida, Michigan, Pennsylvania and Utah and from Thomson Reuters Market Scan.
U.S. News & World Report is in the process of developing a rating system for individual health insurance plans. Its release is expected this summer.