Consumers shun cheapest Obamacare exchange plans

Most Americans are avoiding the lowest-priced health plans on the Obamacare insurance exchanges, taking advantage of government subsidies to seek more protection against high treatment costs.

Only 19 percent of enrollees chose the coverage with the cheapest premiums, called bronze, while 7 percent picked the most expensive, the U.S. Health and Human Services Department said in a report. Mid-level silver plans drew 62 percent. The lower the plan level, the higher the out-of-pocket costs.

That’s good news for insurers who were concerned that too many people would pick the cheapest premiums, then discover they couldn’t pay the plans’ higher deductibles for medical care, said Michael Mahoney of GoHealth LLC, a private online platform that helps people enroll. The popularity of the silver plans shows consumers are selecting the best package of financial assistance offered through the government exchanges.

“The silver plan’s cost-sharing subsidy makes them a great option,” said Carrie McLean, director of customer care at eHealth Inc., an online insurer.

The Patient Protection and Affordable Care Act, known as Obamacare, requires individuals to carry insurance or pay a penalty as it seeks to cover many of the nation’s estimated 48 million uninsured. Those who don’t receive coverage through their workplace or a government program can select a plan using the new exchanges that opened for business Oct. 1.

Based on income, two subsidies are available to help pay the cost: one that covers premiums and another that reduces deductibles and co-payments. While premium assistance applies to every tier, the cost-sharing aid applies only to silver plans.

Bronze plans cover only 60 percent of costs, making consumers liable for maximum deductibles of $6,000 a person in medical care.

“It’s too risky to take on that exposure if you don’t have that kind of money,” Karen Pollitz, senior fellow at the Kaiser Family Foundation, said in a telephone interview.

For a family on a silver plan with an income at 150 percent of the federal poverty level, the cost-sharing assistance reduces a $12,700 annual out-of-pocket maximum to $4,500, and for an individual, from $6,350 to $2,250, Mahoney said.

The cost-sharing subsidies were intended to encourage consumers to “buy up,” said Mahoney, senior vice president of consumer marketing at GoHealth.

The law requires insurers to accept all customers regardless of their medical history or condition and provide some benefits such as free preventative care. The companies don’t want too many people signing up for platinum plans with the most-expensive premiums because those customers typically are sicker, older patients who know they will see their doctors frequently, said Brian Wright, a New York-based analyst at Monness Crespi Hardt & Co.

“So overall, the greater the percentage of enrollment in the bronze and silver plans, the better from a risk pool perspective,” Wright said in a telephone interview.

Bruce Broussard, chief executive officer of Humana Inc., said early enrollment in higher metal tiers was “greater than we anticipated,” with 25 percent of customers picking a platinum plan, and 52 percent picking silver as of Dec. 31.

Since then, they have seen members start to skew younger and pick more silver plans, representing 58 percent of their enrollments at the end of January, Broussard said in a call with analysts on Feb. 5.

In addition to the 7 percent platinum, 12 percent of the exchange selected plans through Feb. 1 were at the gold level, the HHS report showed.

Joseph Swedish, chief executive officer of Indianapolis-based WellPoint Inc., which has the most plans on the public exchanges, said silver and bronze plans were the “most popular metal levels by a wide margin.” This was “consistent with expectations,” he said in a call with analysts on Jan. 29. At the end of January, WellPoint had 500,000 new members enrolled through the exchanges.

More important than what tier plan is picked, however, is who is making the selection.

“What’s most important for the insurers is the mix of enrollment between young and old, healthy and unhealthy,” Wright said.

The number of claims filed are what that determines an insurer’s expenses, Mahoney said.

“If a person is unlikely to make a claim, that’s a good thing,” he said. “A ton of young invincibles on a silver plan is not the same as a bunch of sick people on the same plan.”