Despite Lower Than Expected Premiums, Exchange Consumers Will Face High Cost-Sharing Before the Out-of-Pocket Cap

Initial data suggest that exchange plans under the Affordable Care Act (ACA) will include high out-of-pocket costs for enrollees—including deductibles and cost-sharing for medical services and prescription drugs—before consumers reach their out-of-pocket maximum.

For a single individual enrolled in a Silver plan, the average annual deductible before any plan coverage begins will be $2,550, which is more than twice the average deductible in employer-sponsored coverage. Most exchange plans also rely on coinsurance for drugs on Tier 3 and 4 of the pharmacy benefit (typically for non-preferred brand drugs and higher-cost specialty drugs), with average patient contributions around 40 percent of the drug cost. Despite this comparatively high cost-sharing, exchange enrollees with high healthcare spending will benefit from the $6,350 out-of-pocket maximum for single coverage.

Methodology: Avalere Health analyzed exchange benefit designs among 22 issuers in 6 states where such information is included in public rate filings.1,2 Avalere analysis of the exchanges is offered through the Avalere PlanScape™ offering.

Deductibles: For non-subsidized Silver plans analyzed, the average deductible is $2,550 for individual coverage, ranging from a low of $1,500 to a high of $5,000. By comparison, in 2013, 78 percent of single enrollees in employer-sponsored coverage had a deductible with an average value of $1,135 per year—less than half the average Silver deductible in exchange plans. Bronze exchange plans had even higher deductibles with an overall average of $5,150, ranging from $2,000 to $6,350 among plans analyzed.3

“Consumers will need to balance lower monthly premiums against the potential for unpredictable, expensive out-of-pocket costs in plans with higher deductibles,” said Caroline Pearson, vice president of Avalere Health. “Furthermore, there is a risk that patients could forego needed care when faced with high up-front deductibles.”

Drug Coinsurance: Approximately 90 percent of Bronze plans will rely on coinsurance, which is calculated based as a percentage of drug costs rather than fixed dollar co-payments, for higher pharmacy tiers.4 Based on the rate filings, average coinsurance rates for drugs in Tier 3 and Tier 4 are approximately 40 percent. Interestingly for Silver plans—just like for Bronze plans— average coinsurance is 40 percent for Tier 3 and Tier 4. The biggest difference is that several Silver exchange plans utilize copays (as opposed to coinsurance) for Tiers 3 and 4 in which the averages were $70 forTier 3 and $270 for Tier 4. By comparison to today’s employer-sponsored market, only 29 percent of those with employer coverage have coinsurance on their highest pharmacy tier.5

“It will be very important for consumers to be smart shoppers. Plans that use benefit designs with flat dollar copays rather than coinsurance could significantly reduce out-of-pocket costs for patients who regularly take prescription drugs,” said Matt Eyles, executive vice president of Avalere Health. “Patients need to understand how different health plans will cover the services and medicines that they use most often to determine which plan is best for them or their families.”

Primary Care Visits: Further analysis of exchange benefit designs found that the average cost for a primary care provider (PCP) visit in Silver Plans is a $30 copay, though this copay ranges from $5 to $50 throughout the plans. Several Silver plans are charging coinsurance rates for PCP visits ranging from 10 percent to 20 percent.

Avalere PlanScape will give you a 360-degree view of the plans available through the exchanges, offering critical inputs to inform your exchange market strategy and operational plans for 2014, 2015 and beyond. With PlanScape, you will have a quick synthesis of actionable data and information on the plans most likely to drive enrollment and gain membership in exchanges. We combine our cutting-edge data analytics, unparalleled health reform expertise, and deep understanding of the industry to interpret the impact of market trends on your business, now and in the future. For more information on PlanScape, contact Caroline Pearson.

1 Avalere analyzed benefit design information in Colorado, Connecticut, Indiana, Rhode Island, Vermont, and Washington.

2 Avalere’s benefit design analysis represents a small sampling of the overall benefit design trends apparent in the exchanges and the numbers represented here are approximate and representative of the averages taken from the six state sample.

3 Kaiser Family Foundation and Health Research & Educational Trust, Employer Health Benefits 2013 Annual Survey.

4 The coinsurance analysis of the benefit designs did not include Health Savings Accounts because on average these plans have a 0% coinsurance rate for all drug tiers which would lead to skewed data that underestimated the true average.

5 2012-2013 Takeda Prescription Drug Benefit Cost and Plan Design Report. Pharmacy Benefit Management Institute. http://benefitdesignreport.com/