While the Affordable Care Act (ACA) reforms greatly increased consumer health plan choices and the comparative information available to them, evidence suggests that more reform is needed.
Research shows that consumers continue to select health plans based on their post-subsidy premiums and often fail to take into account other factors, such as cost-sharing obligations and the quality and breadth of provider networks.1 This is unsurprising —premiums are the easiest health plan attribute for consumers to understand,2 and in many cases, non-premium health plan attributes are not as easy to compare (or in some cases, not yet available) when shopping.
In addition, many consumers find the high number of plans and variety of cost sharing structures “difficult to navigate.”3 Research from Medicare Advantage, Part D and Medigap plan markets shows that when consumers are given too many health plan options, consumers are: (1) less likely to make any plan selection; (2) more likely to make a selection that does not match the consumer’s health needs; and (3) more likely to make a selection that leads the consumer to be less satisfied.4
What Is Standardized Plan Design?
Standardized benefit designs standardize cost-sharing into a few basic designs to reflect different actuarial values or health plan generosity.5 This is typically useful in situations where a consumer has many health insurance choices, such as an ACA Marketplace. In addition, standardized plan design also assists regulators and insurance exchanges when negotiating or setting rates with insurance carriers (since the carriers would have less latitude to negotiate), which may also translate into lower prices for consumers.
How Does Standardized Plan Design Help Consumers?
Standardized plan designs are being promoted as a means to both increase the safety of consumer health plan choices and to make it easier for consumers to compare non-premium health plan attributes.6
Cost-sharing features are an extremely difficult health plan dimension for consumers.7
When cost-sharing does not vary between plans (within an actuarial value tier), consumers can focus on provider networks and premiums to make their selection—a much easier task.8
State Experience with Standardized Plan Design
While evidence on the consumer response is limited, these approaches are very promising.
Massachusetts was an early adopter of these designs when early consumer testing of their ACA-like reforms showed that consumers still had difficulty comparing plans. Massachusetts found that adopting a standard set of plan designs could help consumers by reducing the amount of variation they have to take into account.10 Focus groups suggested that three benefit designs and five carriers per tier was an optimal combination of choice and simplicity.11 In addition to standardizing benefits, the Massachusetts Health Connector also required that, at a minimum, plans be offered on the carrier’s broadest commercial network of providers. The standard designs were popular but unfortunately rolled back. To help transition their marketplace to the new ACA rules and to attract more carriers to their small group market, non-standard designs were allowed.12
Following Massachusetts lead, several of the ACA state-based marketplaces also adopted this strategy.13 For example, California does not allow non-standard plans in the individual marketplace, and standardized plans exempt physician visits from the deductible, limits out-of-pocket costs for high-cost prescription drugs, minimizes use of coinsurance, and charges low copayments for primary care visits and generic drugs.14
More recently, CMS has issued a final rule that includes provisions for 2017 standardized plan options in the federally facilitated marketplaces (FFMs).15 CMS did not require insurers to implement standardized plans, but rather they could offer the standardized plans if they chose to do so.16 The final rule included the following:
To be offered at bronze, silver and gold levels, including all 3 cost sharing variations of silver plan
None to be offered at platinum level because “only a small proportion of QHP issuers in FFMs offered platinum plans in 2015”
HHS also proposed specific design elements for standardized plan design that focused on provider tiers (single, in-network provider tier); drug formularies (no more than four - generic, preferred brand, non-preferred brand, and speciality); standard copayments and coinsurance; and deductible-exempt services.
1. Quincy, Lynn, What's Behind the Door: Consumer Difficulties Selecting Health Plans, Consumers Union, Washington, D.C. (January 2012).
3. National Academy for State Health Policy, Standardized Benefit Plans: A Tool for Consumers?, Portland, M.E. (February 18, 2015).
5. National Academy for State Health Policy (February 2015); see also Mitts, Lydia, Standardized Health Plans: Promoting Plans with Affordable Upfront Out-of-Pocket Costs, Families USA, Washington, D.C. (December 2014).
6. Quincy, Lynn, Creating A Usable Measure of Actuarial Value, Consumers Union, Washington, D.C. (January 2012).
8. Mitts (December 2014).
9. For example, while D.C.’s standardized bronze and silver plans still have a significant deductible ($2,000 and $4,500, respectively), they include multiple elements that help keep cost-sharing more affordable, including exempting some services from the deductible, having a separate drug deductible, and charging lower copayments for primary care and generic drugs. See Mitts (December 2014).
10. Blue Cross Blue Shield of Massachusetts, Commonwealth Health Insurance Connector Authority and Robert Wood Johnson Foundation, Determining Health Benefit Designs to be Offered on a State Health Insurance, (November 2011).
11. Massachusetts Health Connector, Seal of Approval: Product Strategy Evolution and Current State, (May 12, 2016).
13. Monahan, Christine H., et al., Realizing Health Reform’s Potential, The Commonwealth Fund, New York, N.Y. (December 2013).
14. National Academy for State Health Policy (February 2015).
15. 81 Fed. Reg. 12203 (to be codified at 45 C.F.R. parts 144, 147, 153, 154, 155, 156, and 158) (March 8, 2016).
16. Herman, Bob Obama Administration Backs Off on ACA Rules for 2017 Health Plans, Modern Healthcare (February 29, 2016).