Short Takes On News & Events

Catastrophic Obamacare Policies Prove Hard Sell So Far

By Phil Galewitz

December 20th, 2013, 4:04 PM

The Obama administration’s decision this week to allow people to buy catastrophic-level policies if their individual health plans had been canceled comes amid reports that few people have bought these less expensive policies sold in new online insurance marketplaces.

In California, only 1 percent of those who had picked a plan in the first two months since the marketplace opened had chosen a catastrophic plan. In Kentucky and Connecticut, just 2 percent have chosen a catastrophic plan from their state’s online exchange. In Washington state, just 0.4 percent of consumers have chosen catastrophic plan. The federal government, which is running the portal for 36 states, has not released data showing what types of plans consumers are choosing.

A catastrophic health insurance plan covers all essential health benefits like doctor and hospital visits but has a very high deductible.  Premiums for catastrophic plans may be lower than traditional health insurance plans, but deductibles are usually much higher.

As expected, the most common level policy being purchased so far are silver plans, according to officials in California and other states that have disclosed the data.

Sabrina Corlette, research professor at Georgetown University, said she’s not surprised the catastrophic plans have had little pickup. That’s because the plans were previously available only to people under 30 and to those offered employer coverage considered unaffordable because it costs more than 8 percent of the consumer’s income. Despite having lower premiums with catastrophic plans, consumers can’t get tax subsidies or cost-sharing reductions.

People with incomes under 400 percent of the federal poverty level, which is $45,800 this year, may get a better deal buying silver or bronze type policies that have lower out-of-pocket costs, experts say.

The high deductibles in catastrophic plans may also deter some buyers, Corlette said.

“We did not anticipate high demand for the catastrophic plans,” said Gwenda Bond, a spokeswoman for Kynect, the Kentucky insurance marketplace.  In addition to their limited audience and lack of subsidies she said:  “We also think that consumers are being savvy and weighing deductible and cost-sharing amounts alongside monthly premiums.”

Joel Cantor, director of state health policy at Rutgers University, said people will find the catastrophic policies attractive if they were previously in high deductible plans or limited benefit plans that are no longer allowed. He said many people in the individual market in New Jersey were in bare-bones type plans that have been cancelled.

“For them, catastrophic plans make more sense because they are extremely price sensitive,” he said. On the other hand, they could get a better deal buying a subsidized bronze plan and have lower out of pocket costs, he said.

10 Responses to “Catastrophic Obamacare Policies Prove Hard Sell So Far”

  1. In Washington state, there is one catastrophic plan available on the exchange. It is offered by Group Health. For a 22-year-old, the premium is $174.64/month. The deductible is $6,350; annual out of pocket max is also $6,350.

    Group Health’s bronze plan is $166.35/month. The deductible is $5,000; annual out of pocket max is $6,350.

    Otherwise, all the “essential benefits” are the same.

    A healthy person under the age of 30 is extremely unlikely to meet even a low deductible, so why pay more every month for only a slightly lower deductible? Also, the plan is not eligible for a subsidy.

    That’s why no one is interested in the “catastrophic” plan (that really isn’t a catastrophic plan at all).

  2. patty says:

    “A healthy person under the age of 30 is extremely unlikely to meet even a low deductible…”

    Frugal Nurse? Huh? So, according to you, chronic health issues and serious accidents virtually never happen to people under age 30, right? So, hospitals that specialize in treating children don’t really exist, right? You mentioned Washington state but you didn’t mention the planet.

  3. gweloboy says:

    In my depressed part of Georgia, Obama care is about double that of decadent Atlanta.
    I can’t afford to pay more for health insurance (Bronze) than I pay on a mortgage.
    400k people lost insurance here in Georgia- no riots, no looting. If 400k people had lost food stamps imagine the consequences.

    Some said that Obamacare would lead to herds of people starting up their own businesses because affordable health insurance would no longer be a concern.

    What is going to happen when people have to choose between food or insurance?

    George Washington would be hard pushed to start a revolution this year. Working Americans just haven’t got it in them anymore.

  4. Michael says:

    Gweloboy – They may riot once they realize how many rural hospitals that treat those with no insurance have closed down: Charlton Memorial Hospital in Folkston; Stewart-Webster Hospital in Richland; and Calhoun Memorial in Arlington; Stewart-Webster Hospital closed earlier this year and Flint River Hospital in Montezuma, closed its emergency room.

    They could have been saved if Georgia had taken the expanded Medicaid monies.

    But your ruling party doesn’t care.

  5. Carol Sprowls says:

    Totally confused!

  6. Chas says:

    @patty – you need some reading comprehension. FrugalNurse never said chronic conditions don’t effect under 30 but did qualify w/ the word HEALTHY which would preclude those that have chronic conditions. FrugalNurse also never said anything about children, who would be covered by their PARENTS. you just failed miserably at this internet thing.

  7. hwm in florida says:

    finally an intelligent conversation about the merits of coverage, the absence of coverage and its impact on people. we are moving on to implement this law. that is a good thing.

    I especially relate to the fact that many red states — who were insensitive to the poor (Florida for one) — continue to ignore the opportunities provided by the affordable care act.

    Not expanding medicaid in Florida will cause close to 1 million poor Floridians to fall into a gap in order that the state avoid the image of any type support of obamacare. its what we in the poor side of town call ‘really dumb”. Many of those people are working every day, two and three jobs trying to make it. Its time those more fortunate recognize that many who are considered poor are not wards of the state and are doing the best they can under their current circumstances to try to survive. We walk away from money that is available to help these people only to put more costs onto those who do have coverage. what kind of sense does that make.

  8. Ray says:

    Just statistically speaking, using public data, about 97% of 18-34 year olds will not hit a $2,500 deductible (the lowest a “high deductible” plan can be by law) in a given year. Obviously, even less hit $6,350 like the Catastrophic plans have. Only about 1% receive benefits equal to or greater than their combined premium and deductible.

    Further, less than 3% of ALL PEOPLE hit a $7,500 deductible, and about 4% hit $5,000.
    Not my opinion, hard data reported by insurers during actuarial studies.

    For all you math majors out there, 3% probability over a 16 year window is what, less than a 50/50 shot you’ll EVER hit your deductible?

    At least on the $2,500 plans, the premium is more than the deductible (that few ever hit). Put another way, there is a more than 50% chance that you will save money, and significantly so, by foregoing insurance over that 16-year window.

    No matter what you think, insurance is nothing but a financial planning/investment tool, just like a bond or stock. That’s why agents have to be licensed/registered/background checked and carry significant E&O policies. For young people, it’s a financial product with a significant negative return for the overwhelming majority.

    You wouldn’t throw 10% of your income into a portfolio that had a >50% shot of loosing all value, and a 3% chance of even breaking even. Don’t expect young adults to be willing to do just that, because that’s exactly what insurance is for these folks now.

  9. mark says:

    given that the probability of hitting a $7,500 deductible in a given year is 3%, the probability of not hitting it are 97%. Thus it follows that the probability of not hitting it for sixteen years in a row is 0.97^16, which is 61.4%. So, there is a 61.4% chance that a health insurance customer will not hit a $7,500 deductible 16 years in row.