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Bronze Plan Meager In Senate Health Care Bill

Jon Walker has gone line-by-line through the Senate health care bill and the CBO analysis, so I won’t replicate his concerns here. In short, he believes the Senate bill has poor risk adjustment, meaning that the insurance companies will be empowered to still game the system, just in different ways; he’s appalled at the creation of nationwide insurance plans, which could easily lead to the gutting of state-based insurance regulations; and he lists several other problems, including the opt-out that states could enact before reform, the 1-year implementation delay, the bad “free rider” provision for employers, and others. I do want to highlight one and expand on it a bit.

6) Incredibly Low Actuarial Value – The minimum actuarial level of the lowest level qualified health insurance is 60%. This level is far too low. This is even lower than the requirement in the Senate Finance Committee bill, which was 65%.

Let’s try to untangle the wonk-speak here. Nicholas Beaudrot does the best job of that. Basically, the bill defines down what qualifies as “insurance,” such that insuring Americans has less meaning and value.

My big fear was that Harry Reid would stay below the $900 billion by watering down the minimum benefits package. This would let the CBO continue to say that however many people are “insured” but not really get into the details of the quality of their coverage. I think I was right:

13 (A) BRONZE LEVEL.—A plan in the bronze level shall provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 60 percent of the full actuarial value of the benefits provided under the plan.

As written, the Bronze plans will be, if not universal, certainly a popular form of individual catastrophic insurance with some first-dollar coverage for certain preventative care tacked on. Insurance with a 60% actuarial value is worse than the insurance offered by over 99% of employer-based plans (search for “exhibit 2″). And, of course, people are notoriously optimistic when it comes to assessing their own risk exposure; lots of folks will opt for these crummy bronze plans, not set aside much savings, and hope they don’t get sick.

If insurance covers less, it’s likely to cost less, and that makes the subsidies to ensure affordability less, so that’s how this saves money for the federal government.

The only mitigating factor that I can see here is that the minimum benefits package in the bill would mandate coverage and no cost-sharing for a fair amount of services, and then there are the limits on out-of-pocket expenses, elimination of lifetime caps and limiting of annual caps on spending. While there’s certainly value in catastrophic coverage, preventive coverage, and guaranteed issue for people with pre-existing conditions, that’s pretty bare-bones coverage, and unless people understand clearly what they’re getting with their insurance they’re bound to be shocked at what the Bronze plan doesn’t cover. And if they opt for a more comprehensive plan, they won’t get the same subsidy help.

I should say that there is more money available for subsidies in this bill than in the Senate Finance Committee’s bill, particularly for middle-class families.

Other analyses of the Senate bill are available at The Wonk Room and Senate Democrats have provided a section by section summary of the bill, a somewhat more robust explanation and an implementation timeline.

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David Dayen

David Dayen