What is the Impact of Returning to Pre-ACA Private Health Insurance Designs?

On January 1, 2017, the 2010 Patient Protection and Affordable Care Act (ACA) will enforce explicit criteria for Qualified Health Plans (QHPs).  QHPs are considered by ACA to have adequate coverage and are eligible to receive a tax credit for health insurance purchase in a state or federal health insurance exchange.  QHP enforcement was to take place in to 2014, but was waived by the Secretary of the Department of Health and Human Services (HHS) when take-up for health plans in the exchanges was initially much lower than expected due to software glitches in the federal and state health insurance exchanges.  One must be enrolled in a QHP to avoid an insurance mandate penalty/tax administered by the Internal Revenue Service (IRS).  We posit enforcement of the out-of-pocket maximum threshold of QHPs will dampen demand for health insurance compared with a permanent waiver of the restriction past 2017.  To test this hypothesis we use the ARCOLA micro-simulation model. 

Our analysis was completed in several steps.  First, we estimated what proportion of plans, available in the marketplace in 2013, would not be considered QHP-compliant because of their high out-of-pocket spending thresholds.  To complete the simulation, we extracted existing health plan benefit designs and premiums from ehealthinsurance.com.  We believe this is the most comprehensive picture of the health insurance market before QHP regulations were enforced.  Our data were generated from snapshots of the health plan choices offered in all 50 states between June 1 and June 20, 2013.  We obtained data on health plan premiums, coinsurance and deductibles, as well as out-of-pocket maximums. We looked at both single and family coverage for a 40-year old male as the primary insured individual.  For family coverage, we assumed the spouse was also 40 and there were two children under age 10.

After we extracted the plan data with these search criteria, we identified the health plan with the largest OOP expense without the QHP threshold restrictions (pre-ACA).  We then identified the plans with the highest OOP expense with QHP restrictions in force post-ACA.

We used these plan designs in a health insurance micro-simulation model to identify the impact of the QHP out-of-pocket cost limitations on the number of uninsured people resulting from health reform as well as the federal cost of health reform from 2016 through 2025.  Our health insurance demand model contains an array of plan choices including a Health Maintenance Organization (HMO), three Preferred Provider Organizations (PPOs) that correspond to silver, gold and platinum ACA metallic categories, a narrow network PPO corresponding to the bronze category, and a high- deductible health plan. 

We find the QHP restrictions will have a negative impact on the full potential of the private insurance market.  Restricting the non-qualified plans will result in nearly 7% fewer insured by 2019.  We will examine the impact on demand by different income levels to see if high earners would buy more high deductible plans if the QHP restriction was permanently waived compared to current regulations.