Our recent report comparing off-exchange premiums vs. on-exchange premiums continues to receive attention. The report examined the lowest premiums for four major off-exchange insurance companies in 39 states versus the lowest premiums found on-exchange for plans of the same metal tier. HealthPocket found that exchanges had cheaper metal plans available than the off-exchange companies in 35 of the 39 regions examined. On average, the lowest cost off-exchange plan was over 40% more expensive than the lowest cost exchange plan in the same region.
A lingering question raised by the study results is “Why are the off exchange plans among UHC, Aetna, Cigna, and Assurant more expensive?” The short answer is: We don’t know…yet. There are several possible factors that alone or in combination could have influenced the off-exchange pricing. One factor is that the off-exchange insurance companies may believe that by avoiding exchanges they can shield themselves from premium comparisons and, therefore, remain less competitive on pricing and push sales volume by classical marketing techniques. Without insider information, it is hard to determine if this explanation played any role in pricing. It should be noted that even off-exchange these same companies face premium comparisons on HealthPocket’s web site since we display both on-exchange and off-exchange health plans together so consumers can make informed decisions.
Another factor that could be influencing off-exchange pricing is the composition of health plan networks. McKinsey published a recent report found that health insurance plans with broader hospital networks are associated with higher premiums as compared to narrow network products. However, the McKinsey study focused on hospitals and did not examine other healthcare provider issues such as specialist participation that might affect premiums. With respect to HealthPocket’s study, we did not include an analysis of healthcare provider networks so we do not know if there are any substantive differences between the off-exchange and on-exchange networks.
Yet another factor that could influence premiums is expected differences among risk pools and their attendant rates of medical usage. Exchange health plans must combine on-exchange and off-exchange beneficiaries within a single risk pool while an insurance company that is only off-exchange has a risk pool with no on-exchange beneficiaries to consider from an actuarial perspective. Why does this matter? Exchanges may attract a disproportionate amount of low-income consumers (because income-based subsidies are only available on-exchange) with higher rates of medical service utilization. However, if this assumption were true it would suggest lower costs for off-exchange plans and the ability to market more competitive premiums. As noted earlier, the four major off-exchange carriers examined had less competitive premiums with respect to their lowest cost offering in each metal tier.
HealthPocket intends to investigate this matter further. We’ll keep you posted.
