NEW YORK — Nobody wants their health benefits cut, but a funny thing happens when U.S. consumers shop for plans on their own: They buy less coverage than they had before.
That “buying low” behavior observed in data collected by consulting companies like Aon Hewitt and Liazon Corp may soon happen much more often. With the start of Obamacare and corporate open enrollment seasons, millions of Americans are likely to buy their own healthcare coverage on public and private exchanges.
Their choices may bring a change in what options will be offered and how much they will cost. For example, some high-end plans may disappear if they appear particularly unpopular, analysts say.
Starting on Tuesday, about 7 million people are expected to buy insurance on the public exchanges created by the Affordable Care Act, but the U.S. Congressional Budget Office expects that number to rise to 24 million by 2019.
Private exchanges, which mimic the public ones but are not mandated by the government, may surge to 40 million by 2018 from about 1 million currently, according to Accenture Research. They would cover almost 25 percent of the U.S. employer-provided workforce of 170 million.
On Aon Hewitt's private exchange for large employers, 46 percent of roughly 100,000 people enrolled last year bought less coverage than they had previously. Over the past five years, 80 percent of customers on Liazon's exchange for small-business employees changed their coverage, with 90 percent of those choosing less-expensive plans.
This was typically coverage with lower monthly premiums, higher annual deductibles and, sometimes, a smaller network of doctors.
“It's about people picking what they need,” says Liazon co-founder Alan Cohen. “Companies overbuy dramatically in the area of health insurance. You quickly realize that it's inefficient to force people into one plan.”
Most exchanges are now set up according to metallic tiers - bronze, silver, gold and platinum - which are based on government-approved actuarial standards. As consumers move up to more-precious metals, they will typically face higher premiums and lower deductibles and co-pays.
This may mean that if people consistently pick lower-end plans, eventually the top level could go away, benefit experts say.
Some insurance carriers are already forgoing platinum, says Gary Claxton, a vice president of the Kaiser Family Foundation, one of the leading groups studying healthcare reform. On the other end, there is already lobbying for a level below bronze - the “lead” level, as Claxton jokes - which would cover just 50 percent of costs, compared with 60 percent for bronze.
“Within five years, I'm sure we'll have changes,” he says.
Not everyone agrees.
Most insurers are counting on people choosing the midlevel silver plan, which is heavily promoted, and are prepared to offer a wide range of options, says Bob Hurley, a senior vice president at eHealth Inc, which runs the private health insurance marketplace
“Consumers do seem to weigh the benefits of the insurance plan, but they do not drive to the basement,” he says.
While consumers look first at premiums, the value of a plan also depends on the deductible and the breadth of the network, says Richard Birhanzel, managing director of Accenture's health insurance exchange business. Those offerings may get worse even if the premium does not go up, he said.
In the wrong plan
Another worry is that if sicker consumers gravitate to the high-deductible bronze and silver plans, they may get overwhelmed with out-of-pocket costs. While there will be trained “navigators” to help people pick the plans on the public exchanges and benefits administrators to steer employees, people do not always listen.
A study by Columbia Business School released on Monday predicts that the average consumer on the exchanges will lose more than $611 a year by failing to pick the most effective option for their needs, and that the government may lose $9 billion subsidizing poor choices.
Other research, however, shows that buying down does not necessarily buy too little coverage. Liazon did a detailed analysis for one of its large clients of one full year of claims data and found that 75 percent of people were in the best plan for them.
If problems arise, there will be some safety nets on the public exchanges to help pay for emergency expenses on the silver tier, Claxton said. And some companies have employee assistance programs to help in these circumstances.
The way high-deductible plans were designed to deal with this situation is with Health Savings Accounts, where conscientious consumers can stash away a bit of an emergency fund. Many employers directly contribute cash incentives to these accounts.
People can also look at the maximum out-of-pocket expenses they would pay under their plans. “Even if you are buying a lower-end plan, you know what your total potential financial exposure is,” says Alwyn Cassil, director of public affairs at the Center for Studying Health System Change.
In the worst-case scenario, there is always the reset button for next year.
“Every year it's a do-over,” says Liazon's Cohen. “You're not making a decision forever.”