Lunch break!
Megan McArdle has a post up on the exchanges, and a concern that the standardized tiers, fixed subsidy level, and open pricing will drive insurers to set their prices high, and drive consumers to purchase the higher-cost option as a marker for quality. Because the subsidy is fixed based on the 2nd-lowest-cost “silver” plan, insurers collectively benefit from that 2nd-lowest-silver-plan being expensively priced.
And that much is true — the entire system would benefit from insurers providing their pricing structure to the government without having any means of knowing where that subsidy baseline will fall, and there would indeed be some benefit to a level of discretion that means that the government may elect a lower subsidy level, to keep the insurers in line. But the insurance companies still have to compete with each other, and the problem here is a different one entirely.
McArdle titles her post “Do We Need Less Transparency on ObamaCare?” — but the problem is that the very nature of the exchanges limits the transparency and the ability of the consumer to comparison shop.
If I want to buy the latest Rick Riorden title (for my kids, of course), I can comparison-shop at Amazon, Barnes & Noble, or a discounter. If I want to buy some new clothes, online shopping isn’t going to work — at least not for me, and, I think, not for women’s clothes in general. Except for those rare product lines where the sizing is reliable and the quality is consistent, I need to look at the item myself.
And in the same way, there’s a lot missing from the exchanges: how is the company’s customer service? How broad is the provider network, and, if it’s limited, how good are they about keeping doctors in their network vs. constantly reshuffling them? How onerous are their preapproval processes? Do they have any innovations in coordination of care or evidence-based medicine? If it’s a high-deductible plan, do they provide tools to help consumers find lower cost options for a given procedure? For that matter, do they actively work to prevent fraud? And how extensive is their coverage of the benefits in the fine print? (Many years ago, back when our insurance was generous, I learned how much this matters — our company covered speech therapy for any reason, with no copay, for our weekly visits with my son; my friend had to pay out of pocket for her son because it was considered “developmental” and not covered under their policy.)
I don’t know about you, but last year at annual enrollment we were presented with multiple options which, on the face of it, seemed indistinguishable except that one was considerably more expensive than the other. (Remember, I’m an actuary, but a consulting actuary — I don’t work at an insurance company.) I suspected that the more expensive policy was probably better in all these intangibles/fine print areas, but we had no way to assess that, or whether they just were unlucky enough to have an unhealthier pool of employees for some other reason.
Now, I’ve said before that I don’t have a problem with subsidies, if they were structured more sensibly. But there’s no reason it would need to be tied to a government-run insurance agency. If an old-fashioned insurance agent provide value by helping his customers understand which plans provide value for the money (while being open about commissions), or a competing website can develop metrics that allow consumers to comparison-shop more effectively, shouldn’t they be able set up shop, with their customers still able to pick up the subsidy?
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