Does it make sense to look for medical plans outside "Obamacare"?

Question

Does it make sense to look for medical plans outside of the ACA Exchanges (such as the https://calheers.ca.gov/ in California), or are those as good as it gets?

If it's illegal for the insurer to consider your medical history regardless of how you are buying the insurance, why would any insurer keep any plans away from the exchange?

I would have preferred lower premiums and higher deductible and out-of-pocket maximum than what's offered on the exchange, where they only go up to $5000 and $6350, respectively. However, as I understand it, these limits are set by law, and you have to pay a fine if your coverage does not meet these limits.

Additionally, are there any subtle differences, like the insurer's ability to hike the premiums outside the open enrollment period, for the same plan that was purchased via the exchange vs off-the-exchange?

Answer 1

In practice, there are two main reasons to stick with the exchange: for many people it is cheaper (because of subsidies), and for most people it is simpler (because you can see many plans in one place in a standardized way instead of having to visit many different insurer websites).

For most people, the biggest advantage of buying plans from the exchange is the potential for the premium subsidies. You can't receive subsidies if you buy a plan off the exchange; you have to pay the entire cost yourself.

If your income is too high to qualify for subsidies, that advantage is moot for you. The exchange does offer some other advantages, such as the ability to directly compare plans from different insurance companies in a standardized way. If you shop among insurance companies "manually" you will have to do this comparison yourself.

In theory, the idea is that the exchanges will be able to negotiate better rates by offering insurers the opportunity to easily reach a large pool of customers and federal money (the subsidies). It is still too early in the adoption to know for sure whether this will be the case in the long run, but I found at least one analysis according to which the cheapest on-exchange plans are usually cheaper than the cheapest off-exchange plans.

As for why companies might choose to offer plans off the exchange, as I understand it the main reason is simplicity. Although the plans themselves must still meet the legal minimum coverage requirements, the process of joining an exchange involves a series of negotiations between the insurance company and the exchange. These negotiations may deal with not only the level of coverage but also the cost (as divided among the "metal tiers") and the doctor network. If insurers don't join the exchange, they don't have to engage in this process, and can essentially set their plan up any way they like, as long as it meets the legal minimums.

If you google around for "off-exchange plans" you can find various articles discussing reasons for looking off-exchange. I found some such articles, here, here and here. (As with most writing about Obamacare, it is wise to read such material critically and with an eye to the source.)

Answer 2

There are some health care co-ops that qualify as alternatives to Obamacare. While technically not insurers, they are typically less expensive. You will want to look at ones with a very long track record.

Answer 3

If you earn an adjusted gross income inside 400% of the federal poverty line, you should probably buy coverage at the exchange because you will qualify for a subsidy. Unless you have a doctor you like who isn't accepting exchange coverage.

As far as the ins and outs of exchange coverage vs some other individually available coverage the only major difference will be the provider network. Do not assume that the networks are the same because all the plans you're looking at are offered through X carrier. Each carrier will maintain several provider networks. "Local access" or "Choice" means only providers in certain zip codes. Similarly, the exchange plans will have different networks than the off exchange plans. There is enough regulation related to mandatory service coverage that it's largely homogeneous. You won't find an out of pocket maximum or deductible higher than $6,350 because the ACA says that's as high as it's allowed to be. Depending on your age you may qualify for "catastrophic" coverage, but generally it's not as good of a deal as a plain vanilla bronze tier plan.

Some high cost providers have opted-out of accepting exchange plans. This is the number one reason insurance carriers offer coverage outside of the exchange. The exchange plans mirror the medicare reimbursement schedules which are typically lower the agreements the carriers would reach with a provider. The omission of higher cost providers typically reduces the premiums of exchange plans. In order to offer individuals expanded provider networks, the carriers offer the plans off the exchange. It's important to remember that the ACA mandates minimum loss ratio of 80% on individual plans; meaning the insurance carriers must spend 80% of the premium received on claims. If the carrier experiences a loss ratio of 76%, it must issue rebate checks for the remaining 4%. This spending requirement means something is missing if two plans are "identical" and one costs less.

When actually choosing a plan, search the provider networks for the doctors and facilities in your area and request a copy of the Rx formulary. If you take a specific drug, understand how the insurance company categorizes that drug in its formulary. Some brand drugs are "preferred" with some carriers but others, this can have a significant impact on the cost.

In CA, individual (and small group) insurance premiums are filed with the state. The rate tables will typically experience an increase every quarter. HOWEVER, you will age up every year. It's not possible for an insurance carrier to single you out to raise your premiums. Each year you will be another year older and the rate table will be a little higher these two things combined can lead to significant increases. Whether you buy through Broker A or Broker B or the state exchange, the premium will always be the same. Never, ever, ever pay an additional fee to someone for negotiation. Nobody can move the needle in CA on individual insurance.