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Question:

Are ACA-compatible Catastrophic plans really more expensive (on average) than the other "metal" plans? After deeper analysis, it seems like a Catastrophic plan costs less out-of-pocket than a Bronze plan and has a high break-even point with a Silver plan.

However as all advice online seems to go against this, I'm wondering if something is missing in my analysis below.


Analysis

I am helping someone select health insurance from a health insurance marketplace and am finding conflicting information regarding which plan is cheaper/appropriate. The following plans are example plans available directly from one of the providers: https://fideliscare.affordablecareadvisor.com/

 Plan         | Catastrophic |  Bronze    | Silver
------------------------------------------------------
 Monthly      |   $176.89    |  $324.45   |  $408.04
 Premium      |              |            |
------------------------------------------------------
 Deductible   |  $6,850.00   |  $3,500.00 | $2,000.00
------------------------------------------------------
 Out-of       |  $6,850.00   |  $6,850.00 | $5,500.00
 Pocket Max   |              |            |
------------------------------------------------------
 Average      | 0% After     |    50%     |   *10%
 Co-insurance | Deductible   |            |
------------------------------------------------------
 Generic      | 0% after     | $10 after  |   $10
 Drugs        | deductible   | deductible |
------------------------------------------------------

* The silver plan is all co-pays after the deductible so the
  10% is an approximation for the purposes of this analysis.

Looking for advice online, one finds that Bronze plans are pitched as the cheapest but with high out-of-pocket costs, Silver as a good balance of out-of-pocket costs and premiums, and Catastrophic a cheaper alternative than Bronze (if you qualify) but with highest cost due to the high deductible.

At first glance, it does seem that Catastrophic is risky/more-expensive as the $6,850 deductible looks very high. However once you plug the numbers into a chart to predict out-of-pocket costs and, most importantly, include the monthly premium in the calculation, the results are surprising:

Annual out-of-pocket expenses based on medical expenses (including premium)

What I am reading from this is that at all levels of medical spending, out-of-pocket costs are lower for the Catastrophic plan than the Bronze plan. The large difference in premiums ($150/month or $1,800 per year) and the low cost-sharing of 50% seems to account for this. The Silver plan behaves more as expected as it costs more upfront but tapers off once you reach the deductible. However it is again interesting to see that the break-even point with the Catastrophic plan is at $5,000 in medical expenses.

  • I'm a little confused by where you got the numbers for Bronze in the graph... Catastrophic appears to be just deductible and premium. What about the Bronze? – BlakeP Dec 8 '15 at 19:47
  • Yes can we please see the data chart for the graph? – Ross Dec 8 '15 at 19:48
  • For Bronze, you'd pay around $3,900 every year in premiums, then pay 100% out-of-pocket until you reach the deductible. That's where the line first slants and your out-of-pocket costs slow down. From there, you'll pay 50% co-insurance out-of-pocket until you reach the OOP Max. That's where the line levels off. For Catastrophic, you'd pay around $2,100 every year in premiums and then 100% out-of-pocket until you reach the deductible. Deductible = OOP Max so the line levels off. Silver behaves the same way but since it's co-pays rather than co-insurance, it's hard to predict actual costs. – Cowlby Dec 8 '15 at 19:52
1

At all points on the spectrum we're not talking about a large separation of total cost between the catastrophic and bronze plan, especially when compared to the unlimited maximum of claims they could each cover. Catastrophic plans are largely left out of the discussion because of the age/hardship eligibility restriction. Most of the information you see compares the metal tiers because most of the people searching aren't eligible for the catastrophic plans.

The lower premium/total annual cost of the catastrophic plan likely represents the population bias of the restricted eligibility. Additionally, I'd imagine carriers have an appetite to receive some premium rather than no premium from a population that generally won't even submit a claim in a year. The metal tier plans are only allowed a 1:3 ratio in smallest to largest premium from the ages of 20-65 (I believe). The high cost of the bronze-enrolled 65 year olds will raise the cost on the younger folks.

Here's a data table with my calcs that come to the same conclusion as threadstarter (Though I used 30% coinsurance on the silver plan because I felt 10% was a little too aggressive).

            |   catastrophic|   bronze      |   Silver
ann. premium|   2122.68     |   3893.4      |   4896.48
deductible  |   6850        |   3500        |   2000
        oop |   6850        |   6850        |   5500
coinsurance |   0           |   0.5         |   0.3

    Claims  |   Annual Cost |   Annual Cost |   Annual Cost 
    0       |   2122.68     |   3893.4      |   4896.48
    250     |   2372.68     |   4143.4      |   5146.48
    500     |   2622.68     |   4393.4      |   5396.48
    750     |   2872.68     |   4643.4      |   5646.48
    1000    |   3122.68     |   4893.4      |   5896.48
    1250    |   3372.68     |   5143.4      |   6146.48
    1500    |   3622.68     |   5393.4      |   6396.48
    1750    |   3872.68     |   5643.4      |   6646.48
    2000    |   4122.68     |   5893.4      |   6896.48
    2500    |   4622.68     |   6393.4      |   7046.48
    3000    |   5122.68     |   6893.4      |   7196.48
    3500    |   5622.68     |   7393.4      |   7346.48
    4000    |   6122.68     |   7643.4      |   7496.48
    4500    |   6622.68     |   7893.4      |   7646.48
    5000    |   7122.68     |   8143.4      |   7796.48
    6000    |   8122.68     |   8643.4      |   8096.48
    7000    |   8972.68     |   9143.4      |   8396.48
    8000    |   8972.68     |   9643.4      |   8696.48
    9000    |   8972.68     |   10143.4     |   8996.48
    10000   |   8972.68     |   10643.4     |   9296.48
    15000   |   8972.68     |   10743.4     |   10396.48
    20000   |   8972.68     |   10743.4     |   10396.48
    30000   |   8972.68     |   10743.4     |   10396.48
    40000   |   8972.68     |   10743.4     |   10396.48
    50000   |   8972.68     |   10743.4     |   10396.48

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