Are Copper Plans the Solution for Affordability?

President Trump introduced the concept of a copper plan as a solution to healthcare affordability.  But is it a solution?  Yes, copper premiums will be lower than what is currently offered (i.e., bronze, silver, gold, and platinum), since its coverage levels will be less than the current options (i.e., 50% in lieu of 60, 70, 80, or 90%).  But the portion paid by the member will increase to 50% compared to 40, 30, 20, or 10%.

Too often, the public focuses on the premium rate and not the total cost of care paid by the member.  In the ideal world, the total cost of care is fixed, say 100%.  If the health plan pays 80% then the patient is responsible for the premium of the plan, paying the 80% plus the 20% not covered by the plan.  If the health plan covers 60%, the total cost is the premium for the 60% plan plus the 40% not covered by the plan.  Simply reducing coverage to 50% does reduce the premium rate but increases the portion not covered by the health plan.

Too often, the public focuses on the premium rate and not the total cost of care paid by the member.

The experienced healthcare policy analyst understands this difference, with the total savings being limited to the reduction in premium overhead on the portion no longer covered by the health plan.  In the individual insurance arena, premium rates are built with no less than an 80% loss ratio.  Therefore, for a typical 80% gold plan, the total cost of healthcare is calculated as (.8/.8) +.2 = 1.2 based upon total healthcare costing 100%.  The silver plan cost is (.7/.8) +.3 = 1.18 or 98% of the gold plan.  The bronze plan cost is (.6/.8) +.4 = 1.15 or 96% of the gold plan.  The introduction of a copper plan lowers the cost to (.5/.8) + .5 = 1.125 or 93.75% of the gold plan.  Yes, this is lower but not appreciably so.

The true solution for affordability is less to do with premium and benefit manipulation and more about how the U.S. reduces the cost of care from the 100% used above to something substantially less than the 100%.  As the Book of Ecclesiastes says, “there is nothing new under the sun,” even in healthcare.  Having spent the majority of my career in healthcare, I know of only two sure ways to reduce the cost of healthcare:

• Reduce the frequency of healthcare events, and
• Reduce the cost of healthcare events.

The modest shifting of costs between the insurance company and the patient fails to meaningfully reduce the true cost of healthcare.

For years, researchers have tried to find the best solution to reduce the frequency of care and the cost of care, and it always goes back to three basic solutions:

• Eliminate care that shouldn’t happen or isn’t necessary (i.e., minimizing potentially avoidable care), and
• Improve the health status of the population so they don’t need healthcare as often (i.e., become healthier)
• Reduce exorbitant prices to more reasonable prices (i.e., obtain discounts and pay a fair price for services performed)

Yes, the introduction of the copper option will result in a modest premium and patient pay cost reduction.  It will also get the patient more involved in the financial management of the need for care as the patient cost increases.  But it will not directly impact the cost of care for the population at large.  We need to go back to the basics and do it the old-fashioned way:

• Implement state-of-the-art care management practices that focus on eliminating potentially avoidable care, care that isn’t needed, and care that clogs up today’s healthcare system. This requires minimizing inpatient care and utilizing outpatient sites of care whenever possible. Enabling the pre-hospital environment to do all it can to avoid unnecessary use of inpatient facilities.
• Intensify efforts to improve everyone’s health status and avoid those conditions that are the result of bad habits (i.e., cardiovascular, diabetes, hypertension, etc.). Wellness presents an opportunity to truly reduce the use and cost of health care services.
• Identify and use high-performing provider networks where providers are willing to do what is needed at the right time and right place for an appropriate price.

Building a healthcare system that focuses on these three objectives will provide a truly affordable system no matter what benefit options are presented to the population.