The Obama administration’s decision this week to allow people to buy catastrophic-level policies if their individual health plans had been canceled comes amid reports that few people have bought these less expensive policies sold in new online insurance marketplaces.
In California, only 1 percent of those who had picked a plan in the first two months since the marketplace opened had chosen a catastrophic plan. In Kentucky and Connecticut, just 2 percent have chosen a catastrophic plan from their state’s online exchange. In Washington state, just 0.4 percent of consumers have chosen catastrophic plan. The federal government, which is running the healthcare.gov portal for 36 states, has not released data showing what types of plans consumers are choosing.
A catastrophic health insurance plan covers all essential health benefits like doctor and hospital visits but has a very high deductible. Premiums for catastrophic plans may be lower than traditional health insurance plans, but deductibles are usually much higher.
As expected, the most common level policy being purchased so far are silver plans, according to officials in California and other states that have disclosed the data.
Sabrina Corlette, research professor at Georgetown University, said she’s not surprised the catastrophic plans have had little pickup. That’s because the plans were previously available only to people under 30 and to those offered employer coverage considered unaffordable because it costs more than 8 percent of the consumer’s income. Despite having lower premiums with catastrophic plans, consumers can’t get tax subsidies or cost-sharing reductions.
People with incomes under 400 percent of the federal poverty level, which is $45,800 this year, may get a better deal buying silver or bronze type policies that have lower out-of-pocket costs, experts say.
The high deductibles in catastrophic plans may also deter some buyers, Corlette said.
“We did not anticipate high demand for the catastrophic plans,” said Gwenda Bond, a spokeswoman for Kynect, the Kentucky insurance marketplace. In addition to their limited audience and lack of subsidies she said: “We also think that consumers are being savvy and weighing deductible and cost-sharing amounts alongside monthly premiums.”
Joel Cantor, director of state health policy at Rutgers University, said people will find the catastrophic policies attractive if they were previously in high deductible plans or limited benefit plans that are no longer allowed. He said many people in the individual market in New Jersey were in bare-bones type plans that have been cancelled.
“For them, catastrophic plans make more sense because they are extremely price sensitive,” he said. On the other hand, they could get a better deal buying a subsidized bronze plan and have lower out of pocket costs, he said.