Today’s Issue

1. Today’s Issue • Is more choice always better? How much choice is too much? • Should the Exchange manage the number and type of products on its store shelves?

2. The Affordable Care Act – Statutory Requirements • Requires coverage of essential health benefits • Limits actuarial value to the precious metals (Bronze, Silver, Gold, Platinum) and a catastrophic plan • Sources of variation • Allows coverage of additional benefits • Does not prescribe cost-sharing designs

3. Potential Benefits of Standardization • Make comparisons easier • Improve consumer decision-making • Enhance competition  improve quality and reduce price • Limit insurers’ ability to use benefit design to select risk • Medicare Advantage: some plans imposed higher copayments for costly treatments like chemotherapy • Increase participation in the Exchange

4. Improving Decision-Making • The chocolate experiment • Participants who had limited choice were significantly more satisfied with their chocolate • Medicare Part D • Consumers frequently choose plans that provide less risk protection at higher cost • Medicare Advantage • CMS: “The large number of MA plan options…has made it difficult and confusing for beneficiaries to distinguish between these plans and to choose the best option to meet their needs.” • Plans must be “meaningfully different”

5. Enhancing Competition • Swiss health insurance: “inertia due to numbers” • People offered more choices were less likely to switch plans • Nonpartisan Congressional Budget Office: Exchanges can enhance competition and reduce premiums by allowing consumers to compare standardized products

6. Increasing Participation in the Exchange • 401(k) retirement savings plans • As the number of fund options increases, employee participation falls • Proctor & Gamble • Reduction in the number of shampoo products increased sales

7. Potential Risks of Standardization • Products that are not in line with consumer preferences • Exchange could conduct market research, and review options annually • Could stifle innovation that promotes value • “Value-based insurance design” – lower cost-sharing for cost-effective services • “Provider tiering” – vary cost-sharing for providers based on their performance

8. Question for Discussion • Should the Exchange have authority to standardize plan designs? • CA legislation: “The board shall have the authority to standardize products to be offered through the Exchange.”