It’s open-enrollment season, and millions of Americans are signing up for health insurance on the individual market. ObamaCare’s creators expected most, if not all, to head into the law’s exchanges.
Yet as many as 9 million people decided to go off-exchange for coverage this year, even though such plans tend to have higher premiums and deductibles — and aren’t eligible for federal tax credits to help cover premiums.
The Department of Health and Human Services suggests that many off-exchange customers are simply “unaware” of the savings available to them on the marketplaces. But there’s a simpler explanation. Many of them may prefer to pay more for insurance rather than settle for the scant coverage options and restrictive provider networks available on the exchanges.
Off-exchange plans, in other words, offer customers something increasingly rare on ObamaCare’s marketplaces — choice. Anyone who doubts that Americans would pay extra to avoid the worst features of the exchanges may be, well, unaware.
The very existence of the off-exchange market is the result of a strategic concession by ObamaCare’s architects. When they designed the law, Democrats wanted to avoid the political consequences of forcing the entire individual market to buy coverage through government-run marketplaces. So they “graciously” allowed insurers to continue to sell policies directly to consumers.
These off-exchange plans were never expected to be popular, especially compared to the government’s marketplaces. As recently as 2013, the Congressional Budget Office was projecting that 24 million Americans would buy insurance through ObamaCare’s exchanges by 2016. The CBO didn’t even bother to predict enrollment figures for off-exchange plans.
Those projections missed the mark. Last year, off-exchange enrollment — 9 million — was within 1 million of that inside the exchanges. Some 2.5 million people have purchased off-exchange coverage even though they would’ve qualified for income-based subsidies through the exchanges. Almost half this group may also be eligible for additional federal subsidies aimed at reducing out-of-pocket costs for low-income individuals.
Even those who don’t qualify for federal assistance would likely save money by enrolling in the exchanges. According to a new report from the Robert Wood Johnson Foundation, average premiums for off-exchange, midlevel silver plans were 14% higher than plans purchased on ObamaCare’s marketplaces. Average deductibles were nearly 60% higher.
Are millions of Americans simply ignorant of the potential savings available on the exchanges? That seems unlikely — especially given the White House’s aggressive, yearslong media campaign to promote ObamaCare.
It’s more likely that, for many consumers, the non-marketplace plans are worth the extra money — because of the considerable choice and access to doctors and hospitals they provide.
Nearly two-thirds of exchange policies feature HMO-style provider networks, according to a recent analysis by McKinsey. These plans restrict patients to a narrow network of approved doctors and hospitals. Anyone who goes outside the network to receive care typically must pay out of pocket.
By contrast, the majority of off-exchange policies this year are “open” plans, such as preferred provider organizations or point-of-service plans, both of which give patients many more choices. As PPOs vanish from the exchanges, it’s likely that even more people will flee to the off-exchange market in order to keep the doctors and hospitals they like.
That is, if the government lets them. Both Washington, D.C., and Vermont have banned the sale of insurance off the exchanges.
A more reasonable response is to recognize that ObamaCare’s exchanges are failing — with many insurers leaving the markets — and to end the government’s control of the insurance market altogether. Thankfully, the next administration appears poised to do just that.