This week the Obama Administration announced that insurers selling Medicare Part D prescription drug plans would be restricted to two drug plans per service area. The Administration believes that such restrictions will ease beneficiaries’ ability to choose plans, while also reducing insurers’ use of plan designs to attract healthier enrollees. This policy marks a continuation of a multi-year trend in the Part D program to streamline plan choices. Research has documented that too much choice can often lead consumers to make plan selections that are not optimal for their health or financial situation.
The Administration’s approach in Part D stands in contrast to its approach to plan selection in the federally facilitated health insurance marketplaces (FFMs). As CHIR experts recently documented in a Commonwealth Fund report, insurers are relatively unfettered in the number and types of plans they can offer through the FFM. While plans must have “meaningful differences” between them – in other words, no “look alike” plans – they are not required to standardize cost sharing or limit the number of plans they offer.
A minority of state based marketplaces (SBMs), however, have taken cues from the Administration’s Medicare Part D approach – as well as efforts in Massachusetts’ pre-ACA insurance marketplace (called the Connector) – and implemented policies to simplify consumers’ plan choices and facilitate “apples to apples” comparisons among different plans.
For example, we found that 9 states (California, Connecticut, Kentucky, Maryland, Massachusetts, Nevada, New York, Oregon and Vermont) restricted or limited the number of plans or benefit designs that participating insurers could offer, and 6 of those same states (California, Connecticut, Massachusetts, New York, Oregon, and Vermont) further required insurers to standardize cost sharing. Massachusetts’ efforts to simplify consumers’ plan choices began before the ACA was enacted, and was instituted in response to market research that found consumers wanted fewer plan choices.
This week the Administration also released a mid-way status report on enrollment in marketplace plans. Interestingly, while approximately 5.1 million people were found eligible for a marketplace plan, only roughly 2.2 million people have selected a plan. At this point we can only speculate why almost 3 million people have not completed the enrollment process (some may have been found eligible for other public coverage programs), but one reason may be difficulties in comparing and understanding plan choices. A Commonwealth Fund survey of marketplace consumers released last week found that while the experience of comparing plans has improved since October, many still find it difficult.
The experience can be particularly challenging for people who have not previously had health insurance. For example, a recent Huffington Post article about Kentucky’s marketplace observed that while Kentucky residents were not facing the technical glitches other states were facing, they can still be overwhelmed by the plan choices before them – and hesitant to make a final selection.
We’re just slightly over the half-way mark in the 2014 open enrollment period. It remains to be seen whether state efforts to reduce the number and variety of plans will help improve the shopping experience and result in optimal plan selections. But if the Medicare and Massachusetts experiences are any guide, the federal and state-based marketplaces may, over time, move to streamline and standardize plan choices to improve the consumer experience.