Exchange Watch: California Dreaming

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In mid-May, The Spokesman-Review in Spokane trumpeted some good news for Obamacare, reporting that “Health insurance next year will cover more and cost less. Huge rate increases predicted by critics and by some health insurance companies, did not materialize.”

The same day the paper also ran a piece from The Associated Press advising readers that premiums in Oregon would be so low that two insurers were scrambling to re-file their rates to compete with lower price tags. An official from the Oregon Insurance Division announced that the rate comparisons were “a taste of what is to come.” In other words, cheap insurance is on the way.

A week later, the healthcare-rates-are-lower story moved down the coast to California, where the insurance premiums have become big, big news in a big, big state, one that will soon have an estimated 5.3 million people in its insurance exchange. The story moved quickly. Last week the advocacy group Health Care for America Now listed 33 news outlets, mostly marquee brands, that had picked up the exchange’s “important announcement.” California is a bellwether, headlines from around the country suggested, as news outlets from CNNMoney to The Hill signaled that rates in the state’s insurance exchange would be cheaper than expected. “California Insurance Exchange Rates: Not Too High, Not Too Low,” read the headline on the piece from Kaiser Health News, which quoted the executive director of California’s exchange, Peter Lee: “We’ve hit a home run for consumers. We held insurers’ feet to the fire.” Kaiser’s story reported the premiums were what Lee characterized as “just right”–Goldilocks pricing, surprising analysts and consumer advocates. “The fear had been that shoppers in the individual insurance market would face severe ‘sticker shock’ when the sweeping changes in the health law take effect beginning in January 2014,” Kaiser reported. No shock had materialized.

But the story the media told was a flawed one, characterized by gee-whiz reporting, a willingness to accept official spin, and failure to ask basic questions. “I don’t see rates going down anywhere I look,” says Robert Laszewski, an industry consultant whose blog was required reading for reporters covering the health reform debate four years ago. “Rates are consistent with what the Society of Actuaries forecasted. The fight emerging is over how to compare rates.”

Insurance policies are a complicated mix of premiums, deductibles, coinsurance, copayments, benefits, and limitations. By their very nature they are difficult to compare. Furthermore, they vary depending on whether they are sold to big employers, small employers, or individuals buying on their own in the so-called individual market–the main target for Obamacare reforms. So it’s reporter beware when it comes to rate stories coming out of the new shopping exchanges. What rates are we talking about?

On Friday, Politico, in a good piece questioning California’s rate announcement, reported that the lower rates for next year for individual policies touted by Lee at his press conference were being compared to rates paid today by small businesses–not to policies purchased by individuals. California’s comparison was between next year’s apples and this year’s oranges. They were not even in the same orchard.

And to its credit, CNNMoney included in its piece a concession from the exchange that “a direct comparison is impossible because the new plans will provide more benefits”–due to the requirements of Obamacare. But CNNMoney also quoted the exchange in a way that should have alerted its reporter to the apples-and-oranges nature of the premium comparisons being made. It quoted the exchange comparing “rates for individuals” with “the average premium for small employers in the state’s most populous areas,” without following up.

The press kind of blew it. Instead of questioning the assumptions behind the exchange’s announcement, too many stories were like an AP story published in the San Jose Mercury News that quoted the vice president of Avalere Health, a data firm, saying that the exchange “brought the premiums down,” but failed to note that the same policies were not being compared. Other outlets, like California Healthline, The Washington Post, and The Hill made the same omission.

The Sacramento Bee began to get this crucial point with a quote from California’s insurance commissioner, Dave Jones, who cautioned: “It is premature to hazard an opinion as to how these rates compare to rates in the individual market today or whether they are justifiable.”

One exception to the less-than-skeptical coverage came from Chad Terhune, an insurance reporter for the Los Angeles Times, who asked the key question “Compared to what?”

Terhune did some digging and found that the average premium last year for individual coverage sold in the state through eHealthInsurance, an online service, was $177 per month. The California exchange said that the average premium for the three lowest priced silver plans across the state was $321 a month–81 percent more. The silver plan will cover just 70 percent of a person’s medical expenses, but at the same time will offer the essential benefits that Obamacare requires.

In Politico‘s piece, Lee defended the apples-to-oranges comparison, saying that current individual policies are not the right comparison, because their benefits are skimpier than those offered by the new policies. They’re closer to what small business employees get now, he argued. Politico reporter David Nather also interviewed Micah Weinberg, a policy adviser at the Bay Area Council, a public policy group backed by the business community. Yes, Weinberg conceded, some of the old policies do have crappy coverage. But that’s still the comparison most people use when deciding whether Obamacare made their rates go up. His observation is spot on.

In reporting the good-news story from the West Coast, reporters also neglected to ask the question about what coverage a persons get for the low rates–if indeed they are low. The “For What?” question about benefits is just as important as the “Compared to What?” question about rates.

Terhune at the LA Times went there, too, reporting that insurers were selling plans with networks that give consumers “far fewer doctors and hospitals to choose from.” For example, the prestigious Cedars-Sinai Medical Center so far is not in any of the networks of the insurers whose rates the California exchange has announced. Insurers are including in their networks for exchange policies only providers who are willing to give deep discounts–sometimes in the 30 percent range. If they can pay providers less, the theory goes, they can pass on the savings in the form of lower premiums. But there’s a trade-off between a cheap premium and going to your favorite doctor.

There are other trade-offs that did not make it into this round of rate stories, and reporters need to explore them in future pieces. I spent some time on the website of the Oregon Insurance Division, which listed rates for insurers selling one of the four standardized policies–the bronze policy, which will cover only about 60 percent of someone’s medical expenses. The monthly premiums for individual policies were indeed low, ranging from $169 to $422 per month, depending on a host of variables, for a single 40-year-old who doesn’t smoke.

The site also disclosed what a person gets for that low premium. The bronze plan comes with a $5,000 deductible for an individual ($10,000 for a family) and very high cost sharing for many services. For example, a person would have to pay 50 percent of the bill for a stay in the hospital, even to have a baby; 50 percent for emergency care, unless it resulted in an admission; 50 percent for diagnostic tests like CT scans and MRIs; and $120 for every urgent care visit. In other words, premiums may be low but that may be nothing to celebrate if you get sick or hurt.

The glowing coverage from the West Coast could spark a new meme that can mislead the public. What’s needed is thorough, comprehensive, and skeptical reporting on rate announcements in other states. It may be impossible to compare this year’s individual market rates with those in 2014. In fact, it may be best to concentrate not on premiums, as officialdom would like, but on all the other policy elements that go into helping people decide if a particular offering will be good for them. It is that mix that will reveal whether a policy is good, bad, or mediocre.

The implementation of Obamacare is not really a political story. It’s a consumer story, and what’s called for is some old-fashioned, hard-hitting, and skeptical consumer reporting.

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