What Is the Difference Between On-Exchange and Off-Exchange Policies?

A THCB reader from Colorado writes in:

“I am an individual health insurance purchaser in Colorado. I know I need to buy my policy through the Colorado exchange if I want to get a possible subsidy. I am not likely to be eligible for a subsidy, however, and I found that it’s also possible to buy policies “off” the exchange. I briefly looked at some of those policies and found similar premiums, copays, and deductibles to policies “on” the exchange. I assume the “off-exchange” policies must also be as ACA-compliant as the exchange policies. 

Given all these similarities, what is the DIFFERENCE between “on”-exchange and “off”-exchange policies?

In the ACA, what purpose do the two categories serve?”

26 replies »

  1. If we would have allowed the ACA Exchange to be a fully, national exchange as it was designed, the power from having millions of members all

    But once the National Exchange was divided by 50 (per SCOTUS), and then divided again as people can still buy “Outside” the exchange, then that group buying power that large industries use to get the really good plans, vanished into dust for the Exchange consumer.

  2. Peter,

    Health care for all is quite doable and affordable it’s the special interests that prevent it from becoming a reality.

    Our two party system is a great enabler of this. Since the dawn of time those with the gold have made the rules. And people with the gold always want more, which in itself is a mental illness.

    In order to get more gold so to speak, hidden players have to pit people against one another. It’s a lot easier to pick someone’s pocket when they’re distracted.

    This is what is occurring. I fully believe at least 60% of the US wants health care for all if done the right way, but because many in this 60% are fighting each other (even though we share the same goal) it doesn’t happen.

    The fix is to get organized and social media is a great place to start. Lobbyists and their masters are extremely well organized so the regular Joe has to get organized and fight back.

    This is how we will elect the politicians that will get things done to benefit American citizens rather than hidden interests.

  3. Peter,

    Just so I understand the benefit of one payer in Germany or other from a cost perspective is that they tell pharma that we’re only paying X so prices go down, they don’t allow out of control suing so malpractice is cheaper, education is cheaper, etc.?

    Is this what happens? I don’t know actually.

    The problem of lobbying is that both parties engage in it heavily and sometimes this is good, but in many cases it is bad. So to rein in lobbying you have to change the fact that it costs so much money to get elected. Unless you are very wealthy you owe special interests when you get into office.

    Neither party will be willing to give up lobbying – I want a 3rd party, but do not think this is doable until after we take great financial pain as a nation.

    As per convincing repubs to go single payer – very difficult before ACA and the botched website roll out, which will get worse due to technical reasons, has made this even harder = don’t know how you would convince repubs.

  4. “For example, Germany has a cost per capita around 50% of US costs per capita. If we had worked to reduce the costs from the get go health care for all would be a lot more doable.”

    Most countries with single-pay/government controlled are doing it for about 50%. If you want to reduce costs then we need to reduce prices. I would accept the German system, but tell me how to overcome the massive lobbying and political bribing by the health industry which prevents price reduction? The ACA was written by the health insurance industry and relies on subsidies and cost shifting not price reduction.

    Tell me how to convince Republicans to accept more government control?

  5. Peter:

    My comments have nothing to do with my costs. Furthermore, I want the uninsured to have insurance. There were other ways to do this that would have worked better.

    If ACA really plays hell with the economy then it will not work so the goal of insuring the uninsured will fail.

    For example, Germany has a cost per capita around 50% of US costs per capita. If we had worked to reduce the costs from the get go health care for all would be a lot more doable.

    I understand your comments that economic pain may be what is needed to get more honest politicians into office, but at what cost?

    The markets are artificially high from Fed pumping and our national debt is quite high. The economy has slowly been recovering, but if due to ACA we go into another bad recession the market may correct 50% downwards. Then joblessness will increase and at this point how will we financially be able to insure the uninsured?

    Our ability to continue increasing money supply to finance bond purchases may disappear and then you risk very bad inflation, left unchecked – Weimar.

    One cannot alter 20% of the economy in a vacuum. One must consider how it affects the rest of the economy.

  6. BC, health care was already approaching 20% GDP. That’s a huge concentration for one industry. Deluding yourself into thinking we should deny millions of people health care to control your costs does nothing to address the underlying problem.

    Maybe when job loss in other industries and reduced profits finally get noticed our illustrious leaders will finally work together to help solve this. The political system sucks – change the system.

  7. Note to BC – thanks for your comments about an ACA led recession.

    I have been saying essentially the same thing to my friends in the single payer movement — namely, that the transition to higher taxes will throw the economy into a tailspin.

    The ACA supporters sometimes seem to live in an illusory world where all employers are generous. (if you are a tenured professor or a senior civil servant, that is in fact your world)

    In this virtual world, employers comply with all mandates and keep their workers whole. Sort of like when the UAW forced auto companies to keep some workers on full pay after they were laid off.

    In the real world, the cost of mandates hits powerless workers like a brick.

  8. Peter,

    If you want to lower costs you have to address lobbying. Pharma, insurance, device OEMs and lawyers have all built in protections/profits via getting laws changed.

    Good luck with getting lobbying changed – they own both sides.

    Also make people pay for their own prescriptions and medical visits unless indigent. Cover very expensive prescriptions and expensive medical treatment.

  9. Peter1,

    I agree with you that our pre ACA system was broken and unsustainable. Medicare in particular. I think ACA is worse though.

    As per disposable income my comment was that it is a huge hit all at once. Let’s say you were paying $500 per month and it goes up 10% to $550 per month = $600 more out of your pocket per annum. No one likes this, but it will not greatly change how people spend money if at all.

    If you take a 100% increase to $1k per month now you have $6k less disposable income. You spend a lot less money because you have less and psychologically you feel poorer.

    My comments have nothing to do with healthcare rather the economy as a whole. If a great many in the employer market large and small see this bump then in aggregate the economy will take a big hit and people will lose jobs.

    Corporations will also get hit – not conducive to hiring more – in fact they may lay people off due to the hit. They may buy less product like making computers last 4 years instead of 3.

    Economically speaking ACA was launched at a terrible time – worse job market since the late 70s/early 80s. Better to launch it in a stable economy.

    Unemployment is still quite high. The most accurate measure of this is U-6 (13.8%) not the U-3 number that everyone looks at.


  10. BC, there is a false assumption here that before the ACA we had a great system.

    In fact there were (are) 4 systems, employer tax free subsidized, Medicare subsidized, Medicaid subsidized and individual self pay non-subsidized, except the subsidies were on the back door through higher hospital rates for non-payers. Each year rates went up, unless your employer increased it’s subsidy or cut benefits. Let me tell you that when I was in the individual market my rates went up 6% – 10% compounded yearly + an age bump every so often. Money was being taken from my disposable income because I did not get any subsidy – still won’t under ACA.

    This was (is) unsustainable. The ACA attempts (ed) to bring everyone into the covered category with subsidies for some – but the failure is it still depends on a private insurance model and does nothing to lower costs. It also tried to level the field with some rates spread across a broader pool. Some people in the individual market (prior ACA) thought they had coverage but really what they had were bogus policies that paid little to nothing when they needed it most – or they found the deductibles too high to afford. The ACA plans attempted to give people real (better) coverage – but that costs money. It all costs money if you can’t pass off the costs to someone else – the great American past time.

    I think the ACA is a failure unless you get a subsidy. I think it has more flaws, now being understood, than good things. But don’t kid yourself, the system before ACA was going to implode at some point – still will.

    The health care system was always taking money from so called disposable income. But given that huge dollars are spent on “entertainment” in this country what do you think the priorities should be. at least now everyone is experiencing the true cost of American health care.

  11. Shouldn’t surprise anyone. You can’t add 30-40 million to a HC system, not reduce the high cost of medicine and then expect rates not to go up.

    Majority of the taxpayers are middle class so when you wish to raise revenue you must soak the middle class. It’s always sold as “hey we’re gonna tax the rich more,” but they’re simply not enough rich.

  12. Bob – I disagree as per corporate plans. I have two contacts who have had their plans changed and they have to pay more every month. One contact for a family of four is paying $500 more a month and because the new plan is lousier it won’t cover his wife and kid’s doctors. So he goes out of pocket another $2k per annum. And another change is coming this April.

    So that’s $6k less disposable income that is not available to be spent on dinners, trips, etc. In aggregate ACA is going to suck a lot of money out of the economy and many will be laid off as a result over the next 2-3 years.

    Corporations look at their bottom lines – many will make employees pay more. You have far too much faith in corporate America.

  13. “These diseases could include cancer, fibromyalgia, MS, hemophelia, not a long list.”
    I disagree, NORD (National Organization for Rare Diseases) recognizes 6,800 rare and orphan diseases. While Medicare may provide a wider provider network (for now,) pairing the patient with the proper provider is much harder. Comorbid conditions complicate this picture even further because a specialist in one area may or may not even know how to treat the other conditions.

    This has been an ongoing issue for me and is why physician choice and access is so vital for many people. I was initially diagnosed as part of a clinical trial, as many of us “zebras” are, but once the comorbid conditions were also diagnosed, I am now excluded from ongoing studies for my diseases. I MUST rely on my own research and the guidance of varied, personally interested physicians for care and maintenance of what “health” I have left and quality of life.

  14. “This will drive up all prices across the board. The Loss ratio rules will also drive up premiums, though once again that is the opposite of what was supposed to happen.
    Just like the ACA was supposed to help part time employees, instead it is slashing their hours.
    A whole hell of a lot of unintended consequences.”

    Bob, listened to an NPR program on the weekend. There could be more uninsured under ACA.

  15. Cynthia, most of the solid middle class works for corporations and government agencies that pay 75-100% of their health insurance premiums.
    They will not see much income decline from the ACA.

    But the self employed who make a decent income will really take a hit as you describe. This is kind of tragic because these were the people that the ACA was supposed to help.

    One last point. Any insurer who offers policies both on and off the exchanges must aggregate the claims results to calculate premiums.
    This will drive up all prices across the board. The Loss ratio rules will also drive up premiums, though once again that is the opposite of what was supposed to happen.

    Just like the ACA was supposed to help part time employees, instead it is slashing their hours.

    A whole hell of a lot of unintended consequences.

  16. So basically what we get is a massive middle class tax increase since the costs are not really being shared equally among all consumers. Those that get the big subsidies get really cheap medical insurance. The solid middle class sees a drop in their disposable income and will have to tighten their belts a lot as a cut of thousands in their yearly income will make a big difference. Less savings. Gonna really hurt now to send those kids to college when you have to make the choice between college savings and health care. Even more of a hurt on retirement savings. Just wait until the employer mandate starts to go into effect eventually. Talk about a hollowing out of the middle class. The rich stay about the same, and you narrow the gap some between poor and middle class. Brilliant.

  17. That’s been happening since the late 70s, with the redistribution’s been from the middle out. They haven’t caught on yet and still cling to the “American Dream” concept for comfort.

  18. One small point that I have been itching to express for some time —

    the ACA was not needed to “prevent your insurance company from dropping you after you got sick”………..because that form of bad conduct was banned in the HIPAA law of 1997! Of course it still happened and you had to challenge or sue the insurer, but it was illegal to do so.

    But to get to the important question at hand:

    The Obama administration has zero leverage left to force the insurance companies to adopt wider networks. There has to be some other solution for persons with an advanced and complex disease to get expert care.

    My long run solution would be to allow a subset of persons with advanced diseases to go onto Medicare, which has much wider networks. These diseases could include cancer, fibromyalgia, MS, hemophelia, not a long list.
    We did this for kidney failure 25 years ago, not a perfect solution but not all bad either.

  19. It’s finally dawning on the Middle Class that they are the victim of a redistributionist “knockout game.”

  20. I understand the cost containment angle of narrow exchanges, but one of the big selling points on ACA was that people can go bankrupt from certain illnesses, sick people can’t get insurance, sick people can be dropped, etc.

    So if sicker people flood the exchanges based on subsidies and their narrow plans exclude doctors and hospitals (according to t) that treat the sickest patients then doesn’t this obviate one of the core purposes of the bill?

    The WSJ documented a lady with stage 4 gall bladder cancer who received treatment at Stanford and UCSD and due to cancellation she could only choose plans that covered one or the other.

    G-Mom wrote an article whereby she has to go out of state for some treatment and the fear if booted off of her husband’s plan was that this would be disallowed under new insurance given the narrow nature of coverage.

    So is the idea that you can have regular checkups and more birth control, viagra, lipitor, etc. than you can shake a stick at, but not treatment for serious illness?

    The reality is that for certain diseases you have to go out of state/plan as that’s where the expertise is. Then you also have less severe problems that also require specialists perhaps out of state/plan – say an ear problem.

    Specialists are certainly more expensive, but the more they treat people the more medicine advances. So is the idea if you have money and buy an expensive plan you’re good to go, but if you don’t you get herded into a “cattle-ac” plan and are sent off to the slaughterhouse?

    This strikes me as very regressive. Take breast cancer – huge advances over the past 20 years as what used to be a guaranteed death sentence is now survivable.

    Years ago treatment was experimental, expensive and required specialists, but the end result is that it is curable so if we had taken the it’s too expensive route back then we would not have made breast cancer survivable.

    In this regard, specialists are like entrepreneurs that stumble and fail a lot initially, but they ultimately get it right and in doing so a great many benefit.

    So is ACA a euthanasia plan for those without big bucks that have serious disease?

    I’d love to hear someone more knowledgeable on the law to comment.

  21. “Without subsides, Exchange plans are absolutely NOT a good bargain over plans with a good network.”

    Why, because out of exchange is more “affordable”?

    I doubt any exchange plan is significantly cheaper than out of exchange. The risk does not get better, especially when those who are sicker/older will flood the exchanges for the subsidies and skew the risk pool. That will leave out of exchange with better risk pools.

  22. Exchange plans typically have narrow doctor networks and these typically disclude hospitals and doctors who treat the sickest patients. Without subsides, Exchange plans are absolutely NOT a good bargain over plans with a good network. Go with a plan outside of the Exchange if you don’t think you’ll be subsidy eligible.

  23. States that did not expand Medicaid have faced a problem with applicants who would qualify for a subsidy but cannot receive one, but CMS and the administration are trying to find a way to remedy that. So far Arkansas (which has a Dem governor and GOP legislature — and did not expand Medicaid) is the only state that has received a waiver to allow subsidies,

    I didn’t listen to the whole program but this link is full of current information, including the fact that off-exchange brokers can and do enroll ppl AND get them subsidies. I wish I could tall you which part of this to look at but I didn’t watch the whole thing and pay close attention. This may answer your question.


  24. Out of curiosity what kind of subsidy would have made an exchange plan worthwhile for you?