What Are Standardized Health Insurance Plans?

Get familiar with your exchange options

Holding magnifying glass up to clipboard with different plans

If you buy your own health insurance, you might have heard of standardized plans, depending on where you live. Several of the state-run health insurance exchanges already offer standardized plans to some degree. But when open enrollment begins on November 1, standardized plans will be available for the first time in states that use the federally-run exchange, with the debut of "Simple Choice" plans.

How Does Standardization Work?

Plan standardization is just what it sounds like. Guidelines are laid out in terms of specific coverage details, and all standardized plans must offer the same coverage for those aspects of the plan.

Healthcare.gov is rolling out standardized plans for 2017, although participation will be optional, at least in the beginning. When the Department of Health and Human Services published the Benefit and Payment Parameters for 2017, they laid out the details for the six standardized plan designs that carriers would be able to offer (details are on page 309 of the Benefit and Payment Parameters). As much as possible, HHS worked to keep the standardized plan designs similar to the plans that were already offered in 2015.

For carriers that use the federally-facilitated exchange (ie, Healthcare.gov), there will be a standardized plan option for each of the bronze, silver, and gold metal levels, plus three additional standardized plan designs at the silver level for people who qualify for cost-sharing subsidies. The federally-run exchange will not have a standardized HSA-qualified plan design in 2017, although HSA-qualified plans will still be available for purchase among the non-standardized plans that will be available.

For the standardized Simple Choice plans, many aspects of the coverage will be the same regardless of which health insurance carrier offers the plan. For example, all standardized silver plans in the federally-run exchange will have $3,500 deductibles, $30 primary care office visit copays, and $15/$50/$100 copays for generic/preferred brand name/non-preferred brand name drugs (coinsurance for specialty drugs will be 40 percent for standardized silver plans).

When consumers log onto Healthcare.gov this fall (open enrollment starts Nov. 1), they'll see the Simple Choice plans displayed prominently among the available options; the exchange has committed to making it easy for people to determine which plans are standardized and which are not.

How Do Standardized Plans Differ From One Another?

Although standardized plans make apples-to-apples comparisons much easier, you still have to pay attention to the plan details. Plans can differ from one another in areas that aren't specifically addressed by the plan standardization guidelines. Provider networks and formularies (covered drug lists) will also differ considerably from one plan to another.

So although you might be comparing three standardized silver plans that all have the same out-of-pocket costs for prescription drugs, you'll need to look at the formularies for each company to determine whether they cover a specific drug you need, and if so, which prescription tier applies.

For the Simple Choice plans that Healthcare.gov is debuting for 2017, only one provider network is allowed per plan, so there will be no tiered network plans among the standardized options. But the networks themselves will differ from one plan to another.

Aren't Health Plans Already Standardized?

The Affordable Care Act already brought a certain degree of standardization to the individual health insurance market, with the introduction of metal-level classifications for health plans. All individual health insurance plans with effective dates of January 2014 or later—including plans sold outside the exchanges—must fit into either a metal-level classification or be a catastrophic plan

Because all new health plans are either bronze, silver, gold, platinum, or catastrophic, it's easier for consumers to compare apples to apples than it was prior to 2014. But the metal-level classifications are determined based on the actuarial value (AV) of the plan. And that's not a measure that tends to mean much to individual consumers. Bronze plans have AV of 60 percent (it's actually a range, from 58 percent to 62 percent; the +/- 2 percentage points range applies for all classification levels), silver plans have an AV of 70 percent, gold plans have an AV of 80 percent, and platinum plans have an AV of 90 percent.

So a silver plan can be expected to pay roughly 70 percent of total health care costs for an entire standard population. But that's an average, including people who have very little healthcare spending, along with people who might need a million dollars worth of care during the year.

The person with very little healthcare spending might pay for most or all of her own care during the year, depending on her plan structure (ie, if she has a $3,000 deductible and only uses $1,000 worth of healthcare to which the deductible applies, she'd pay the full cost herself). On the other hand, a person whose healthcare costs reach a million dollars during the year will only pay a tiny fraction of her own costs, since her health plan will pay 100 percent of her costs after she hits the out-of-pocket maximum for her plan.

Although plans within the same metal level have roughly the same AV, the coverage specifics can vary considerably from one plan to another. For example, it's common to see silver plans with deductibles that range from $1,500 to $4,500. Some have copays for office visits, while others do not. Some have the highest out-of-pocket exposure allowed, while others have lower out-of-pocket caps. In short, there are many different ways that a plan can achieve an AV within one of the ranges set for metal-level plans.

So although consumers who narrow their search to a single metal level will be comparing plans that all offer similar overall value, they may still find that the plan comparison process can be overwhelming, particularly in states that have numerous health insurance carriers participating in the exchange.

The introduction of standardized plan designs is an effort to make the plan comparison process more intuitive, and could also help reduce the prevalence of discriminatory plan designs.

States That Already Have Standardized Plans

Several states already have standardized plans in their exchanges. The plan designs vary from state to state, but the overall focus is on keeping deductibles, copays, coinsurance, and total out-of-pocket costs identical across all standardized plans at a given coverage level. So for example, all standardized silver plans in Oregon's exchange will have $2,500 individual deductibles in 2017 and $35 primary care office visit copays. 

Many of the standardized plan designs cover outpatient care with copays, rather than applying it towards the deductible. Most states with standardized plan designs also allow carriers to offer non-standardized plans as well:

  • In California, the exchange only allows carriers to offer standardized plans.Covered California—the state-run exchange—does not allow non-standardized plans to be sold, and was very much in support of the introduction of standardized plans in states that use Healthcare.gov instead of running their own exchanges. 
  • New York requires health insurers to offer at least one standardized plan at each metal level, although insurers are also allowed to offer up to three non-standardized plans. 61 percent of the people who enrolled through New York State of Health in 2015 selected standardized plans.
  • Massachusetts introduced standardized individual health insurance plans in 2010, and they continue to be available through the state-run exchange, Massachusetts Health Connector. But carriers selling plans in the Massachusetts exchange also have the option of offering non-standardized plans
  • In the District of Columbia, the exchange—DC Health Link—introduced standardized plans in 2016, but carriers have quite a bit of flexibility to offer non-standardized plans aswell. The exchange only requires a carrier to offer the standardized plan at any metal level for which the carrier is offering plans. 
  • Connecticut's exchange—Access Health CT—requires carriers to offer at least one standardized gold plan, at least one standardized silver plan (which must be the lowest-cost silver plan the carrier offers), and at least two standardized bronze plans, one of which must be HSA-compatible. Carriers are not allowed to implement gatekeeper requirements for their standardized plans; enrollees must be allowed to visit specialists without a referral from a primary care physician. As long as carriers meet the standardized plan requirements, they can also offer up to two non-standardized platinum plans, and up to three non-standardized plans in each of the bronze, silver, and gold categories.
  • Oregon initially had a fully state-run exchange, but now uses Healthcare.gov as its enrollment platform. The state created standardized plans in the bronze, silver, and gold categories, but insurers offering coverage in the exchange can also offer up to two non-standardized plans and two "innovative" plans in each coverage level.
  • Vermont's state-run exchange, Vermont Health Connect, has standardized bronze, silver, gold, and platinum plans, plus additional standardized plans at the bronze and silver level that are HSA-compatible. The two carriers in the state's exchange also offer non-standardized plan options.

HHS is making standardized plans very much optional—for carriers and for consumers—in 2017. Depending on how well the Simple Choice plans are received, they might become mandatory in the federally-run exchange in the future. 

And although some critics contend that standardized plans stifle innovation in the health insurance market, it's worth noting that nearly all of the state-run exchanges that already have mandatory standardized plans also allow carriers to sell non-standardized plans. 

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