“The standard broad Exchange/IFP network has prices roughly 50% below the broad PPO.”
By David Gaines
They don’t work everywhere, but when they work, they can work very well. Why?
Because in some regions they offer fundamentally different networks and substantially lower prices.
South Carolina is a good example where ICHRAs work quite well because:
1. Exchange/IFP plans offer different products — they have a number of regionally-focused narrow HMOs — not available to fully- and self-insured accounts.
2. The rates are substantially lower.
In the image above are rates from one hospital in the state with BCBS of SC.
To go from the broad group plan to the regional HMO, prices decline by 60%. The standard broad Exchange/IFP network has prices roughly 50% below the broad PPO.
I’m not cherry picking here. When we run the numbers across the state, these differences generally hold, sometimes to a lesser degree than this example, but they hold nonetheless.
Three questions worth sitting with:
1. Are commercial plan members effectively cross-subsidizing exchange networks, funding a more affordable alternative they can’t access themselves?
2. Will providers continue to accept these rate differentials as employers begin to recognize the arbitrage opportunity?
3. And does the rise of ICHRAs tell us that self-insured employers should be taking a much harder look at HMOs and narrow networks that produce similar price effects, no ICHRA required?
