Insurers blast Senate health care provision as 'unworkable'

Faith Castro
July 17, 2017

A health-care factoid can help frame the issue: US health care spending is highly skewed toward the sickest people. The traditional idea behind insurance is that the healthy subsidize the sick.

If consumers were willing to buy such "bare bones" plans - and some people did, usually at very low prices - those policies were considered health insurance coverage. More important, it would allow insurers to discriminate among customers based on medical status, charging higher premiums or denying policies altogether to people with existing medical problems ― from the severe, like cancer, to the relatively mild, like allergies. Instead, it incentivizes people to retain an insurance plan or face paying higher premiums upon returning.

She worries the stripped-down plans would be worthless for her - offering insurance coverage in name only. "It's supposed to be available under the Cruz Amendment to help prevent a huge increase in rates for people with pre-existing conditions".

But to reduce federal health care costs, the Republican bill reduces the subsidies, requiring individuals to pay a higher share of their income for premiums as well as higher deductibles. Susan Collins (R-ME) voted for the 2015 full Obamacare repeal bill.

And in the opinion of both America's insurance companies and one of the leading non-partisan health think tanks, it's a bad idea that could devastate the health insurance market.

"You have the possibility of two different risk pools", explained economist Douglas Holtz-Eakin, a longtime Republican adviser.

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That report did not mention the Cruz proposal by name, but it made the same points ― stating, among other things, that, "in a market with separate risk pools for compliant and noncompliant coverage, costs would no longer be spread over the broad enrollee population". "It would seem like an undesirable outcome for an exercise meant to rescue Obamacare (markets) that are melting down", he said.

Jenny Beth Martin, one of the Tea Party Patriots co-founders, said that the Cruz-Lee amendment is a "no-brainer and a common-sense solution". Insurance expert Karen Pollitz, now with the nonpartisan Kaiser Family Foundation, said several states tried a similar approach in the past, and it didn't go well.

Cruz's amendment, which would essentially make that transitional policy permanent, "would create even greater instability", AHIP said. Many sick individuals, meanwhile, will need to buy Obamacare-compliant plans-which could send the cost of that coverage skyward.

Cruz says that doesn't have to happen. (It also bulks up the market stabilization fund that was already in the legislation by an additional $70 billion, which should help keep a lid on premiums.) Beyond that, the market probably won't divide entirely into two tiers. "People with opioid and other drug problems have other health issues, from HIV, to hepatitis, health and liver problems, mental health, depression and on and on". But critics say that would depend on how much money is provided.

Writing a year ago, CBO's Susan Yeh Beyer and Jared Maeda warned, "If there were no clear definition of what type of insurance product people could use their tax credit to purchase, some of those insurance products would probably not provide enough financial protection against high medical costs to meet the broad definition of coverage that CBO and JCT have typically used in the past-that is, a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals".

"The "Consumer Freedom Option" is unworkable as it would undermine pre-existing condition protections, increase premiums and destabilize the market", BlueCross BlueShield President Scott Serota wrote the senators in a letter released Wednesday.

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