One of conservatives’ favorite features of the new Senate health care bill — a provision allowing insurers to sell cheaper policies — has come under increasing fire from Obamacare defenders.
Senate Majority Leader Mitch McConnell included a version of a proposal, first offered by Sen. Ted Cruz (R-Texas), that would authorize states to let insurance companies sell less comprehensive and cheaper policies that currently are illegal under the Affordable Care Act.
Insurance companies could only sell such policies if they also sell plans compliant with Obamacare regulations.
The idea is that increased choice and competition will drive down costs for consumers who do not want or need plans that cover services they are unlikely to use. But some health care experts argue that it would induce the young and healthy to flee current Obamacare plans, leaving them as ghettos for the old and sick who would be unable to afford the premiums.
Even some insurance companies have come out against it.
“Unfortunately, this proposal would fracture and segment insurance markets into separate risk pools and create an un-level playing field that would lead to widespread adverse selection and unstable health insurance markets,” America’s Health Insurance Plans, a trade association, said in a memo this week.
Advocates who favor scrapping Obamacare regulations — including some who argue that the Cruz amendment does not go far enough — are unimpressed by opposition from insurance companies.
“I don’t really care what insurance companies think,” said Jason Pye, vice president of legislative affairs at FreedomWorks.
The goal of the health system should be what is good for patients and consumers, not what’s good for insurance companies, he said.
Michael Tanner, senior fellow at the libertarian Cato Institute, said that states that approved the sale of slimmed-down insurance policies would bring quick relief to many insurance customers in the individual market.
“They would be able to immediately buy lower-cost plans, and premiums would come down,” he said.
Tanner acknowledged that it is a legitimate concern that more-expensive Obamacare plans might become more imbalanced than they already are.
“I don’t think either party … fully appreciates how expensive the promise is to provide health insurance to people with pre-existing conditions.”
“Who is going to pay for people with pre-existing conditions?” he asked.
To deal with that issue, the Senate bill would create a State Stability and Innovation Program with $182 billion over nine years. About 40 percent of those funds would be used to help offset expected premium increases in Obamacare plans. Jonathan Gruber, one of the architects of Obamacare, argued on CNN on Friday that the Obamacare plans would become a giant high-risk pool.
“With enough money, you could deal with that,” he said. “There is not enough money. The amount of money that’s put into high-risk pools is not nearly enough to make insurance affordable for sicker and older people. These are people who spend the bulk of the dollars in our health care system.”
Robert Graboyes, a senior research fellow and health care scholar at George Mason University’s Mercatus Center, said it is impossible to predict how the individual insurance market might evolve. He said much would depend on the number and details of specific plans insurance companies decided to sell and the specific regulations that each state wrote.
Graboyes said customers remaining in Obamacare plans would fall into two general groups: those earning less than 350 percent of the federal poverty line, who would be shielded from the impact of premium increases by tax subsidies; and people making above that threshold, who consume a higher-than-average amount of health care.
The bigger the latter group is, Graboyes said, the more it will drive up costs.
“I don’t know big that group is,” he added. “My guess is it’s not enormous.”
Graboyes described reforming health care as a complicated series of trade-offs that politicians rarely like to acknowledge. He pointed to Kentucky’s experience with insurance reform in the mid-1990s. The state passed a law forbidding insurance companies from denying insurance to people with pre-existing conditions and required them to charge the same premiums.
With no mandate on people to buy insurance, many simply waited until they were sick to buy insurance, he said. The result is that the state in 10 years went from about 100 insurance carriers to two — a state-run entity and Blue Cross and Blue Shield. Both bled red ink, he said.
“You had a death spiral as insurers fled the state,” Graboyes said.
Something similar, he added, happened in other states that adopted similar laws.
“I don’t think either party … fully appreciates how expensive the promise is to provide health insurance to people with pre-existing conditions,” said Graboyes.