A U.S. Senate bill meant to provide more insurance options for individuals living in markets with no HealthCare.gov plans could exacerbate the problem by taking away both participation incentives and money from insurers.
On Wednesday, Tennessee Republican Sens. Lamar Alexander and Bob Corker introduced legislation that will allow people who live in counties with no health insurance options on the Affordable Care Act exchange to use their subsidy to purchase any plan outside of the exchanges.
Only individuals who live in so-called dead zones will be afforded the subsidy flexibility and the option would only be in place through the end of 2019.
But insurers stand to lose money if the bill becomes law, as the proposal doesn't call for continuing the reinsurance fund, which reallocates funds from plans with healthier patients to subsidize plans with the sickest beneficiaries.
“If you get a $1 million baby and there isn't risk corridor funding, then you would take a bath on this population,” said John Gorman, head of the Gorman Health Group.
The bill could also spark a greater exodus from the federal marketplace as it creates a scenario where plans with skimpier benefits could get the same subsidies as more robust ACA-compliant plans. Since insurers say they are losing money on marketplace plans, they may question whether they need to stay in the marketplace, Gorman said.
Larry Levitt, senior vice president of the Kaiser Family Foundation, said plans on the marketplace would likely be upset that other offerings—such as short-term insurance policies, which can exclude people with pre-existing conditions—would get the subsidies.
The Trump administration already has been noncommittal about enforcing the individual mandate. If the subsidies suddenly can go to plans that can exclude riskier patients, there is less incentive to offer ACA-compliant plans, Levitt said.
The bill is also expected to generate little new business for insurance companies as there are very few markets that would have no coverage options according to Dan Mendelson, CEO of Avalere Health.
The only example of such a market outlined by both Lamar and Corker is Knoxville, Tenn., and it's unclear what other markets could benefit from the proposed law.
Many more markets are expected to have only one coverage option, Gorman said.
Currently one-third of the counties relying on HealthCare.gov only have one plan offering, according to the Trump administration.