Senate healthcare bill will hurt individual market in the long run
Senate Republicans' healthcare bill to repeal and replace the Affordable Care Act would bolster the dwindling individual insurance market in the short term, but eventually cause enrollment to plummet, according to a report by ratings agency S&P Global.
The Senate bill eliminates the financial penalty for individuals who don't purchase health insurance. Instead, the Better Care Reconciliation Act replaces the fine with a six-month waiting period that's unlikely to keep people enrolled, S&P analysts said.
"The lack of a requirement to have insurance can prove to be a negative for insurers in the individual market," the report states. "We expect insurers to increase pricing to offset the potential of a higher-morbidity risk pool."
The bill is seen as a boon to insurers in several ways. Funding for cost-sharing reduction subsidies for low-income enrollees through 2019, billions of dollars in short-term assistance funds to steady the ACA exchanges, and greater leeway in what insurers can charge older plan members all "could make the market more attractive to insurers," the report notes.
The bill, which was dealt a setback earlier this week when Senate Majority Leader Mitch McConnell delayed a vote until after the July 4 recess, would provide insurers with $50 billion over the next four years to prop up the exchanges. It would also allow insurers to charge older members for premiums that are five times higher than younger members' premiums. The ACA prohibited insurers from charging more than three times as much.
But the legislation would also slash subsidies for individual plans and allow insurers to sell less-generous coverage. It would lower the value of the benchmark health plans used to determine premium tax credits, raising deductibles and co-pays for consumers. Premium tax credits would go only to plan members with incomes up to 350% of the poverty level, below the ACA's 400% cut-off. Further, the Senate bill eliminates funding for cost-sharing subsidies after 2019.
Without an individual mandate, fewer consumers will be willing to buy health insurance that comes with higher out-of-pocket costs and less financial assistance, according to the S&P report. The agency's analysts predicted that low-income enrollees who currently receive a subsidy will drop off the insurance rolls when the cost-sharing subsidy is no longer available. Older enrollees who will be charged more, and people with incomes above 350% of the poverty level will also be more likely to drop coverage.
While noting that the current mandate is weak, S&P said the Senate's proposed six-month waiting period imposed on people who have a break in coverage of 63 days or longer "will fail to be the 'stick' that encourages healthy individuals to get insurance and thus will not meaningfully improve the risk profile of the pool."
The federal funding that S&P predicts will prop up the market in the next four years will drop sharply in 2022 and will no longer be able to offset the effects of less-generous insurance and no mandate. The damage would require "another round of reform later on."
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