Among the many daunting issues facing Senate leaders as they pull together a bill to repeal and replace the Affordable Care Act is trying to keep premiums from spiraling out of control.
Sen. Ted Cruz (R-Texas) believes he has the answer. Although details are scarce, Cruz has been pitching an amendment that would allow insurers to sell plans in the individual market that don't meet ACA requirements so long as they sell at least one plan that does. The so-called Consumer Freedom plans could be designed however companies wish, as long as they meet state standards.
Would insurers that have stayed on the exchanges want to design plans with fewer benefits covered, or utilize medical underwriting and higher prices for people with illnesses?
Five insurers selling individual policies on exchanges in a dozen states in New England, the Midwest, West and South, and cover hundreds of thousands of lives all said they couldn't speculate, or that the proposal was too vague at this point.
The trade group for the Blues, the largest insurer in the exchanges, also declined to answer whether its members would consider selling non-compliant plans. The Blue Cross Blue Shield Association did send Cruz a letter last week saying that the Consumer Freedom option is unworkable. BCBSA President and CEO Scott Serota said it would drive insurers to exit the exchange market or price coverage out of reach of consumers.
The Kaiser Family Foundation estimated that 1.5 million people with pre-existing conditions would face higher premiums if the amendment became law.
Cruz has said that tax dollars will prevent the exchange plans from becoming unaffordable, both through the subsidies available to those with modest incomes, and through reinsurance, for those who make too much for subsidies.
Nonetheless, America's Health Insurance Plans, the industry's lobbying group, also opposes the amendment. It said Wednesday that states that allowed medically underwritten plans to continue longer experienced 10% higher rates than other states. "Proposals to re-open noncompliant plans would create even greater instability by driving adverse selection and acceleration of the downward spiral in the exchange markets of higher premiums and lower enrollment," AHIP suggested.
How states regulate the market might prevent insurers from selling plans that cost far less than what's sold today.
Community Health Options, Maine's coop insurer, covers 33,000 people through individual plans. CEO Kevin Lewis said Maine regulators disallowed plans that didn't cover mental health, or imposed lifetime caps, or allowed discrimination on the basis of pre-existing conditions.
Before Maine introduced reinsurance to slow the rise in premiums—two years before Obamacare launched—a typical individual plan deductible for a single person was $15,000, Lewis said. Under Bronze plans in Maine today, the typical deductible is $6,000 to $6,250, but the out-of-pocket ceiling is $7,150. Preventative care is not subject to the deductible.
Lewis said that only about 20% of Maine's individual market buyers earn too much to qualify for subsidies, and only 10% of the exchange population buys without subsidies. So he's not sure how much segregating them would change the risk pool, though he thinks there would likely be at least some deterioration. It would depend, he said, on whether the premiums for non-compliant plans were cheaper than what people pay after a subsidy.
Would Community Health Options sell a skimpier plan?
"We'd have to look at the specifics," Lewis said, and "We'd certainly take a look at what those parameters were. I think we'd provide plans that consumers would find meaningful. In some cases, who are we to judge, if there's a market there?"
