Insurers on the individual market mum on the return to medical underwriting
Among the many challenges Senate leaders face as they draft 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) thinks he has the answer. 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 Consumer Freedom plans could be designed however companies wish, as long as they meet state standards.
But would insurers that have stayed on the exchanges want to design plans with fewer benefits covered, or deny coverage to people with illnesses or charge them more?
Five insurers on exchanges in a dozen states in New England, the Midwest, West and South that cover hundreds of thousands of lives wouldn’t speculate, or said the proposal was too vague at this point.
The Blue Cross and Blue Shield Association also declined to say whether its members would consider selling noncompliant plans. The Blues trade group, which represents the largest bloc of insurers in the exchanges, did send Cruz a letter saying that the Consumer Freedom option is unworkable. Blues CEO Scott Serota said it would force insurers off the exchange market or price plans in a way that could be unaffordable for 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 help consumers buy exchange plans. Subsidies would help those with modest incomes, and additional funding for reinsurance would mitigate the rise in premiums for those who make too much to get a subsidy.
Nonetheless, America’s Health Insurance Plans, the industry’s lobbying group, also opposes the amendment. It said states that allowed some insurers to medically underwrite plans after the ACA became law experienced 10% higher rates than other states.
“Proposals to reopen 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 said.
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 co-op insurer, covers 33,000 people through individual plans. CEO Kevin Lewis said before the ACA passed, Maine regulators required plans to cover mental health, and didn’t allow lifetime limits or discrimination on the basis of pre-existing conditions.
Before Maine introduced reinsurance to slow the rise in premiums—two years before ACA launched—a typical deductible on a plan 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. Preventive 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 noncompliant 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. “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?”
Cruz’s amendment may not survive vetting under rules for reconciliation, or may be stripped during the amendment process.