The Washington PostDemocracy Dies in Darkness

Ted Cruz’s health-care plan works great unless you need health care

Sen. Ted Cruz (R-Tex.) has a health-care proposal that would let health insurers offer plans that don't follow Obamacare's rules as long as they offer one that does. (Jabin Botsford/The Washington Post)

Republicans have come up with a new twist on their health-care plan that would make premiums cheaper for healthy people but prohibitively expensive for upper-middle-class people with preexisting conditions.

I guess that counts as progress?

The proposal, the brainchild of Sen. Ted Cruz (R-Tex.), would let health insurers offer plans that don't follow Obamacare's rules as long as they offer one that does. Which is to say that they'd once again be free to not only sell skimpy plans that didn't cover things like mental health or maternity care or prescription drugs, but also charge people with preexisting conditions more for them — if they didn't just deny them outright.

This is a small idea that would have big consequences. That's because letting insurance companies sell plans that only healthy people could buy would mean it wouldn't be long until those were the only ones healthy people did buy — at which point sick people would be left having to pay more than they could afford. Think about it like this. The simple fact that, given the choice, many healthy people would pick bare-bones plans over more comprehensive (and costlier) options would set off a chain reaction in the rest of the insurance market. The prices of those more extensive plans would go up a lot since not enough healthy people had signed up for them, and the healthy people who had done so would drop their coverage since it had gotten so much more expensive — which, you guessed it, would make prices shoot up even more, until eventually there were only sick people left.

The health insurance market, in other words, would split into two. Healthy people would buy plans that wouldn't actually cover much, and sick people would try to buy plans that would actually cover them.

And as long as they weren't getting paid too much, they could do that. The Senate bill, you see, gives people making 350 percent of the poverty line or less —$42,210 for individuals, or $86,100 for a family of four — the same kind of subsidies Obamacare does that automatically go up as premiums do. So the people who got them would be insulated from what would otherwise be the unaffordable increases the Cruz plan would cause.

Despite that, though, people with preexisting conditions would still be considerably worse off under the Republican plan than they are under Obamacare. Why is that? Well, the people who did get subsidies would only be able to buy plans they couldn't really afford to use, and the ones who didn't wouldn't be able to buy any kind of plans, period. There are two stories here. The first is that the Senate bill would peg the value of its subsidies to much cheaper plans than Obamacare does, so a lot of people would be pushed into higher-deductible ones that, as far they're concerned, might as well be none at all. Indeed, in the case of someone making $18,090 or less, the nonpartisan Kaiser Family Foundation estimates that their deductible would go from an average of $255 under Obamacare to $6,105 under the Senate bill.

The second is that it would make the cost of comprehensive plans skyrocket so much that nobody would be able to afford them without government help. This would be a big difference from the way things are now. For all of President Trump's talk about Obamacare alternatively “imploding” or “exploding” or entering a “death spiral,” his own administration has concluded that this is not the case. Insurance markets are mostly stable. And since people with preexisting conditions aren't shunted off on their own, their premiums haven't gone up more than everybody else's. It might not be easy, but for individuals making more than $48,240, or families of four making more than $98,400 — that's how high Obamacare's subsidies go — it is possible, for the most part, to get covered regardless of their health status.

But the Cruz plan, as we've said before, would change that. Sick people would be segregated into what would be de facto high-risk pools, and, as a result, their premiums would soar into the financial stratosphere. Compounding that is the fact that the Senate bill would only offer subsidies up to 350 percent of the poverty level instead of the 400 percent that Obamacare does. Anyone making more than this new lower level would be out of luck, and out of the health insurance market. That means if you had acne or diabetes or were pregnant — all preexisting conditions that insurers could use to discriminate against you under the Cruz plan — you'd be better off making $42,210 than $42,211, since that extra dollar would cost you thousands in subsidies.

The Republican plan, then, would make it so sick people couldn't buy insurance without subsidies at the same time that it cut the value of those subsidies and took them away from some middle-class people.

This is really only about one thing: redistributing money from the poor and sick to the rich and healthy. And that's not just what liberals are saying. Conservatives are too. James Capretta, a former Bush administration official who is now a resident fellow at the American Enterprise Institute, says that “the main effect” of Cruz's plan “would be to shift costs from healthy consumers to less-healthy consumers and household with lower incomes.”

Freedom, ain't it grand!