The powerful health insurance lobby has been noticeably absent from the public debate over the Republican health-care bill but finally stepped into the fray this week, with major trade groups slamming policy ideas proposed by Sens. Ted Cruz (R-Tex.) and Mike Lee (R-Utah).
Cruz and Lee's amendment, called the “consumer freedom amendment,” would allow insurance companies to sell cheap health plans that don't meet the Affordable Care Act's coverage requirements as long as insurers also agree to sell a plan that does. For example, an insurer could sell a skimpy plan without maternity coverage or reject people with certain preexisting conditions — so long as they sell a plan that doesn't do those things. The idea, endorsed by Vice President Pence, is that healthy people would be able to buy only the coverage they want.
But in a letter to lawmakers and a document circulating on Capitol Hill, health insurers' trade groups said that policy would destabilize the insurance marketplaces, cause premiums to rise unsustainably for people with chronic health conditions and leave fewer and fewer insurers selling plans — all the hallmarks of a death spiral.
“I'm writing to make clear my view on how the 'Consumer Freedom Option' is unworkable as it would undermine preexisting condition protections, increase premiums and destabilize the market,” Scott Serota, president and chief executive of the BlueCross BlueShield Association, wrote to Cruz and Lee.
Health insurance plans fundamentally depend on a balance of healthy and sick people among members. Healthy people's premiums help pay for the care for sick people. One of insurers' chief complaints about the markets in the Affordable Care Act has been that too few young and healthy people have signed up for insurance, causing premiums to rise.
Cruz's amendment, insurers argue, would make the problem much worse by leading to a split in the market: Healthy people would gravitate toward cheaper plans that cover fewer services and sick people would buy the more generous ones. If people with expensive chronic conditions overwhelmingly ended up in generous plans without many healthy people to help share the risk, the cost of those plans would inevitably spiral upward.
In a document circulating on Capitol Hill, the trade group America's Health Insurance Plans outlined how allowing some health plans to be exempt from coverage requirements would create instability, cost more and fail to protect people with preexisting conditions. The group predicted that the generous exchange plans that were compliant with coverage requirements would become a de facto high-risk pool, with higher premiums that would mean mostly sick people would want to enroll. More people would drop out as premiums rose, leaving all but the sickest buying insurance — which would push premiums even higher.
“The individual market faces well-documented challenges to stability, including higher premiums, lower-than-expected enrollment, fewer plan choices, and risk pool problems in certain states and markets,” the document states. “It is important that policymakers avoid policies that threaten to further increase uncertainty or threaten stability.”
Up until now, major insurer groups' response to the Senate bill has been noticeably muted, despite the fact that it would fundamentally reshape their business. That public silence was part of a strategy, several health-care lobbyists said, to work behind the scenes. That strategy appeared to have worked. The Senate bill contains many items insurers have been asking for: a tax repeal worth $145 billion over a decade, money to stabilize the insurance marketplaces and the short-term continuation of billions of dollars in cost-sharing reduction payments that have created uncertainty for the industry.