According to media accounts, Republican senators met with President Donald Trump today to discuss efforts to repeal the Affordable Care Act (ACA). The meeting featured Senator Cruz explaining his amendment to the recently-abandoned Senate bill, with a supporting analysis from the U.S. Department of Health and Human Services (HHS).
The Cruz Amendment divides insurance markets between those who need health care and those who do not
Even without the Cruz Amendment, the Senate health bill offered states a deeply problematic invitation to waive essential health benefits and other consumer safeguards. The Cruz amendment would go even further—in every state it would divide the individual insurance market into two segments. One would meet all applicable federal consumer protection requirements. The other segment of the market would be exempt from consumer safeguards.
Insurance companies could sell junk coverage: plans without any minimum benefit requirements, any restrictions on deductibles or copayments, or any obligation to pay catastrophic medical expenses. Insurers could deny coverage or raise premiums based on preexisting conditions, the results of genetic testing, age, or gender. If someone with junk coverage decided to switch to federally-compliant insurance, they would have to wait at least six months before making that change.
According to the insurance industry and the actuarial profession, this policy would structurally destabilize insurance markets. Consumers who need health care would enroll in federally-compliant plans, as insurers offering cheap, non-compliant coverage “cherry-pick” the young and healthy. Without the broad sharing of health insurance expenses among those in better and worse health, the cost of federally-compliant plans would inevitably skyrocket, triggering a death spiral that leaves high-quality coverage unaffordable or completely unavailable.
More broadly, both the Cruz Amendment and the broader Senate health bill reveal an extremist, pseudo free-market vision for health care that is radically at odds with what American consumers need and want.
A radical and dangerous vision
Under the vision at the Cruz Amendment’s core, public policy’s overarching goal is letting the young and healthy buy health insurance with low premiums. It is entirely secondary whether that insurance has deductibles that make it unaffordable to obtain care; whether covered benefits meet consumers’ basic needs; or whether the insurance provides protection from catastrophic medical costs.
By letting insurers sell junk coverage to people without health problems, the Cruz Amendment ensures that other consumers, who have known health problems, are locked out of meaningful coverage as a result of segregated and therefore unstable markets. Even the young and healthy consumers who buy flimsy, inexpensive plans that appear initially adequate may develop health problems, at which point they will find their insurance provides little value, and they will be barred from switching to coverage that meets their needs.
It is not sustainable to have two unrelated individual markets, one for the sick and another for the healthy. Only if risks are shared by a broad range of consumers can those who need comprehensive coverage obtain it.
The Trump Administration’s analysis of the Cruz Amendment is unpersuasive
The anonymous HHS analysis released to support the Cruz Amendment asserts that premiums would fall and enrollment would climb, both for healthy people in unregulated plans and for less healthy people in federally-compliant coverage. Enrollment levels would differ only modestly based on whether insurers were required to pool risk between their federally-compliant and non-compliant plans. Incredibly, the Trump Administration’s report concludes that as many as 8.6 million people would buy non-compliant coverage featuring $12,000 individual deductibles.
The assumptions and methodology that yielded these implausible results are opaque, based on unspecified “proprietary” modeling. The authors may have assumed the continued availability of ACA tax credits, cost-sharing reductions, and consumer protections other than those involving essential health benefits, actuarial value, and risk-rated premiums. Among the few assumptions spelled out in the document, several are not credible:
- Every geographic area is assumed to include “an adequate number of insurers” offering comprehensive, federally-compliant coverage at silver and gold metal levels. The model apparently does not allow for a death spiral, even though a death spiral resulting in the unavailability of comprehensive coverage is a central danger of the Cruz amendment.
- When consumers move between federally-compliant plans and non-compliant plans, the federally-compliant plans are assumed to be at the bronze level of coverage. In fact, HHS’s own report on enrollment into ACA marketplaces shows that 76 percent of consumers have silver, gold, or platinum coverage.
- The report assumes that insurers will be unable to limit risk pooling between federally-compliant and non-compliant plans, when actuaries and insurers question whether a single-pool requirement can be meaningfully enforced. But even if the single-pool requirement works as intended, carriers must charge far less for their federally-compliant plans than the members will incur in claims. As a result, insurers will have little choice but to erect enrollment barriers and make such plans as unappealing as possible to people with preexisting conditions.
What consumers want and need
What consumers want and need is simple: Health coverage that includes necessary benefits, with affordable premiums and deductibles, a sufficient network of providers, and protections against both foreseeable and unforeseeable needs for health care. What they do not want is junk insurance, sold on terms that discriminate based on preexisting conditions, age, or gender. Innovation, competition, and consumer options are all important values, but they can be safeguarded without resorting to the kind of extreme, market fundamentalism embodied in the Cruz Amendment and the broader Senate health bill.