If certain parts of the House Republican health care bill become law, states that opt out of Obamacare protections could see an explosion of “junk insurance” in their individual markets – which could leave millions of people with very little coverage.
Such plans often can be dirt-cheap, but they offer so few benefits that the recent Congressional Budget Office score on the Republicans’ American Health Care Act said such coverage basically amounted to no coverage at all.
Junk insurance can include several types of health care coverage: limited-benefit, specified disease plans that cover only certain diseases; supplemental plans that cover only the expenses another policy doesn’t; and fixed-dollar indemnity plans that provide a specified amount per day toward medical costs.
The CBO considers people with these policies to be uninsured, “because they do not have financial protection from major medical risks.”
Americans have seen these kinds of plans before. Before the Affordable Care Act, consumers buying health coverage outside the workplace faced a minefield of low-quality insurance with gaping coverage exclusions and benefit limits designed to protect insurers against costly medical conditions.
The ACA pushed that coverage to the margins by requiring individual plans to cover 10 “essential health benefits,” including maternity care, mental health services and prescription drugs.
But that could change. States could waive both these Obamacare protections under provisions of the GOP’s Affordable Health Care Act, which narrowly passed the House of Representatives on May 4.
If those provisions survive Senate negotiations and become law, states that drop the medical underwriting prohibition and waive or substantially weaken the essential benefits mandate could open the door for a resurgence of junk coverage.
Although “highly uncertain,” the Congressional Budget Office estimates in its latest analysis of the Republican legislation, released a week ago, that “a few million people” would migrate to the cheaper, less comprehensive coverage.
Young, healthy people would be most likely to do so because the Republican legislation would repeal the Affordable Care Act’s individual mandate, which compels them to buy coverage that includes the 10 essential benefits.
The only people who’d buy (the more expensive policies) will be people who think they’re going to need it. So it brings back all the problems the Affordable Care Act was meant to solve.
Timothy Jost, an emeritus law professor at Washington and Lee University
“People that consider themselves to be healthy will buy the skimpiest coverage that’s available, which could be really, really cheap, particularly for young people,” said Timothy Jost, an emeritus law professor at Washington and Lee University.
But people with health problems who need comprehensive coverage would end up paying more because insurers know “the only people who’d buy (the more expensive policies) will be people who think they’re going to need it,” Jost said. “So it brings back all the problems the Affordable Care Act was meant to solve.”
Pennsylvania Insurance Commissioner Teresa Miller agrees.
“These plans do not provide adequate coverage to protect consumers when they go to access even routine care and are not required to cover pre-existing conditions,” Miller said in an email statement. “While the (Republican health care bill) may open the door for more junk insurance, it is perhaps even more likely to close the door for the comprehensive plans that we see today.”
But Maryland Insurance Commissioner Al Redmer said he supported giving states greater authority to opt out of the Obamacare regulations.
“To the extent we can unwind the burden of federal regulation and give the decision-making regarding state-based insurance to state-based legislators, I think it’s a positive step,” Redmer said.
Junk insurance can include limited-benefit, specified disease plans that cover only certain diseases; supplemental plans that cover only the expenses another policy doesn’t and fixed-dollar indemnity plans that provide a specified amount per day toward medical costs. The CBO considers people with those policies to be “uninsured.”
He added that concerns about junk coverage might be overblown. Some states might waive the Obamacare consumer protections and impose more stringent safeguards, Redmer said.
“I find it hard to believe that state legislators all of a sudden would allow their constituents to be taken advantage of from a consumer-protection standpoint,” Redmer said.
But before the ACA, when states set their own rules for individual coverage, consumer horror stories were rampant about lean coverage, deceptive marketing, high costs and high denial rates.
Miller said her office still got complaints about junk insurance plans being deceptively marketed as ACA-compliant. They aren’t, because the coverage isn’t considered major medical insurance.
States that required fewer mandatory benefits and had fewer restrictions on medical underwriting prior to the Affordable Care Act are most likely to weaken the essential benefits and community-rating requirements if the GOP legislation becomes law, the CBO projects.
That could end up being a lot of states: Only seven states barred insurers from basing premiums on health status before the main Affordable Care Act provisions were implemented in 2014. And 32 states had no such restrictions, the Congressional Budget Office reported. Only 23 states required some mental health benefits in individual coverage, while just 18 required maternity coverage.
“My fear is that the same benefits that were often not covered prior to the ACA would be the ones once again excluded: maternity coverage, mental health and substance-use-disorder coverage and even prescription drug coverage,” Miller said.
The CBO also warns that because the GOP legislation would cut roughly $300 billion in tax credits that help people purchase individual coverage, insurers would end up crafting policies priced to match the leaner subsidies.
“Although such plans would provide some benefits, the policies would not provide enough financial protection in the event of a serious and costly illness to be considered insurance,” the CBO wrote.
If coverage is cheaper, more people will buy it and that will bring down the cost, Jost said, explaining the Republican rationale for weakening Obamacare consumer protections.
However, people with health problems who need comprehensive coverage would end up paying more because insurers know the “only people who’d buy (the more expensive policies) will be people who think they’re going to need it,” Jost said.
Washington Insurance Commissioner Mike Kreidler called that “the worst scenario you could ever have in insurance” because premiums would rise and insurers would exit the market because “the only people you’re insuring are the people that are using it.”
Kreidler, whose office aggressively prosecutes junk insurers, said offering consumers less expensive, less comprehensive policies in order to provide greater choice was a slippery slope.
“Giving people more choices always looks popular,” he said. “However, when you start to scratch the surface and you have no standards, then you wind up having a race to the bottom.”