A proposal by Sen. Ted Cruz to let insurers provide less comprehensive coverage under the Senate health care bill could lead to an explosion of limited-benefit “junk insurance” in states that weaken consumer protections in the Affordable Care Act.
Junk insurance can include 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 Congressional Budget Office considers people with these policies to be uninsured “because they do not have financial protection from major medical risks.”
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 ten “essential health benefits,” including maternity care, mental health services and prescription drugs.
But Sen. Ted Cruz, R-TX, wants to amend the Senate bill to allow individual insurers to offer the cheaper, less-comprehensive plans if they also sell plans that comply with the ACA’s coverage requirements.
The proposal has drawn praise from conservatives who favor more choices for consumers.
“It is encouraging to see Senate leadership exploring the merits of serious proposals that would inject much-needed consumer choice and competition into an otherwise deteriorating market,” said a statement from Michael A. Needham, chief executive officer of Heritage Action for America, a conservative political advocacy group.
But because the Senate bill allows states to weaken or eliminate the ACA’s essential benefits mandate, consumer advocates say healthy people in those states would flock to the cheaper plans. That would leave sicker people to purchase the more expensive and comprehensive coverage, which would drive up prices even more.
In its analysis of the House Obamacare repeal legislation, the CBO estimated that “a few million people” would migrate to the cheaper, less comprehensive coverage.
“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.
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.
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 gets 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 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 CBO 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.
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.
People with health problems who need comprehensive coverage, however, 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.