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Why Returning to a Pre-ACA Market Isn’t an Option
After the recent failed attempts to repeal the Affordable Care Act (ACA), it is anyone’s guess as to what comes next. Tax reform and infrastructure now appear to have moved ahead of health care on the legislative agenda—leaving the ACA largely out of lawmakers’ hands, and the Department of Health and Human Services (HHS) at the helm.
The President has implied that the federal government might halt federal payments to insurance companies meant to provide financial assistance to consumers who qualify for subsidies if they purchase health insurance on the ACA exchange. So far that has not happened. In a recent appearance on ABC’s “This Week” Sunday newsmagazine, HHS Secretary Tom Price, MD, said that he and his team are combing through the specifics of the ACA law, “asking the question, ‘does this help patients or does it harm patients? Does it increase costs or does it decrease costs?’”
There are more than 1400 instances in the law where the HHS Secretary has discretion to make changes, making the HHS the most likely source for any forthcoming health reform.
Republicans generally favor pushing more decision-making down to the states, and offering more choice to consumers. Dr Price has talked up a provision drafted by Senator Ted Cruz (R-Texas) that was included in the Senate’s plan. It would have given consumers the choice to purchase insurance that does not meet the ACA’s standard of the essential health benefits, but instead meets a given State’s definition of which service it deems essential. Coupled with the ability to grant state waivers for changes to the current law, many have suggested this could lead to consumers purchasing plans that do not cover most services.
“Dusting Off” The Old Way
The so-called Consumer Freedom Option is strongly opposed by the nation’s largest health insurers, which seemed to bewilder Secretary Price.
“It's really perplexing, especially from the insurance companies, because all they have to do is dust off how they did business before Obamacare,” he said during the This Week interview. It is “exactly the kind of process that has been utilized for decades.”
Even though the Cruz provision went down with the rest of the Senate bill in July, it is not unreasonable to wonder if Secretary Price might try to figure out how to offer low-cost “skinny plans.” Or if Congress might do that same if and when health care moves back into the limelight.
This begs two questions:
- Can the United States ever go back to the way health insurance worked before the ACA, dusting things off, as Secretary Price suggested?
- Can selling insurance inside and outside of the ACA—as the Cruz provision envisioned—work?
Most industry experts offer a resounding “no” to both questions. As we have reported previously, it is difficult to take benefits away once they are given. For that reason, there is consensus that the ACA in some form or fashion is here to stay. There is also near universal agreement that certain parts of the ACA—notably the exchanges—need work. But experts also point out that provisions like Sen Cruz’s, that propose parallel systems where different rules apply, will not improve the exchanges, and indeed will likely hasten the so-called death spiral.
AHIP Objects, Actuaries Agree
In a July letter to Senate leaders, America’s Health Insurance Plans (AHIP) pointed out that even though the Cruz provision calls for a single risk pool, such a pool would be established “in name only. In fact, it creates two systems of insurance for healthy and sick people.”
A paper published this year by the American Academy of Actuaries, reinforces this claim.
“If insurers were able to compete under different issue, rating, or benefit coverage requirements, it could be more difficult to spread risks in the single risk pool.... Changes to market rules, such as increasing flexibility in cost-sharing requirements, could require only adjustments to the risk adjustment program. Other changes, such as loosening or eliminating the essential health benefit requirements, could greatly complicate the design and effectiveness of a risk adjustment program, potentially weakening the ability of the single risk pool to provide protections for those with preexisting conditions.”
Such a system, according to the paper, would effectively create two risk pools, and premiums in the ACA plans would be much higher than in those not subject to ACA regulations, leading to a destabilized ACA market. Moreover, things would get worse if people were allowed to move between plans depending on their health status
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Making the Problems Worse
The experts we spoke with agreed, citing the potential for confusion and flawed benefit design. Additionally, it does not adequately address the ACA exchange problems, and indeed may exacerbate them.
“The Cruz amendment would not likely achieve anything other than allowing young/healthy individuals to purchase cheaper, inadequate coverage at a lower price,” David Marcus, director of employee benefits at the National Railway Labor Conference, explained. “It would generally do nothing to lower premiums for ACA-compliant coverage.”
Gary Owens, MD, president of Gary Owens Associates, a medical management and pharmaceutical consultancy firm, implied that Cruz’s plan is a half-baked solution that most would have a difficult time navigating.
“This seems to just one more attempt to cobble together a solution to address the issue of healthcare access and coverage,” he said. “It would probably create more confusion for consumers about which plan is appropriate for their needs.”
Norm Smith, president of Viewpoint Consulting, Inc, which surveys managed markets decision-makers for the pharmaceutical industry, concurred.
“Many of the people buying these plans would not be able to define what’s covered, and what’s not,” he said. “Plans would be difficult for state insurance commissions to control without standardized benefit design.” He added that ACA plans would be crippled as younger, healthier people leave in favor of non-ACA coverage.
F Randy Vogenberg, PhD, RPh, principal at the Institute for Integrated Healthcare, said that the Cruz approach is a tepid response to what he sees as failure on the ACA exchanges.
“It has no merit because it does not address the need to change from the current exchange products,” he explained.
More Choice or Inadequate Coverage?
Proponents cite the fact that skinny plans give more choice to consumers, and that free-market principles are needed, vs increased government intervention. Mr Smith reminded us that the ACA—which is based on the Romney plan that became law in Massachusetts—already contains free-market components. For that reason, he said that introducing more choice could work in theory. However, in practice, “with the level of medical insurance literacy being so low, I’m not sure most members will understand what they are buying.”
Mr Marcus added that “The marketplace is already designed to have market principals, though the insurance that is available through [it] is limited to certain types of coverage. Offering more choice means certain people can get cheaper plans, but those cheaper plans are generally inadequate methods of protecting against health costs.”
Dr Owens explained that health reform will take much more than simply going back to the way insurance was sold in the 1990s, or tacking piecemeal amendments onto the ACA one after the other.
“Trying to glue on a piecemeal solution is not the answer,” he said. “Congress needs to drop the partisan approaches, put together a real working group that will take the needed time and use the available expertise to develop a comprehensive plan that takes the ACA to the next level.”
New Consumer Expectations
In the end, a big reason that insurers cannot simply dust off their plans from the past may be due to customer preference. Consumers often feel hamstrung when it comes to buying appropriate, affordable coverage. Yet they possess more power than many believe, as evidenced by the backlash Washington lawmakers have faced at local town hall meetings. This, in large part, led to the downfall of ACA repeal efforts.
The term “pre-existing conditions” is now a part of almost every health consumer’s lexicon, and people do not expect to be shut out of the market or forced to buy an exorbitantly expensive plan just because they have such a condition. The ACA appears to have cemented that mindset.
Dr Owens explained that insurers are more eager to work within the already established system of regulations, as opposed to wading into uncharted regulations.
“I don’t think the insurers want to increase the complexity of the marketplace,” he said.
Mr Smith agreed, adding that there would need to be “an awful lot of explaining before members knew what they were buying.”
“Going back just doesn’t make sense,” Mr Marcus noted. “Insurance carriers have spent huge sums of money developing systems to comply with the ACA. Profits at the largest carriers are the highest they have ever been. Insured individuals now have an expectation for ACA market reforms to be continued, but the concept behind the Cruz amendment would not change that.”
Additionally, the health insurance industry as a whole is probably concerned about payers who would choose to sell substandard plans outside of the ACA exchanges. Consumers would be left “in a bind when they need to access coverage,” Dr Owens said, which would not reflect well on the industry.
