| Today's Managing Health Care Costs Number is 49.5% |
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As Kim Jung Un fires ballistic missiles into the waters off Japan and Donald Trump encourages the right wing in Poland, the Senate continues to work under the cover of heavy secrecy on a bill to strip health care from tens of millions.
But that's not enough. In the name of free markets, Ted Cruz has suggested that insurance companies should be allowed to sell insurance plans that do not comply with pre-existing condition prohibitions or offer all ACA-required essential benefits - as long as in each state they offer at least one plan that does comply with ACA requirements.
Here's how this would work. Insurers would offer one plan that complied with the Affordable Care Act. This plan would cover maternity (just think!), mental health services, ambulance rides, prescription drugs, and emergency rooms. (All of these requirements would be waived in the non-compliant plans). The plan would be available for the same price to all comers, whether they were healthy or had preexisting illnesses. The plan would be attractive to those at high risk - so it would have to have a high price. It would also likely be saddled with the largest allowable deductibles and coinsurance - to discourage utilization and to keep the premium from being even higher.
This plan is the definition of a "death spiral." Insurers would offer compliant plans to gain the right to offer the less inclusive plans, which would be priced to sell. Risk for having babies or taking expensive medicines would be transferred to individuals - as healthy members would no longer be subsidizing the sick. Those with preexisting illnesses could choose between affording their housing or their health insurance.
What would noncompliant insurance look like for those at low risk who could make it through the underwriting process to gain eligibility? For starters, it would be cheap! Five percent of the population represents49.5% of all medical costs - so you could design an insurance plan for 40% less if you could exclude those expensive patients - and still make a whopping profit. But Mitch McConnell will focus on the lower prices, not he value of the available plans.
However that noncompliant plan would be a bum deal. It could be a "mini-med" plan which had a cap of a few thousand dollars - enough for an emergency room visit. (These were banned by the ACA - but would be revived under Trumpcare). It would exclude specialty medications which often cost $100,000 a year, and would not cover mental health services. It would be designed to be unattractive to those with real needs -because that's how to make such a plan profitable. Do you need maternity care? Then buy a rider priced at the cost of delivery!
These plans would have very low "medical loss ratios." Under the ACA, insurers must issue refunds if their administrative costs exceed 15-20%. Those rebates would go away - and insurance company profitability would soar. That's why health plans are ambivalent about TrumpCare. They hate going back to offering plans designed to exclude coverage for the sick - but those profits are mighty attractive.
Even worse, the bottom 50% of the population represents under 3% of total costs. Imagine how cheap the health plan catering to just the healthiest half of the population could be - while leaving room for healthy profits.
We don't allow automakers to sell cars without bumpers. We don't allow furniture makers to sell baby cribs that have risk of finger amputation or decapitation. The government has a role in promoting public safety -and this role includes structuring markets to prevent the sale of defective or dangerous goods.
There's no reason to allow the resurrection of insurance plans that fleece policyholders and leave sick people with no coverage. The Senate should reject this terrible idea.
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