The Cruz amendment, as it is known, would allow insurers to offer plans on the individual market that do not comply with key Obamacare regulations, including rules that require coverage of people with pre-existing conditions; prevent insurers from charging people with those conditions much higher rates; ensure coverage of “essential health benefits” like maternity and emergency room care; and mandate that insurers devote a set ratio of premium dollars to covering actual medical costs.
The new provision is so risky that two organizations representing the health insurance industry publicly excoriated it, calling it “simply unworkable in any form” in a letter to Senate leaders this week.
As the insurers note, the Cruz amendment is liable to lead to a situation where healthy people overwhelmingly congregate on the cheaper plans, and insurers have to jack up premiums for the sicker people who remain on the more comprehensive plans.
Meanwhile, there’s another big problem with the provision. In order to encourage people to stay insured, the Senate bill would prevent people whose “creditable” health insurance coverage lapses for 63 days from purchasing insurance again for six months.
But the bill also does not consider the bare-bones plans “creditable,” according to Timothy Jost, a health policy expert at Washington and Lee University School of Law.
On its face, that would mean a person could violate the prohibition on lapsed coverage the moment he or she leaves one of the bare-bones plans, because the person would most likely have been without “creditable” coverage for more than 63 days.
The law includes an exception that appears designed to avoid such a scenario, however ― exempting people from the six-month waiting period if they were enrolled in one of the bare-bones plans the day before trying to enroll in a new one, according to Jost.
For people trying to leave the less comprehensive plans, the exception would “probably” spare most of them the risk of going without coverage entirely for six months, Jost said.
But there would still be an “element of added risk” that people would get stuck with the six-month waiting period, he noted.
More importantly, the exception to the six-month waiting period does little to minimize the other risks inherent in buying those plans in the first place.
Even without the six-month waiting period for lapsed coverage, individuals with the deregulated plans would almost certainly have to wait until the following year’s open enrollment period to buy more comprehensive coverage, Jost noted. (Special enrollment periods are typically only available to people who experience major life events like a marriage or the birth of a child.)
As a result, people who experience injuries or illnesses that the skimpier plans do not cover could be stranded for months without adequate coverage.
“The way these things are sold is, ‘If you are young and healthy, why do you need more?’” Jost said. “The answer is, if you get hit by a car, or if... you get a terrible infection, or you realize you’ve got cancer, you’re gonna have very skinny coverage that may not cover a lot of the services you need, that may have very, very high cost sharing. And you can’t just switch and say, ‘Oh, now I need comprehensive coverage.’”