AHIP: Market instability, higher premiums for sicker enrollees under Cruz amendment

America’s Health Insurance Plans (AHIP), health insurers’ largest lobbying group, has been largely silent on Senate Republicans’ version on an Affordable Care Act (ACA) replacement plan, but now is warning against a conservative amendment to allow insurers to now offer plans which don’t comply with ACA regulations.

The amendment, introduced by Sen. Ted Cruz, R-Texas, would allow insurers to sell non-compliant plans if they simultaneously offer at least one ACA-compliant plan in a state’s insurance exchange. These plans would be exempt from regulations like community rating, allowing members to be charged more based on health status, and could deny coverage based on pre-existing conditions like pre-ACA plans on the individual market.

Cruz has argued his proposal provides additional choice for consumers with “more affordable plans that are tailored for their individual healthcare needs.” AHIP, however, said the result would be a “fractured market,” splitting the risk pool into healthier customers choosing the skimpier, cheaper non-compliant plans and patients with pre-existing conditions going into the ACA-compliant plans.

“As a result, the exchange markets would basically function like a high-risk pool—with unaffordable premiums for those with pre-existing conditions,” AHIP wrote in a letter obtained by The Hill. “As premiums rose, only those with the highest health needs and expenses would remain thereby accelerating the decline in the Exchange market.”

Including both kinds of plans in a single risk pool wouldn’t work either, AHIP wrote, since the two could offer vastly different products, rather than the common set of essential benefits established under the ACA.

Premiums for those who need more comprehensive compliant plans would skyrocket, according to Kaiser Family Foundation. Assuming the amendment is included in the Senate’s Better Care Reconciliation Act (BCRA), some would be shielded from premium increases by federal subsidies. BCRA does cut off subsidies at a lower level than the ACA—350 percent of the federal poverty line—which according to Kaiser, would leave 1.5 million people with pre-existing conditions stuck in the exchange plans and having to shoulder the full cost of any rate hikes.

“For these 1.5 million individuals, non-compliant plans would likely either deny coverage outright or charge very high premiums tied to their health,” the Kaiser analysis said. “Even if they could obtain coverage in non-compliant plans, it might not cover key benefits, such as maternity care, mental health care, substance use treatment, or prescription drugs, and would not solve the affordability problem.”

The Cruz amendment will be analyzed by the Congressional Budget Office (CBO) as Senate Republicans continue efforts to pass an ACA replacement.