Cruz health care bill amendment – “….healthy people could get coverage although that coverage might not protect them if they got sick and sick people would have to pay an unaffordable amount for coverage.”

“The proposal would allow insurance companies the freedom to sell any kinds of health plans they want as long as they also sell at least one plan that qualifies under the regulatory requirements of the Affordable Care Act (ACA)….”
““It sounds like a recipe for segmenting the market in a way that would destabilize it. You would end up back in the scary dysfunctional world we were in before the ACA where healthy people could get coverage although that coverage might not protect them if they got sick and sick people would have to pay an unaffordable amount for coverage,” …..“The coverage that sick people need would still have to be offered but offered at any price, so probably unaffordable,” …. (A)

Here’s why the problem exists. Imagine that two plans are available from an insurer, one in which you get charged the same rate regardless of your medical risks and one in which your rates depend on your medical risks. It does not take a genius to forecast the results: people who believe themselves high risk will flock to the plan that does not base rates on medical risks (the “community rated plan”) while people who believe themselves to be low risk will go for the plan in which healthier people pay lower rates. This tendency will be even stronger if the latter plan also offers lesser benefits. But … the insurer, realizing that this separation will occur, will set the premiums in the community rated plan quite high, precisely because it knows the applicant pool is going to come disproportionately from the sick… In the end, then, the community rated pools are likely to have very high gross premiums, perhaps akin to a high risk pool. (B)

“Under Cruz’s model, many healthy consumers would avoid shelling out for high-cost, comprehensive plans. This would then make the pool of people willing to pay for such coverage disproportionately sick, which would cause the price of such plans to rise, which would make the pool even sicker, which cause prices to premiums to rise further, which would make the pool sicker still, on and on, in a death spiral, until the sick were priced out of the market completely.” …..
Conservatives are being honest about one thing: A full repeal of Obamacare would send the health-care system back to the pre-ACA status quo ante. In those days people with preexisting conditions were mostly out of luck (aside from whatever succor they are offered via the health-insurance ghettos states create under the rubric of “high-risk pools”), while healthy people had a wide range of affordable options — including the option of going without insurance…..” (C)

(A) GOP tensions rise over Cruz proposal, byAlexander Bolton, http://thehill.com/policy/healthcare/340765-gop-tensions-rise-over-cruz-proposal
(B) Senator Cruz’s Healthcare Reform Proposal Creates A Monster “Income Cliff”, by Seth Chandler, https://www.forbes.com/sites/theapothecary/2017/07/03/senator-cruzs-healthcare-reform-proposal-creates-a-monster-income-cliff/#5dc929484615
(C) Cruz Amendment to Senate Health-Care Bill Now Dividing GOP, by Ed Kilgore, http://nymag.com/daily/intelligencer/2017/07/cruz-amendment-to-senate-health-care-bill-now-dividing-gop.html

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