The policy players now trying to improve or replace the current Affordable Care Act system are facing a familiar enemy: anti-selection.
An insurance market is a little like a plate spinning in the air. Infusions of premium dollars, fee revenue, investment income and any government subsidies help balance the effects of claim payments and keep the plate spinning.
Anti-selection, which is also known as “adverse selection,” is the risk that the bad risks will roll to the side of the plate with the kinder, more generous insurers, like hot potatoes of insurance risk doom, and the good risks will end up on the side of the plate with the tougher, cheaper insurers, or roll off the plate altogether, until the spinning stops and the plate falls down.
One challenge for policymaker is that almost any provision that an ordinary consumer or health care provider thinks of as a nice little feature to add to a health finance program, such as a ban on medical underwriting, or a temporary loosening of enrollment rules to cope with consumer confusion problems, can increase anti-selection and cause the spinning plate to fall down.
Efforts to fight anti-selection helped create some of the longest, most complicated, most controversial provisions in the Affordable Care Act, such as the provision requiring many people to own what the law classified as solid major medical coverage for most of the year or else pay a penalty. Today, some of the provisions in the law, such as weak provisions for getting healthy people to pay for coverage, appear to be close to shoving the healthier patients out of the market and making the spinning plate fall down.
Drafters of the House American Health Care Act bill, which passed by a 217-213 vote in the House on May 4, tried to make the individual commercial health insurance market simpler, cheaper and less dependent on government involvement. Analysts at the Congressional Budget Office predicted the changes would make individual health coverage cheaper and easier to get for some people, but that it would destabilize the market for people with health problems in about one-third of the United States.
Now, the backers of the Senate’s Better Care Reconciliation Act bill, an alternative to the House bill, are doing what they can to address commercial health market stability concerns as well as concerns about access to Medicaid and other government health programs.
Here’s a look at five ways the Senate’s BCRA bill could possibly make commercial health risk roll in unhelpful or surprising directions, if lawmakers, regulators, insurers and others fail to make adjustments, based on a review of social media chatter and other sources.
1. An interstate small business health plan provision could push states to bid for interstate small-group plan business by weakening their essential health benefits standards and other small-group standards.
One provision in the BCRA would let a state waive the current Affordable Care Act coverage standards, such as the standards for the essential health benefits package, or list of services a solid individual or small-group major medical policy should cover.
Another provision, a small business health plan provision, would let a bona fide association offer small employer members access to an interstate health plan. The interstate health plan would be governed by the state insurance regulators in the state where the plan was based.
Some states collect taxes on health insurance premiums.
The BCRA small business health insurance plan provision might give a state that wanted to maximize small-group health insurance premium tax revenue an incentive to get as many interstate plans as possible to make it their state of domicile.
Even if a state of domicile could collect premium taxes only for the interstate plan employers in its jurisdiction, a state might still want to attract many interstate plan headquarters, to increase the number of health plan administration jobs in the state.
One simple way for a state to make itself an attractive state of domicile would be for it to narrow the scope of its essential health benefits package as much as the BCRA waiver program would allow.
The current BCRA waiver provision sets no minimum essential health benefits standards.
Federal regulators might let states use BCRA waivers only to make modest tweaks to essential health benefits standards, such as adding caps on access to some types of inpatient mental health care. In theory, however, federal regulators could let a state use a waiver to cut all coverage requirements for physician office sick care, or all coverage for hospital care, out of its essential health benefits package.
That change could push the healthiest small employers into interstate plans with weak benefits, and leave single-state plans that still meet Affordable Care Act quality standards with the employers with older, sicker employees. Because health care providers might have a hard time getting much cash from the health plans of the patients with interstate plan coverage, providers might fight to increase the reimbursement rates they get from traditional, single-state health plans, further increasing the pressure on the single-state plans.
2. Essential health benefits changes in some states could push sick residents in those states to move to states with richer essential health benefits packages.
If some states loosen essential health benefits package requirements, that could lead to migration-related anti-selection pressure between states.
States with looser essential health benefits packages might end up exporting residents who need care for autism, hemophilia or other health problems to states with strong essential health benefits package requirements.
Over time, states with richer benefits rules might look for ways to shut newcomers with serious health problems out of their health insurance markets.
3. The Affordable Care Act public exchange system could end up providing heavily subsidized catastrophic coverage for healthy people, and for sick people with health care providers who adapted quickly to the new BCRA rules.
The Senate’s BCRA bill would leave the Affordable Care Act public exchange system in place.