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The Senate health care bill could once again allow insurance companies to offer some individuals plans that cover few benefits — and, in certain policies, exclude sick people entirely.
These changes result from a little-noticed provision that lets self-employed Americans opt out of the individual market and buy into the health plans that large employers provide, which have more lax regulatory standards.
Health policy experts at the Kaiser Family Foundation and Georgetown University have recently analyzed this provision, and concluded that these “small-business health plans” could siphon off healthy consumers.
These plans could, according to one analysis, “condition membership on the health status of small businesses” — including cases where the small business is a self-employed individual.
Sicker Americans would still be able to purchase coverage on the individual market, but those plans would be expected to get more expensive as healthier people flock to the cheaper options.
“It’s a sleeper issue,” says Karen Pollitz, a senior fellow at the Kaiser Family Foundation who recently wrote a brief on the topic. “If you have people segmenting between a regulated market and a deregulated market, that could be pretty destabilizing.”
Sen. Mike Enzi (R-WY) advocated for this provision of the bill as a way to provide more flexibility to small businesses. The goal here is to provide an option for small businesses that will not only allow but encourage more employers to offer coverage for their employees,” Enzi spokesperson Max D’Onofrio said in an emailed statement.
The individual market under the Affordable Care Act has long struggled to attract healthy consumers, who help lower premiums for enrollees with high medical bills. This provision of the Senate bill would likely exacerbate that problem by giving healthy people a way to leave the market and buy skimpier coverage through an association.
This could harm consumers in two ways. First, it could badly damage the individual market by leaving behind a sicker, more expensive population. Second, these association health plans may not cover expensive benefits like maternity care or mental health services, which could leave enrollees in a lurch should unexpected medical needs arise.
"You'd have a shifting of the healthiest part of the self-employed cohort, who would have the option to look at both markets and pick the one that worked better for them,” says Kevin Lucia, a health researcher at Georgetown University who has studied the issue. “This would leave behind the unhealthy people in the individual market, including the self-employed, and over time result in less plan choices and higher premiums for consumers.”
The Senate bill lets self-employed Americans buy into skimpier benefit plans
An estimated 1.4 million enrollees on the Affordable Care Act marketplaces — one out of five people who rely on the program — are self-employed.
The Senate’s Better Care Reconciliation Act would make these people eligible to join together with one another, as well as with small-business workers, to form a small business health plan (SBHP).
Specifically, the bill says that members of these plans must be “active or retired owners (including self-employed individuals) officers, directors, or employees of, or partners in, participating employers.”
The process would start with the creation of a business association. This could be based on professional qualifications (an association of dentists or carpenters, for example) or much broader criteria. There is a Federation of American Consumers and Travelers, for example, run by an insurance company, which only requires one to be a consumer or traveler to join.
“You could provide travel brochures to people and say that is what your association does,” Pollitz says.
There is nothing in the Senate bill to stop an association from asking questions about health status as it screens potential members, a practice that harks back to the lengthy medical questionnaires insurance companies used in the individual market prior to the Affordable Care Act.
The only nondiscrimination requirement around these plans requires them to make information readily available to any small businesses.
The association would then go to a health insurance plan to purchase a large-group plan for its members. Large-group plans are not subject to Obamacare’s requirement to cover essential benefits or charge sick and healthy people the same premiums. The Affordable Care Act excluded these plans, which cover 57 million Americans, from those regulations. Still, most tend to comply; large companies typically use benefits to woo workers, and have historically offered robust benefits with standard premiums for all employees.
Small-business health plans may, however, act differently. When an association goes to a health insurer seeking a plan for its members, the product they would be offered could cover fewer benefits and charge high rates to sick members.
As Pollitz and her co-author Gary Claxton write in a recent brief for the Kaiser Family Foundation:
The insurer covering the [association] could medically screen small firms applying, and charge relatively low rates for healthy groups but very high rates for groups with sick employees. In addition, the insurer could consider a group’s health and claims at renewal and give them considerably higher rate increases than other groups.
Under the Affordable Care Act, self-employed Americans cannot join these associations to escape insurance market rules. Most purchase coverage in the individual market, where their health status cannot be taken into account for setting their premiums. Or, if they buy coverage through associations, the plan must follow ACA market rules, including community rating of premiums.
But the Senate bill would essentially create an uneven playing field. This would advantage healthier people, who could find cheaper plans with fewer benefits. These people would likely find their premiums go down.
But sick people would be undeniably disadvantaged with these new small-business plans. Experts expect they would be denied membership to associations — or, if they joined, charged higher premiums when the association applied for insurance. These people would be unlikely to find those plans attractive in the first place; many would want the more robust benefits that the individual market would still be required to offer.
A spokesperson for the Senate Health, Education, Labor, and Pensions Committee, which has jurisdiction over this part of the bill, did not immediately respond to a request for comment on whether this was the intention of the bill.
This provision fits into the Republican vision for Obamacare repeal and replace
The small-business health plan is similar to other Republican health policies in that it tilts the playing field to advantage healthier consumers and ask those with higher medical costs to pay a bigger chunk of the tab.
Both the Senate and House Obamacare repeal bills would lower the financial help that low-income Americans receive to purchase coverage. Deductibles would rise under these plans, too. Under the House bill — and under an amendment offered by Sen. Ted Cruz (R-TX) in the Senate — health plans would be able to offer coverage with fewer benefits, cutting out costly services that drive up premiums.
All of these changes shift the individual market closer to the one that existed before the Affordable Care Act, where healthier Americans could easily get coverage with relatively affordable premiums, but those with preexisting medical conditions could face steep costs or denials.
The Republican plan, and these small-business health plans in particular, would once again allow insurers to tether health insurance access to medical status. That is a burden borne by those with more costly conditions, whom insurers would attempt to avoid — and who would face more trouble finding an affordable option.
