Editor’s Corner—Tom Price says insurers can ‘dust off how they did business’ before the ACA. Here’s why he’s wrong

Tom Price speaking
Health and Human Services Secretary Tom Price finds it "really perplexing" that the health insurance industry is opposed to Sen. Ted Cruz's amendment to the Better Care Reconciliation Act. (Mark Taylor/CC BY 2.0)
headshot of Leslie Small
Leslie Small

Health and Human Services Secretary Tom Price simply doesn’t understand why health insurers don’t want to turn back the clock.

In an appearance Sunday on ABC News’ “This Week,” Price was asked about the healthcare industry’s opposition to the revised Senate healthcare bill—in particular, a recent letter from two top insurer groups slamming Sen. Ted Cruz’s “Consumer Freedom Option," which would have allowed some individual market plans that don’t adhere to the Affordable Care Act’s rules.

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To Price, such opposition is “really perplexing, especially from the insurance companies, because all they have to do is dust off how they did business before Obamacare.”

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“A single risk pool, which is what they’re objecting to, is exactly the process that has been utilized for decades,” he added.

Leaving aside how oddly regressive that message sounds, there are two main problems with Price’s take:

The individual market before the ACA isn’t worth revisiting.

Here’s why:

  • Roughly 27% of the under-65 population has pre-existing conditions that could render them uninsurable if they applied for individual market coverage under pre-ACA underwriting practices, per the Kaiser Family Foundation. Granted, most of those people get insurance through a public or employer plan, but they would be subject to such underwriting practices if they were to lose that coverage due to a job loss, divorce or other life change that affects eligibility.
  • Many individual market insurers also had a list of “declinable medications”—if you’re taking one or more you could be denied coverage—and some even had declinable occupations, such as working as a firefighter or EMT, or having hobbies such as hang gliding.
  • Beyond all that, medical underwriters often scanned individual applications and medical records for conditions—as common as migraine headaches and depression—which could result in “adverse medical underwriting actions" such as modified benefits, an increased deductible, premium surcharges or a coverage exclusion for a particular condition.
  • Those who couldn’t access a garden-variety individual market policy before the ACA had the option of applying for policies in their state’s high-risk pool. Yet as FierceHealthcare has reported, pre-ACA high-risk pools were hardly a perfect solution: Not only did they often have waiting lists and feature plans with limited benefits and high prices, they covered only a small fraction of people with pre-existing conditions who lacked insurance. (Maine's was an exception, but it was also well-funded.)

Reading that list, of course, it isn’t immediately clear why health insurers should care. After all, analyses of their individual market financial performance show that the ACA put downward pressure on their margins in the law’s early years—though there are signs they are now on track to return to profitability.

The problem is that the ACA irreversibly altered what Americans expect from the individual market, and insurers, like any type of company, are acutely aware of their customers’ shifting expectations. Now that “pre-existing conditions” is an everyday term, insurers know they can’t return to cherry-picking healthy enrollees and denying coverage as common business practices.

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Not only that, but many insurers probably don’t want to; after all, they took great pains to readjust their business models to adapt to the individual market’s new status quo—even if some, like UnitedHealth, ultimately decided it wasn’t worth it.

The Consumer Freedom Option wouldn’t let insurers go back to the old days, anyway.

The way Cruz’s amendment is set up, insurers would have to offer at least one ACA-compliant plan in any given state in which they sell bare-bones, non-ACA-compliant plans. So they wouldn’t ever really be “free” from rules like guaranteed issue, community rating and essential health benefits.

Instead, they’d have to somehow figure out how to navigate a single individual market risk pool where different rules apply to different plans, and there would be no risk-adjustment program as a safety net. The authors of the letter Price responded to this weekend—America’s Health Insurance Plans and the Blue Cross Blue Shield Association—were unequivocal in their criticism of that idea.

“We believe strongly that the rules must apply equally to all insurance products offered in state individual and small group markets,” they wrote. In other words, you can’t simply cobble together a strange version of a pre- and post-ACA individual market and hope for the best.

If lawmakers do go that route, the groups warn, it would “undermine protections for those with pre-existing medical conditions, increase premiums and lead to widespread terminations of coverage for people currently enrolled in the individual market.”

Perhaps then, from the ashes of the ACA’s public exchanges, a new type of market would emerge that looks a lot like the old individual market that Price seems to hold so dear. But the cost—to consumers, insurers and yes, even politicians—would be frighteningly steep.

— Leslie | @lesliecsmall

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