The new amendment to the Senate “Better Care Reconciliation Act” which was derived from the mind of Senator Ted Cruz literally changes EVERYTHING. Conservatives have been clamoring for an escape from the Obamacare regulations which have driven health insurance premiums through the roof in the last few years. For the first time, their requests have been clearly and unequivocally answered. The new “Cruz-like” amendment creates two separate health insurance marketplaces. They are the “On-exchange” and “Off-exchange” marketplaces. Below are the differences between these two market places and they are huge differences. These difference should significantly deter the initial worries about churning (moving between both markets) that concerned myself and other health care policy experts. And, they should bring former naysayers like Senator Rand Paul back into the ‘aye’ vote column as well as any other Conservative hold-outs like Senator Mike Lee.
How individual health insurance will work in the ON-exchange marketplace
ON-exchange plans will contain all of the same PPACA (Obamacare) regulations and consumer protections that have existed since the full implementation of Obamacare on January 1, 2014. This includes all of the Obamacare “Essential Health Benefits” and so long as consumers keep consistent creditable coverage in place (with no lapse of more than 63 days in coverage) preexisting conditions will be covered seamlessly when moving from policy to policy during the annual OEP – Open Enrollment Period – and for those eligible for SEP – Special Enrollment Period – rights (loss of employer sponsored coverage, divorce, marriage, birth of a child, adoption etc.) during the rest of the year.
Here’s where everything changes
Only ON-exchange plans will qualify as creditable coverage. This means that if you purchase OFF-exchange plans, those plans will not count as creditable coverage. So, you would have to wait 6 months before preexisting conditions would be covered if you decided to jump into the ON-exchange marketplace in order to receive a richer benefit plan. This difference should significantly reduce the risk of churning between OFF-exchange plans (when you’re healthy) and ON-exchange plans (when you’re not). So, system-gaming should be significantly thwarted by this intelligent plan design and it should help stabilize pricing in both markets.
Other differences for OFF-exchange plans
OFF-exchange plans will not have to include the Obamacare EHBs – Essential Health Benefits – or other Obamacare provisions like unlimited lifetime maximums, coverage for drug rehab, maternity, sexual reassignment surgery and other mandated benefits. This means that premiums for these OFF-exchange plans will most likely be much lower and they had better be because OFF-exchange plans will not be eligible for ANY federal subsidies a.k.a. APTCs – Advance Premium Tax Credits. In other words, regardless of your income, you will pay the actual premium for health insurance without any assistance from other taxpayers. And, these plans will be medically underwritten which means that you can be denied coverage for these OFF-exchange plans or charged more based on a preexisting condition.
Protections that will still exist for OFF-exchange plans
In order to alleviate the predictable pearl clutching from the naysayers, it must also be understood that in order for a health insurer to be able to offer OFF-exchange plans in a state that allows them, that insurer must also offer ON-exchange plans. Also, in order for a state to be allowed to offer OFF-exchange plans, they must also first have a working state risk mitigation program in place and funded (utilizing the nearly $200 billion included in the Senate Better Care Act for such purposes). This will ensure that those who do not qualify for an OFF-exchange plan due to a preexisting condition have access to a state run high risk pool plan that the state makes available. This also does not mean that state regulators won’t also require OFF-exchange plans to provide a certain amount of “Essential Health Benefits” that they require to be included. For example, coverage for Cancer and a whole host of other medically necessary benefits.