The cost-control amendment that Susan Collins is co-sponsoring with Lieberman is the most promising sign yet that she might be willing to support the overall reform bill. But it’s not just over the public option that Democrats might have to compromise in order to get her vote. Collins has stated previously that her support is contingent upon improved insurance affordability. On Friday, she affirmed that she’d like to do so by watering down the lowest-level benefits package that insurers would be required to provide in the exchange.
The merged Senate bill has already watered down the “actuarial value” of the lowest-level insurance plan in the exchange--roughly, the average percentage of an individual’s health-care expenses that an insurance company would pay for--to 60% from 65% in the Senate Finance bill. Collins said on Friday that she’d like to see the actuarial value lowered even further:
I believe that anyone who is not receiving a subsidy should be able to buy what’s referred to as the young invincibles plan. If we’re not subsidizing an individual’s insurance, I do not see why we should limit their choices to the degree that this bill does.
What would such a change amount to? Under the bill, a “young invincibles” plan is essentially a catastrophic insurance plan, with a $6,000 deductible and three primary care visits a year without co-pays--in other words, a far cry from comprehensive insurance. To put this in perspective, the actuarial value of an employer-provided plan typically has more than 80%. The merged bill already cuts this down to 60%, and the CBO has gauged that a “young invincibles”-type plan would be under 50%. Rather than making insurance more affordable by pressuring insurance companies themselves cover more of the costs--or by expanding individual subsidies--Collins’s suggestion would diminish the minimum benefits package that some individuals would receive and drastically increase their co-pays and deductibles.
While such a change would reduce the upfront cost of premiums, it could also mean that individuals end up paying more than the difference in out-of-pocket costs. Moreover, there’s the adverse selection problem: as healthier individuals would be more likely to buy such catastrophic coverage, it could end up raising the cost of insurance for those who choose to buy comprehensive plans as there would be an increase in sicker, more expensive people left in the pool. Either way, the effect is to shift the burden of medical spending onto those with medical problems, which is the opposite of what insurance ought to do.
To be sure, there’s still a danger that the bill could mandate individuals to buy insurance when they feel they can’t afford it; the legislation needs to make sure that insurance plans are within financial reach. Alternate solutions like strengthening subsidies are neither cheap nor politically easy. But improving affordability by lowering the bar for what insurance companies will be required to cover could leave individuals more vulnerable--and ultimately drive costs up for those who need the most help.