Conservatives and moderate Republicans in the Senate remain divided over the Consumer Freedom Amendment. The amendment, which was proposed recently by Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah), is being touted as a compromise that would both win over conservative voters and allow insurers to sell plans that don't comply with the Affordable Care Act's regulations, so long as they also offer compliant plans. But moderates (as well as health-care policy experts from across the political spectrum) are worried the amendment would dramatically drive up premiums on ACA-compliant plans as healthy, young people flee to the skimpier non-compliant plans, destabilizing the exchange markets.
Apparently those concerns are shared by some insurers too. America's Health Insurance Plans, an industry group representing health insurers, recently released a memo Wednesday stating that "this proposal would fracture and segment insurance markets into separate risk pools and create an un-level playing field that would lead to widespread adverse selection and unstable health insurance markets."
The letter further warns that, under the Consumer Freedom Amendment, exchange markets (those selling only ACA-compliant plans) would essentially come to function as high-risk pools, offering high premiums and an uncertain future: "As premiums rose, only those with the highest health needs and expenses would remain thereby accelerating the decline in the Exchange market," the memo reads.
As Margot Sanger-Katz of the New York Times notes, the BlueCross BlueShield Association has also come out against the Consumer Freedom Amendment, arguing that it would result in "higher premiums, increased federal tax credits for coverage available on the exchanges, and insurers exiting the market or pricing coverage out of reach of consumers."
That sounds a lot like a death spiral.