Julie Arkison remembers what it was like to buy health insurance before the Affordable Care Act created standards for coverage. The policy she had was from the same insurer that covers her now, but it did not pay for doctor visits, except for a yearly checkup and gynecological exam.
“I couldn’t even go to my regular doctor when was I sick,” said Ms. Arkison, 53, a self-employed horseback-riding teacher in Saline, Mich.
The plan did not cover her exams before and after hip surgery, her physical therapy after her operation, the crutches she needed while she recovered, or any of her medications. She estimates that she spent $20,000 on medical care in the seven years before she could buy a plan through the marketplaces created by the Affordable Care Act.
As Senate Republican leaders struggle to secure enough votes to repeal and replace the health law, the centerpiece of their effort to win conservative support is a provision that would allow insurers to sell such bare-bones plans again. The new version of the bill released on Thursday incorporates an idea from Senator Ted Cruz of Texas that would permit insurers to market all types of plans as long as they offer ones that comply with Affordable Care Act standards. The measure would also allow companies to take into account people’s health status in determining whether to insure them and at what price.
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State insurance regulators say the proposal harks back to the days when insurance companies, even household names like Aetna and Blue Cross, sold policies so skimpy they could hardly be called coverage at all. Derided as “junk insurance,” the plans had very low premiums but often came with five-figure deductibles. Many failed to pay for medical care that is now deemed essential.
One Aetna plan, for example, defined hospitalization coverage as mainly for room and board. It capped coverage at $10,000 for “other hospital services,” a category that included such routine care as medication and operating room expenses.
The Affordable Care Act drastically changed the health insurance landscape by requiring insurers to offer a set of comprehensive benefits — including hospitalization, doctor visits, prescription drugs, maternity care and mental health and substance abuse treatment — in order to formally qualify as insurance. “The new bill opens the door to junk insurance,” said Dave Jones, the California insurance commissioner.
Ned Scott, 34, who lives in Tucson, said the health plan he had before the Affordable Care Act left him with $40,000 to $50,000 in unpaid medical bills after he learned he had testicular cancer when he was in his late 20s.
“I thought it would cover things,” Mr. Scott said. But once he needed it, he learned the plan limited what it paid for outpatient care to $2,000 a year, and all of his treatment, from chemotherapy to CT scans, seemed to fall in that category.
Many Republicans, including President Trump, say giving insurers the leeway to offer less-comprehensive plans will give people greater choice and cheaper options. The Senate bill “ensures consumers have the freedom to choose among more affordable plans that are tailored to their individual health care needs,” Mr. Cruz said.
Proponents of the bill argue that it would allow people to buy insurance they could not otherwise afford. Senator Jeff Flake, Republican of Arizona, said he supported the idea of allowing insurers to sell plans that do not comply with the rules under the Affordable Care Act. The current proposal, Mr. Flake told The Arizona Republic in a recent interview, would allow “183,000 Arizonans who can’t afford insurance because it’s just too expensive to buy a product that meets their needs.”
But both consumer advocates and insurers — forces that are not often allied — are wary. They predict that healthy, younger people would most likely gravitate to the cheaper policies, believing they do not need the more comprehensive and expensive coverage, while older people with health conditions would see their premiums soar for more comprehensive plans.
On Friday evening, the insurance industry’s two main trade associations, America’s Health Insurance Plans and BlueCross BlueShield Association, sent a letter to the Senate voicing adamant opposition to the plan, which they say would create two distinct markets. The proposal “is simply unworkable in any form and 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,” the groups wrote.
Plans with much lower premiums are certain to be attractive to many people. But Elizabeth Imholz, a health policy expert for Consumers Union, warned, “The reality for consumers is that they can be stuck with huge, unexpected out-of-pocket costs.”
The Republican proposal also encourages the sale to small businesses of cheaper, less-comprehensive plans modeled after so-called association health plans that were in vogue decades ago, allowing associations or groups of like businesses to come together to buy insurance. The Republican bill would allow small businesses and people who are self-employed to buy plans that would be largely exempt from the current Affordable Care Act rules as well as state oversight.
That, too, has drawn concern. The National Association of Insurance Commissioners, which represents state regulators, wrote a letter to the Senate contending that the provision “appears to block the ability of states to preserve important consumer protections, effectively oversee the plans, or ensure a level playing field.”
Association plans, which had been virtually unregulated because they were not under the purview of any state rules, have had a mixed history. Some plans failed because they did not have the money to pay for their customers’ medical bills, while some insurance companies were accused of misleading people about what they would cover.
These plans are “just the classic example of insurance that disappears exactly when you need it,” said Jay Angoff, a former state insurance official in Missouri and New Jersey, who also worked in the Obama administration overseeing the insurance marketplace.
Antony Stuart, a lawyer who lives in California, has brought more than a dozen lawsuits accusing insurance companies of misleading consumers by selling them policies that provided much less coverage than they realized.
Mr. Stuart recalled one case involving a man, Doug Christensen, who bought a policy from Mega Life and Health Insurance, which was the subject of numerous lawsuits and state regulatory actions. Mr. Christensen, who previously had bone cancer, was assured by the insurance agent selling the policy that he would have adequate coverage if the cancer returned. But the plan limited payments toward chemotherapy to just $1,000 a day of treatment when the actual cost was sometimes 10 times that amount. Mr. Christensen was left with nearly $500,000 in unpaid medical bills.
“These plans lacked the necessary transparency that would give consumers an idea of what they were actually purchasing,” said Ashley Blackburn, a senior policy analyst with Community Catalyst, a consumer advocacy group. People buying plans now benefit not only from the standards the federal law sets but also from the fact that policies are clearly divided into categories with set levels of coverage. “We’re really moving back to a market where people are going to have a hard time reading through their plan options.”
The association plans, in particular, would make small businesses and self-employed individuals more vulnerable to policies that would leave them unprotected. State regulators cracked down after some of these plans became insolvent. Four associations in the early 2000s left their customers with nearly $50 million in unpaid medical bills, according to researchers in an overview of the plans’ history published in the journal Health Affairs.
Many states adopted a more aggressive stance as a result, but the Senate proposal would make plans largely exempt from state oversight. “There are a lot of consumer protection laws that states have passed that would have to be overruled or ignored,” said Rebecca Owen, a health research actuary with the Society of Actuaries.
A few weeks ago, Ms. Arkison came down with a bad cough. Her doctor prescribed antibiotics, steroids and an inhaler. She is thankful that her current insurance lets her see the doctor when she becomes ill. Under her old plan, she said, “I could not have gone in.”