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Upton Bill to Allow Insurers to Offer Non-Compliant Plans Would Undermine Health Reform

The House is planning to vote this week on a bill allowing insurance companies to continue offering existing individual-market health plans through 2014 — even if the plans do not comply with health reform’s new standards and consumer protections.  The bill, sponsored by House Energy and Commerce Committee Chairman Fred Upton (R-MI), would jeopardize the Affordable Care Act (ACA) in several ways, as we explain in a new paper.

The Upton bill would allow health insurers that had individual-market plans in effect as of January 1, 2013 to continue selling all of those plans throughout 2014.  And, the plans would be available to new enrollees as well as current ones.

Here are some of the major problems it would cause:

It would raise premiums significantly. By encouraging healthier people to remain in non-compliant individual-market plans outside the new insurance marketplaces (also known as exchanges), the bill would make the pool of people enrolled in plans offered through the marketplaces sicker, on average, than under current law.  That would raise marketplace premiums for coverage in 2015 and beyond (and possibly even for 2014), and could trigger sticker shock when the premiums for 2015 are announced next October.

It would threaten the insurance marketplaces’ long-term viability. While the Upton bill would extend the availability of non-ACA-compliant plans only through 2014, there would be pressure next summer and fall to extend their availability through 2015 or (more likely) permanently.  That would permanently raise premiums in marketplace plans, further discouraging healthy people from enrolling and threatening the marketplaces’ long-term viability and, hence, the extension of coverage to millions of uninsured near-poor and middle-income Americans.

It would undermine new insurance market reforms. The Upton bill would likely undermine the ACA’s reforms to the individual market that take effect in 2014, such as the prohibitions against denying coverage for pre-existing conditions, charging higher premiums based on an individual’s health, and offering plans with glaring gaps in coverage, which can leave people subject to catastrophically high costs even though they are insured.  If a large market of non-ACA-compliant plans continues to exist through 2014, as it would if insurers could continue all existing individual-market plans, individuals enrolled in ACA-compliant plans inside and outside the marketplaces would face sharply higher premiums.  This dynamic could eventually make the market reforms unworkable.

It would create new problems for an already troubled open enrollment period. The bill would further disrupt the open enrollment period that started on October 1, and could result in confusion that deters some consumers from enrolling in marketplace plans that offer more comprehensive benefits at lower cost.

Ultimately, the Upton bill would undermine health reform — and hurt the millions of Americans who are expected to benefit from the improved coverage and subsidies available through the new health insurance marketplaces.

Click here to read the full paper.