Opinion: Walker has rigged health insurance system to raise rates

Robert Kraig and Kevin Kane, Citizen Action of Wisconsin

A much larger number of Wisconsinites than previously believed are enrolled in substandard health plans that don’t meet the standards of the Affordable Care Act. In fact, almost as many people are enrolled in substandard “lemon” health plans in Wisconsin as in individual coverage through Healthcare.gov.

The state’s inadequate health insurance situation was revealed by J.P. Wieske, the deputy insurance commissioner for Gov. Scott Walker’s administration, in testimony before the Homeland Security Committee last week.

Wieske’s admission has major implications for the availability of affordable health care in Wisconsin. It provides evidence that the Walker administration is working to sabotage the health care law.

In the hearing Wieske testified (p. 6–7) that 203,000 Wisconsinites are covered by so-called “transitional plans,” the technical term for most plans not in compliance with the ACA. These are also often referred to as “grandmothered” plans. Currently 239,034 Wisconsin health consumers are enrolled in individual coverage on Healthcare.gov. The numbers show how much larger the ACA marketplaces in Wisconsin would be if transitional plans were prohibited.

Under the ACA, states were allowed to “grandmother” plans sold during the health care law’s implementation period, even when they did not meet the standards of the new law. The consumers in transitional plans tend to be healthier, because the insurance corporations were still permitted at the time to discriminate against people with health conditions. Wisconsin exercised the option to continue these plans, while Minnesota and many other states working to improve health insurance access banned them.

Transitional plans have two highly negative consequences for health consumers.

  • Substandard “lemon” plans increase prices in the ACA marketplace by skimming healthier people. These people were able to buy insurance before discrimination against people with health conditions was banned. This deprives healthier individuals from the ACA marketplace, leaving the remaining population sicker and costlier, and raising rates.
  • Substandard “lemon” plans might be cheaper, but they become dangerous for health consumers when they face a major injury or illness. The plans often have gaps in coverage or extremely high cost sharing.

There is strong evidence that allowing the health insurance industry to continue to sell transitional plans increases prices.

  • From the Rand Corporation: “Non-ACA-compliant plans … have a far more detrimental effect on the ACA-compliant market, raising premiums by as much as 10 percent and decreasing enrollment.”
  • From the American Academy of Actuaries: “In states with the transition policy, ACA-compliant plans exhibited less favorable experience, because lower-cost individuals were more likely to retain their prior policies.”
  • From Milliman Actuaries: “Integrating these underwritten members into the ACA pool is expected to improve the health status of the market as a whole, which could lower the relative cost of coverage on average.”

It is hard to escape the conclusion that the Walker Administration is deliberately trying to destabilize the Affordable Care Act by allowing insurance companies to skim healthier consumers. The impact of this policy is to rig the health care system against Wisconsin families who need access to quality affordable coverage.

The only party who benefits from the continuation of “lemon” health plans is the insurance industry, which is allowed to continue to profit by separating the healthy from people with health conditions.

— Robert Kraig and Kevin Kane, Citizen Action of Wisconisin