Insurance Industry Worried By GOP Plan To Replace Obamacare, Consultant Says

Steve Inskeep talks to Robert Laszewski, a health policy consultant, about how the Republican's plan to reform health care would effect insurers. Laszewski had a long career in the insurance industry.

STEVE INSKEEP, HOST:

Here's a scathing review of the Republican plan to replace the Affordable Care Act. It comes from one person with long experience in the insurance industry. We hear him as many Republicans call for adjustments to their plan. Robert Laszewski is a former insurance executive, now a health policy consultant - and not a fan.

ROBERT LASZEWSKI: First of all, the viability of the insurance market itself depends upon getting lots of people to enroll, getting enough healthy people to enroll to pay for the sick people. You know, you can make the argument that Obamacare was a massive transfer of wealth from the middle class to lower-income people because Obamacare has worked really well for low-income people and not so well for higher-income people, who've seen large increases in their premiums and generally don't get a subsidy.

The Republican plan basically reverses that. The Republican plan now provides much better subsidies for working and middle-class people, so we'll probably see more of those sign up. But the people who are going to pay are the low-income people. They're not going to be able to afford the kinds of health plans that are going to be offered. The other thing that the Republican plan does that's not good for the viability of the insurance pool is - you know, there's been much criticism of the individual mandate under Obamacare to get people to sign up. And it hasn't really worked very well. It hasn't really encouraged people to sign up. They don't have enough...

INSKEEP: A lot of people have just paid the tax penalty or whatever.

LASZEWSKI: Paid the tax penalty. Ironically, the Republican plan to get people to sign up is actually worse from an insurance pool standpoint because what the Republicans are saying is, you don't have to sign up. But if you get sick later on, you can sign up right away and get coverage. And you'll pay a penalty of 30 percent of your premium for one year, which is nothing. Somebody paying $5,000 a year for health insurance would only pay a $1,500 penalty to go have their brain surgery.

INSKEEP: Meaning that if I think this through in a totally rational, economic way, I might not bother to have insurance at all until I get cancer.

LASZEWSKI: A lot of people won't. I mean, why would you sign up for very expensive insurance if you can get it for a paltry penalty when you get sick?

INSKEEP: So people have put out charts, including NPR, looking at what happens with different people at different income levels. And somebody who's really hurt, for an example, is a low-income somewhat older person not yet old enough for Medicare. And it might be somebody who only earns $25,000 or $30,000. And the insurance bill is $20,000 a year, and the subsidy is only $4,000, which is impossible. They're not going to have insurance. To this, the administration and House Republicans have said, we're going to encourage more competition on the insurance market. Prices are going to go down.

Is the industry going to cut prices that much?

LASZEWSKI: No. In fact, the CBO said prices would go up in the short term. And that conclusion on the part of the CBO is absolutely right. I think the thing that Republicans are really missing here is - I do agree with the Republican conclusion that, ultimately, they can bring premiums down. There may be more competition. There may be fewer benefits in the plans. But consider this - if it's true that the Republicans will give a catastrophic health insurance plan to many low-income people for free - that the amount of subsidy they're going to get is going to pay for a catastrophic health insurance plan, that free insurance plan is a catastrophic plan. It'll have a $2,000 or $3,000 or $4,000 deductible.

INSKEEP: Meaning you'll never go to the doctor.

LASZEWSKI: What's somebody making $12,000 a year going to do with a $2,000 deductible?

INSKEEP: It's only going to help them if they end up getting a million-dollar hospital bill.

LASZEWSKI: Well, it'll help the hospital because the hospital will get paid. But it's not going to pay for the primary care. It's not going to pay for their specialists that they go see. In other words, there's no value to that policy.

INSKEEP: House Republicans have also used the word choice - that there are a lot of parts of the country under Obamacare where there might only be one or two insurance providers...

LASZEWSKI: Yeah.

INSKEEP: ...That's going to change, they say. Is it going to change?

LASZEWSKI: No. It's - the key here is you've got to have a vibrant market. Look, Democrats and Republicans have decided we're going to use the marketplace for health insurance.

INSKEEP: Not going to do national health care.

LASZEWSKI: Not going to do single-payer, Canadian-style plan. OK, fine. If you're going to do that, you better promote a vibrant market. And Obamacare is not promoting a vibrant market. And ironically, Republicans who are supposed to know much more about business are not promoting a vibrant market either. If the insurance companies don't see something good enough to show up for, then the whole solution doesn't work for the consumer.

INSKEEP: I want to ask one other thing about some of the particularly poorly served parts of this country.

LASZEWSKI: Yeah.

INSKEEP: And I'll pick a region where I used to live. Eastern Kentucky - lots of poverty and an older population than the median and a lot of Trump voters - under the House Republican plan, if it becomes law, are insurance companies going to want to rush in to eastern Kentucky and offer good plans at low prices to people?

LASZEWSKI: No. And, you know, many of these Trump voters voted for President Trump because they're working-class people. They have working-class incomes. And so what the Republicans now are doing is they're trying to craft a plan that provides better subsidies for working-class people. The problem is that even though the Republican plan gives those people better subsidies in many cases, overall, the Republican plan makes the market worse and, as a result, isn't really going to help their community that much.

INSKEEP: Robert Laszewski, thanks for coming by.

LASZEWSKI: Good to see you again.

INSKEEP: He's a health policy consultant and a former executive at Liberty Mutual.

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