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 now enrolled in the individual market", trade associations America's Health Insurance Plans and BlueCross BlueShield Association wrote in a letter to the Senate.
A preexisting condition is a term insurance companies used before the ACA, the healthcare law better known as Obamacare, to classify certain diseases or health problems that could cause a person to be denied coverage or make their coverage more expensive than that of people considered healthy.
But critics say the plan would siphon premium dollars paid by healthy people out of the insurance pool that covers the sick.
Health insurers are blasting an effort by conservatives to modify the Senate Obamacare repeal bill and set up a two-tier market in which companies could sell plans that don't meet Obamacare's coverage requirements.
The CBO estimated the original bill would increase the number of uninsured Americans by 22 million by the end of 2026. Under Cruz's proposal, plans like that would come back to the individual market. With the well no longer subsidizing the sick, the latter may face ever-escalating premiums or fewer choices entirely if insurers no longer are required to sell to anyone who wants to buy a policy.
The main health insurer trade group is warning Senate Republicans against including a controversial conservative amendment in their healthcare bill, saying the move would destabilize the market and harm coverage for people with pre-existing conditions. Senate Majority Leader even reportedly went so far as to ask the Congressional Budget Office to score the proposal. Some of the pre-existing conditions that insurers declined coverage because of before the ACA, according to the foundation, include diabetes and heart disease, which affects millions of Americans.
At the time, the system favored young, healthy people who wanted to buy cheaper plans without all the frills. Senate GOP leaders are hoping to vote on revised legislation next week.
"Everyone will want to stay on the exchange and use that money to subsidize off-exchange people", Holtz-Eakin said. And indeed, those are the people who have shied away from numerous Obamacare marketplaces, frustrated by premium hikes and willing to instead pay the relatively small fine for lacking coverage.
For some consumers, a fixed-indemnity insurance plan is a helpful add-on to a regular health insurance plan, as it helps cover out-of-pocket costs for medical expenses they expect to incur during the year.
"If we drive down the cost of premiums so that people who are struggling can more easily afford health insurance for their family, we will have succeeded", Cruz said.
Whether that funding would be enough to make the plans affordable remains to be seen. Hence the skyrocketing premiums under Obamacare.