Ted Cruz's Obamacare repeal plan would cripple the market say experts

Health care promises made by candidate Trump
Health care promises made by candidate Trump

Texas Senator Ted Cruz thinks he can break the Obamacare repeal logjam in the Senate.

His solution, which is being touted as a "Consumer Freedom Option," would allow insurers that sell Obamacare policies to also offer skimpier plans.

One set of policies would contain all of the Obamacare protections, including covering those with pre-existing conditions, offering all 10 essential health benefits and limiting consumers' financial exposure.

The other plans would not have to adhere to these rules, allowing them to offer less comprehensive policies at a cheaper price.

Details remain scarce, and it's unclear whether Cruz's proposed addition to the Senate health care bill meets the chamber's rules for passage with just a simple majority of support. But the Congressional Budget Office is reviewing it, along with several other changes being made to the Senate legislation, known as the Better Care Reconciliation Act.

Cruz's idea has been praised by conservative lawmakers and lobbying groups as a way to lower premiums and increase consumers' options. It might entice more senators to support the legislation.

"It is encouraging to see Senate leadership exploring the merits of serious proposals that would inject much-needed consumer choice and competition into an otherwise deteriorating market," said Michael Needham, CEO of Heritage Action.

Related: 32 million people would lose coverage if Obamacare was repealed

But its inclusion risks alienating moderates further. Maine Senator Susan Collins told Bloomberg News last week that she feared it would weaken consumer protections and hurt those with pre-existing conditions.

Health policy experts agree, saying it would split the individual market in two. Healthier people would gravitate to the non-Obamacare plans since they don't need -- and don't want to pay for -- a sweeping set of benefits.

That would leave all the sicker consumers clustered in the Obamacare plans, which would send premiums skyrocketing. That would likely drive out all but the most seriously ill, which would push rates even higher, possibly prompting some insurers to leave.

"If there were a Joy of Cooking for insurance, this would be the perfect recipe for destabilizing the market and turning the marketplaces into high-risk pools," said Larry Levitt, senior vice president at the Kaiser Family Foundation.

Separating the sick and the healthy is "not the best path forward," said Ceci Connolly, CEO of Alliance of Community Health Plans, a lobbying group for non-profit, community-based insurers. Instead, it's better to spread the risk around in a larger pools of enrollees.

The Cruz option would do the opposite.

"You are increasing the likelihood that there will be some smaller, sicker group with higher rates," Connolly said. "That's what you want to get away from."

Related: Senate Republican health bill: Pay more, get less

Asked for comment, a Cruz spokesman pointed to a Vox article last week in which Cruz acknowledged his plan would divide the market. But he noted the availability of federal subsidies and stabilization funds that are designed to shield consumers from rising premiums. The senator also told Vox that it's better for the government to pick up the tab, rather than force healthy people to pay higher premiums.

The subsidies, however, would only be available to low- and moderate-income folks earning less than $42,000 (in 2017), Levitt said. And those subsidies would be pegged to plans with high deductibles.

Middle class and higher-income consumers who want Obamacare plans would have to shoulder the higher premiums without subsidies, he said.

CNN's Lauren Fox contributed to this report.

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