President Obama's decision to let Americans keep bare bones insurance plans that do not meet Obamacare's criteria is unlikely to send new marketplaces into a "death spiral," in which health premiums steadily rise as young, healthier people are driven out of the market in favor of older, sicker consumers, a study released Tuesday found.
The nonprofit RAND Corporation studied a trio of options on the table to let people keep old health plans and fulfill Mr. Obama's promise that his law would not force people to forfeit coverage they liked.
Mr. Obama's proposal to let state insurance commissioners decide whether to extend low-level policies for one year is the least disruptive and will have a "minimal effect on enrollment and premiums," researchers said.
RAND said a Republican-led alternative that allows people to keep their old health plans while letting additional consumers buy the policies, too, is the most disruptive.
"Our analysis shows that plans to allow individuals to keep their old policies will not threaten the short-term viability of the new individual insurance marketplaces," said Evan Saltzman, the study's lead author and a project associate at RAND. "However, the strategies put forward may increase federal spending and increase prices in the new individual marketplaces."
Mr. Obama faced a political scramble last fall, when millions of Americans received cancellation notices from their insurers despite the president's pledge that people could retain existing health policies under his overhaul.
He gave insurance commissioners the option of letting insurers extend non-compliant policies, an idea that some state officials embraced and others rejected. It also raised fears that young people would shirk the new health exchanges in favor of low-level coverage, upsetting the fragile economics of the marketplaces.
The Obama administration opposed a House bill that passed in November and would allow Americans keep bare bones plans for one year, because it let new enrollees buy plans that do not comply with the Affordable Care Act's coverage requirements.
Nearly 40 Democrats supported the bill, although many of their party colleagues said the legislation was an insidious attempt to rot the Affordable Care Act from the inside out.
A separate bill by Sen. Mary Landrieu, Louisiana Democrat, would let existing consumers keep their non-compliant plans for as long as they like, but prohibit new enrollees from purchasing those policies.
Mr. Saltzman and co-author Christine Eibner said that opening up barebones coverage to new enrollees would have the most detrimental effect on the health overhaul, raising premiums in the new marketplaces by as much as 10 percent and decreasing enrollment by 3.2 million people per year.
"In addition, such a plan would trigger an additional $5 billion in federal spending on subsidies and tax credits in the individual marketplace in 2015," the study said. "The two other strategies would result in far smaller cost increases."
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