Pacific Research Institute

Time To Face Facts On Pre-Existing Conditions

Forbes.com

Democrats have assailed the American Health Care Act, which narrowly passed the House by four votes on May 4, for supposedly ripping away Obamacare’s protections for people with pre-existing conditions.

House Minority Leader Nancy Pelosi, D-Calif., called the bill’s approach to covering such conditions a “sad, deadly joke.” Rep. Frank Pallone, D-N.J., said that the American Health Care Act would allow “insurance companies to discriminate against the 129 million Americans with pre-existing conditions.”

Neither accusation is true. The American Health Care Act contains multiple provisions to ensure that those with pre-existing conditions can secure affordable coverage. Unlike Obamacare, the GOP plan does so without making insurance unaffordable for everyone else in the individual market.

First, the AHCA, like Obamacare, prohibits insurers from denying coverage to patients because of their health status — a provision known as “guaranteed issue.”

The bill also preserves Obamacare’s prohibition on insurers charging the sick more — called “community rating” — and maintains its “essential health benefits” mandates, which require insurance policies to cover everything from mental health to maternity care.

The House-approved plan does, however, give states the option of applying for waivers from these latter two provisions, if they can show that such waivers will lead to lower premiums and more widespread coverage. The states must also commit to setting up a high-risk pool or participating in another risk-sharing mechanism to guarantee access to affordable insurance for those with costly ailments.

Critics of the House bill claim that these waivers will gut Obamacare’s pre-existing condition protections and leave sick Americans unable to secure care.

As the liberal Center on Budget and Policy Priorities puts it, without community rating, “Insurers could increase premiums by unlimited amounts for people with a history of cancer, hypertension, asthma, depression, or other conditions.”

Likewise, lifting the essential health benefits requirement would allow insurers to offer plans that don’t cover chemotherapy, maternity care, prescription drugs, or other expensive treatments.

In other words, insurers could effectively turn away the sick by refusing to sell policies that cover the services they need at any price, much less an affordable one.

These concerns are wildly overstated.

First, the only people supposedly at risk of being denied affordable coverage by these waivers are the 7 percent of Americans who buy coverage in the individual insurance market.

Insurers have long been banned from discriminating against the sick in the employer-sponsored market, where a little less than 160 million Americans get their coverage. Those with pre-existing conditions who get their coverage from Medicare, Medicaid, or another government program have nothing to worry about, either.

Second, the House-passed American Health Care Act would only allow insurers to base premiums on the health status of an applicant if that person went without coverage for 63 days or more the previous year. Those in waiver states who maintain continuous coverage could not be medically underwritten — and so would be protected from egregious premium hikes.

Further, pre-existing conditions are far less common than Rep. Pallone and his fellow travelers claim. A 2010 congressional investigation found that, pre-Obamacare, insurers denied just one in seven applicants in the individual market because of a pre-existing condition.

That means that about 1 percent of the total non-elderly population has a health problem serious enough to even need those pre-existing condition protections.

Even if we add the entire uninsured population to the individual market and assume the same denial rate, the share of non-elderly people declined coverage because of pre-existing conditions would be less than 3 percent. That estimate is almost certainly high, as a number of the uninsured are probably eligible for coverage elsewhere, whether through work or a government program.

For this small share of the population that could potentially be priced out of the individual market because of pre-existing conditions, the AHCA includes several additional layers of protection. The House bill seeds a Patient and State Stability Fund with $130 billion over ten years to reduce premiums and out-of-pocket costs for these folks.

A last-minute amendment to the AHCA provides an additional $8 billion over five years specifically earmarked to help those with pre-existing conditions in waiver states who let their insurance coverage lapse for more 63 days or more pay their premiums. Insurers can consider these folks’ health status when determining premiums — but only for one year. After that, they’d pay the standard rate for their age.

Many waiver states will choose to direct at least part of that $138 billion toward high-risk pools — programs that offer subsidized coverage to those rendered uninsurable because of a serious medical condition.

By removing these most costly patients from standard risk pools, high-risk pools would help keep premiums down throughout the insurance market — and ensure that younger, healthier patients have affordable coverage options.

The AHCA has plenty of flaws. But it’s dishonest to argue that it abandons individuals with pre-existing conditions.

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