Democrats and Republicans have made competing claims on whether the latest version of the GOP health care bill maintains protections for people with pre-existing medical conditions. President Trump has said, “Pre-existing conditions are in the bill. And I mandate it.” Democratic Sen. Chuck Schumer has said that “insurance companies could deny coverage to those with pre-existing conditions.”
Neither of those comments quite gets it right. The latest version offers lesser protections than the Affordable Care Act, but it doesn’t allow insurers to deny coverage to someone with a health condition.
We’ll go through what the Republican American Health Care Act, the legislation that aims to replace Obamacare, now proposes on this issue.
Changing Premium Pricing
The amendment in question was proposed by Rep. Tom MacArthur of New Jersey on April 25. It would allow states to apply for waivers from certain Affordable Care Act requirements for plans sold on the individual market, where those who buy their own insurance get coverage. Seven percent of the U.S. population, or 21.8 million people, are covered by health insurance purchased on the individual market.
The amendment calls for three waivers that would allow states to:
- Increase how much insurers can charge based on age. Under current law, insurers can charge older individuals up to three times as much as younger people. The American Health Care Act, beginning in 2018, would allow insurers to charge older people up to five times as much, and the amendment would allow the ratio to go even higher.
- Establish their own requirements for the essential health benefits. Insurers currently must abide by a list of 10 benefits mandated by the ACA. The amendment would give the states the power to set their own essential benefits, beginning in 2020.
- Allow insurers to price policies based on health status in some cases. The current law does not and the original GOP bill would not allow insurers to set premiums based on health status. But the amendment would allow it for those who do not maintain continuous coverage, defined as a lapse of 63 days or more over the previous 12 months. Such policyholders could be charged higher premiums for pre-existing conditions for one year. After that, provided there wasn’t another 63-day gap, the policyholder would get a new, less expensive premium that was not based on health status. This change would begin in 2019, or 2018 for those enrolling during special enrollment periods.
Under the Affordable Care Act, insurers couldn’t deny anyone coverage based on their health status. And the amendment doesn’t change that part. As a Kaiser Family Foundation summary of the GOP bill says, it retains the “requirement to guarantee issue coverage” — which means coverage must be offered regardless of health status — and it retains the “prohibition on pre-existing condition exclusions” — which forbids insurers from excluding coverage specifically for a policyholder’s pre-existing conditions.
But, as we explained, a waiver would allow insurers to charge some with pre-existing conditions higher premiums.
The original GOP bill said that insurers, again on the individual market, were required to charge a 30% higher premium for one year to those entering the market who didn’t have continuous coverage, defined as that 63-day lapse over the previous 12 months.
The waiver as proposed in the new amendment would enable states to instead allow insurers to price plans based on health status for those without continuous coverage. So they could be charged more than the 30% surcharge.
States with such a waiver would also have to have either a “risk mitigation program,” such as a high-risk pool, or participate in a new Federal Invisible Risk Sharing Program, as a House summary of the amendment says.
The programs are designed to help those with high medical costs.
To facilitate these programs, the bill calls for a Patient and State Stability Fund, with $100 billion in federal money over nine years and state matching requirements. States can apply to use the money for various purposes, including lowering out-of-pocket costs or setting up high-risk pools, which are state programs that cover high-risk individuals. Such pools were in 35 states before the Affordable Care Act, and they typically keep individual insurance market premiums down by keeping the high-risk (and high-cost) individuals in their own pool.
Instead of setting up their own programs, states could use a default reinsurance program, administered by the Centers for Medicare & Medicaid Services, which would pay a percentage of high-cost claims.
An additional $15 billion would be used to set up the Federal Invisible Risk Sharing Program, another reinsurance program. (And $15 billion is set aside specifically for maternity and mental health coverage.)
“Under reinsurance, high-cost individuals remain covered under private health insurance, but instead of financing their claims with premium revenue the insurer submits the high-cost claims to the reinsurance program,” explains Karen Pollitz, a senior fellow at the Kaiser Family Foundation. The details of this program, such as how much claims would be covered, would be determined by CMS.
A state applying for the waiver to allow some insurance pricing based on health status would have to use Patient and State Stability Fund money for one of those options: their own program, CMS’ default reinsurance or the Federal Invisible Risk Sharing Program.
What the waivers and stability programs would mean for those with pre-existing conditions remains to be seen.
“Health status underwriting could effectively make coverage completely unaffordable to people with pre-existing conditions,” Timothy Jost, an emeritus professor at the Washington and Lee University School of Law and a contributing editor to Health Affairs, wrote in a blog post for the journal. The reinsurance and risk-sharing programs could entice insurers to not charge higher premiums. Since those programs pay for some of the high-cost claims, insurers would not be relying only on premiums to cover medical costs. “[B]ut they do not obviously do anything to help individuals whom insurers do charge higher premiums because of their health status,” Jost wrote.
Republican Rep. Fred Upton of Michigan said in a radio interview on May 2 that “I’ve supported the practice of not allowing pre-existing illnesses to be discriminated against from the very get-go ― this amendment torpedoes that.” But the following day, he reportedly changed his position to support the GOP bill, proposing an amendment to add $8 billion over five years to financially aid those with pre-existing conditions who find themselves facing higher premiums in waiver states.
The higher premiums for those without continuous coverage would only last one year, however, provided the policyholder continued to have coverage. If there wasn’t another 63-day gap, the policyholder would get a new premium that wasn’t priced based on health status.
There’s another way that the waivers could impact not just those with pre-existing conditions, but anyone buying an individual market plan.
The ACA’s essential health benefits required insurance companies to cover 10 health services: ambulatory, emergency, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative services and devices, laboratory services, preventive care and chronic disease management, and pediatric services including dental and vision.
The amendment allows states to propose their own essential health benefits, beginning in 2020.
The KFF summary of the bill notes that the ACA’s “[p]rohibition on lifetime and annual dollar limits is not changed; however, the prohibition applies to limits on essential health benefits, which can be changed under state waiver authority.”
So individual market policyholders could see a change in what benefits their insurance policies have to cover and the dollar amounts of coverage under the waiver program.
How Do States Get Waivers?
States would have to apply and describe how the waiver would do at least one of the following, according to the amendment: reduce average premiums, increase insurance enrollment, stabilize the insurance market, stabilize premiums for those with pre-existing conditions, or increase choice among health plans.
State can get a waiver for up to 10 years, and then apply for a continuation. And as we explained above, the state would have to participate in one of the high-risk or reinsurance programs to get the waiver on health status pricing.
If the secretary of Health and Human Services doesn’t respond with 60 days, the waiver is considered approved. “An application submitted under paragraph (1) is approved unless the Secretary notifies the State submitting the application, not later than 60 days after the date of the submission of such application, that the application has been denied for not being in compliance with any requirement of paragraph (3) and of the reason for such denial,” the amendment reads.
The waivers don’t apply to ACA exchange plans held by members of Congress and their staffs, the amendment stipulates. But, KFF explains, another amendment — by Rep. Martha McSally of Arizona — “would eliminate this provision upon enactment of the AHCA.”
Trump claimed in an April 29 interview with CBS News, “Pre-existing conditions are in the bill,” but that glosses over the fact that the bill weakens the ACA protections against higher premiums and less-generous benefit plans.
Sen. Schumer, meanwhile, was wrong to say, as he did on the Senate floor April 28, that the bill goes “back to the day when insurance companies could deny coverage to those with pre-existing conditions.” Insurers would still be required to offer plans to anyone regardless of pre-existing conditions, although they could in some circumstances charge higher premiums based on health status.