The general public and possibly the Senate are being misled into thinking that the revised American Health Care Act (AHCA) recently passed by the House of Representatives will cause many millions of people with pre-existing conditions to lose health insurance coverage. In reality, the number of people truly at risk of losing coverage because of pre-existing conditions is quite small, consisting of a group of persons who simultaneously fall into multiple categories.
The Affordable Care Act (ACA) prohibited denial of coverage based on pre-existing medical conditions and mandated community rating so that the sick, including those with pre-existing conditions, could not be charged higher premiums based on their health status. The AHCA maintains the ACA’s guaranteed issue and community rating but instead of the ACA’s individual mandate to buy insurance it substitutes a late enrollment penalty of 30% higher premiums for one year on individuals who do not maintain continuous coverage (have a coverage gap of more than 63 days over the preceding year).
The MacArthur amendment to the earlier AHCA version allows states to seek waivers to replace the AHCA’s premium penalty with health status rating (underwriting) beginning 2019 for those who fail to maintain continuous coverage. Any waiver application must explain how it will lower premium costs or expand the number of covered persons and is conditioned on a state operating a high risk pool or participating in a federal high risk pool.
AHCA critics have made expansive claims, often exceeding 100 million, about the number of people with pre-existing conditions at risk of losing coverage. But these estimates rely on overly broad definitions of pre-existing conditions and ignore the fact that most of these people already have insurance through employer plans, Medicaid, or Medicare disability. More realistic estimates of the number of people who previously faced coverage exclusions or prohibitive premiums caused by pre-existing conditions range from two to four million.
The number of people at risk under the AHCA because of pre-existing conditions and state waivers is far smaller. It only applies to a small subset of the 7 percent of Americans who obtain their coverage through the individual and small group markets — individuals who do not maintain continuous coverage and who live in states that seek and receive a waiver.
Many states will probably not seek a waiver. Prior to the ACA, community rating was already imposed in the small group market in eleven states and in the individual market in seven states. These states, which include the populous states of New York, Massachusetts, and New Jersey, will not seek waivers. Legislatures in other states will find that reinstituting health insurance underwriting through a waiver, even for a small group of people, is politically unpopular. Other states may not want to go the trouble of seeking a waiver and then maintaining a community rated insurance pool, a risk rated (health status) pool, and a high-risk pool.
How many people will fail to maintain continuous coverage under the AHCA remains to be seen but they will not all be people with pre-existing conditions. The revised AHCA provides an incentive for people with pre-existing conditions to obtain and maintain coverage prior to 2019 when waivers become available. Knowing that they could be subjected to higher premiums under risk rating will be a more effective deterrent to people who game the system by waiting to buy insurance until they need it than the weak ACA individual mandate penalties have been or the AHCA’s one year, 30 percent premium increase penalty will be.
Anyone subject to risk rating under a waiver will be protected by the requirement that waiver states operate their own high-risk pool or participate in a federal one. Some states like Minnesota and Wisconsin operated successful high-risk pools before the ACA. Most others suffered from inadequate funding. The AHCA is far more generous than earlier programs making up to $123 billion available over ten years for states to establish risk pools. Well-run high-risk pools could provide a fairer, more transparent way to subsidize high cost individuals than the current system since financing would come from a broad taxpayer base rather than forcing low risk, individual market enrollees to pay higher premiums. The lower cost, average and low-risk enrollees remaining in the market will enjoy lower premiums.
The risk of losing coverage because of a pre-existing condition under the AHCA is confined to the subset of people buying insurance in the small group/individual market, who live in the likely small number of states that seek and receive a waiver, who do not maintain continuous coverage, who have a pre-existing condition, and whose state did not set up an effective high risk pool or participate in a federal pool. As far as pre-existing conditions are concerned, the sky is not falling.
