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Does the health care bill the House passed maintain protection for people with pre-existing conditions, or not?

Minnesota’s Republican representatives, who all voted for the bill, claim people with pre-existing conditions will still be able to buy health insurance. Are they right?

The House’s passage of the American Health Care Act has sparked a debate about whether the bill would protect people with pre-existing conditions from exorbitant premium hikes.
REUTERS/Carlos Barria

Barely an hour after the American Health Care Act passed narrowly out of the U.S. House of Representatives, the Democratic Congressional Campaign Committee — the Democratic Party arm tasked with taking back the House — started running digital ads slamming Republicans for their vote in favor of the GOP’s proposed replacement of the Affordable Care Act.

A key line of attack? That Republicans decided to destroy protections for people with pre-existing conditions — any kind of health condition that makes someone more expensive to insure as they seek coverage.

“The Republican health care bill: no more protections for people with pre-existing conditions,” the DCCC ad declared.

Minnesota’s three Republican representatives, all of whom voted in favor of the bill, painted a much different picture: they believe the bill will expand access to affordable health coverage, and have maintained that it won’t do anything to jeopardize the coverage of those with pre-existing conditions.

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Third District Rep. Erik Paulsen, who was publicly undecided until just hours before the vote, appeared to make clear that pre-existing conditions protections were essential to his support of any bill. In an April 14 letter to constituents, he said that “Any reform efforts should maintain important provisions that expand access to health care. These include protecting patients with pre-existing conditions.”

In an op-ed in the Star Tribune this week, Paulsen said the AHCA is “aimed at addressing many of the shortcomings of the ACA by stabilizing insurance markets and beginning to bring down premiums… Nothing in this bill would allow an insurance company to deny someone coverage, including to those with a pre-existing condition.”

Second District Rep. Jason Lewis, in an interview with MinnPost, said he believes the AHCA will “be beneficial for everyone, especially the sicker folks and folks with pre-existing conditions. Otherwise I wouldn’t have voted for it.”

In a statement after the vote, 6th District Rep. Tom Emmer said the AHCA “protects Americans, ensuring they cannot be denied coverage based on their gender or whether or not they have a pre-existing condition.”

It’s not uncommon for political rhetoric from opposite sides to say apparently contradictory things, but who’s right in this case? Does the AHCA protect people with pre-existing conditions, or not? As with most things having to do with health care — and to the surprise of some — the answer is complicated.

Waiving goodbye to Obamacare

If the AHCA were to move forward and become law as it is written right now, states would have a lot of flexibility and a range of options to comply with the law. That flexibility, giving more power to the states, is a big selling point for Republicans on the new law, but the choices also come with major consequences for insurance access. (The U.S. Senate is poised to make major changes to the House bill, but let’s leave that alone for now.)

The AHCA leaves some aspects of Obamacare in place — such as the provision allowing those under age 26 to remain on their parents’ plans — and totally repeals others, like the requirement to hold health coverage or else face a tax penalty, which is known as the individual mandate.

States can’t change these things. But the AHCA, as passed by the House, does give them the option to seek an exemption from two key parts of Obamacare. States may submit waivers to Washington to get out of complying with two elements of Obamacare that are preserved in the letter of the AHCA: essential health benefits, and community rating.

The essential health benefits provision, under Obamacare, requires insurers to cover 10 benefits, from prescription drugs to prenatal care, in any health care plan they offer. Community rating is a provision that prohibits insurers from charging any person more based on their individual health status — important if you have a pre-existing condition.

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Under the GOP’s proposal, Washington can only approve waivers from states if their proposals meet certain conditions, such as lowering premiums, stabilizing the market, stabilizing costs for those with pre-existing conditions, and/or expanding the choices available.

Proponents argue that the criteria for waivers is strict — states must ensure “no one is left out in the cold,” writes National Review’s Rich Lowry — while critics, like Washington and Lee University health care professor Tim Jost, counter that “essentially, any state that wanted a waiver would get one.”

Why would a state apply for a waiver? The AHCA reduces significantly federal subsidies for monthly premiums — and it’s unlikely states would be able to make up the difference. With no individual mandate for coverage, healthier people would likely withdraw from the market, leaving older and sicker people remaining in the pool.

As a result, insurers would likely flee those states, so state authorities would feel compelled to cut essential health benefits and community rating in an effort to keep insurers in the market.

That’s because those waivers would, experts say, allow insurers to charge some patients significantly more for health coverage, particularly those with pre-existing conditions.

Essential health benefits

How would that happen? Consider essential health benefits: with a waiver, a state could set its own definition of what insurers are required and not required to include in their health plans.

If an insurer is losing money in a state, it either needs to charge people more or limit the amount it pays out for health care. States could entice the insurers to stay in the market by giving them room to raise patients’ cost of coverage by excluding some current essential health benefits from insurance plans.

If a state no longer makes insurers provide basic coverage for prescription drugs for someone with a chronic condition like HIV/AIDS, for example, a patient’s out-of-pocket cost would substantially rise, and reduce the insurer’s risk.

That, critics say, effectively makes any condition requiring treatment with prescription drugs a pre-existing condition that could make the cost of obtaining insurance prohibitively high.

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Community rating

But the provision of the AHCA waivers with potentially more far-reaching effects is the end of the community ratings provisions in Obamacare.

Matt Fiedler, a health policy expert at the Brookings Institute, explains that “under the ACA, what [community rating] means in practice is for a person of a given age and given location, everyone has to pay the same premium,” he said.

Community rating existed before the ACA, but it did not work well because there was no individual mandate for coverage. Getting healthy people to join insurance pools that didn’t charge more for costlier patients — thus raising the healthy people’s own premiums — was a tough proposition, states found. But with everyone required to have insurance or pay a penalty under Obamacare, the problem was somewhat mitigated.

The AHCA would get rid of the individual mandate, and it would also end a lot of federal subsidies to incentivize people to purchase care. Instead of a mandate, the AHCA proposes that insurers charge a patient 30 percent more in premium payments upon entering the health care market if that patient does not have “continuous coverage,” which is defined as a lapse in insurance coverage for more than 63 days in the last year.

But the premium hikes for people with pre-existing conditions could be much higher under the proposed law. That’s because, aside from the 30 percent penalty, people who had allowed their coverage to lapse might no longer be eligible for premiums based on community rating, but instead could be assessed premiums based on “health status” — meaning insurance companies could charge sick people much higher premiums than their healthy peers in the same age group.

The effect, Brookings’ Fiedler explains in a blog post, is that “health status would replace the 30 percent premium surcharge” for people without continuous coverage.

How costly could that hike be? Significant, explains Gary Claxton, a vice president at the health care policy nonprofit Kaiser Family Foundation, and a former Bill Clinton administration official at the Department of Health and Human Services.

If someone doesn’t demonstrate continuous coverage, Claxton says, “there’s no limit of what they can be surcharged. They can be charged as much as the insurer wanted.” That, he says, is effectively the same as being denied coverage outright.

Does that mean, though, that as long as you maintain continuous insurance coverage, you’d be protected from dramatic premium hikes? Not necessarily.

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Brookings’ Fiedler explains that in a waiver state, insurers could set two different ways to charge people in the individual market: one that is technically community-rated, designed for people who have demonstrated continuous coverage.

But the problem comes from the fact that insurers would be free to set up a separate pool that uses health status, rather than community rating, to determine premiums for people who haven’t maintained continuous coverage. As explained above, that could result in prohibitively high premiums for people with pre-existing conditions. But it also allows insurance companies to offer health plans with extremely low premiums to healthy people, based on their overall good health status.

Healthy people could save hundreds or thousands of dollars by leaving the community-rated pool and paying premiums based on their health status. Consequently, the people left in the community-rated pool would be relatively sicker, which means insurance companies would need to raise premiums for that group.

Fiedler concludes that ultimately, “premiums in the community-rated pool would have to be set at a prohibitively high level, leaving people with serious illnesses with no affordable options, whether or not they had maintained continuous coverage. Many of these people would likely be driven from the individual market entirely.”

High-risky business

Republican backers of the bill say that their critics are blowing the pre-existing condition debate out of proportion. They are quick to offer what they see as important context as to how many Americans would actually be affected by changes to insurance rules.

“I would say, number one, that the whole pre-existing issue does not apply to 93 percent of Americans,” Paulsen says, since the AHCA’s language affects the Americans who obtain insurance through the individual market. Eight percent of Minnesotans have coverage in the “non-group,” or individual market — people who don’t get insurance through an employer or through Medicare or Medicaid.

Still, the AHCA’s supporters maintain they aren’t ignorant of those who could be affected by changes: they say they have set up safeguards to prevent a worst-case scenario for those with pre-existing conditions — the most important of which are high-risk pools.

High-risk pools are insurance pools for the sickest and costliest patients in the health care market, and they exist as a way for states to offer health coverage to people with pre-existing conditions who are considered uninsurable by insurance companies.

They were a feature of the health care landscape before Obamacare, and were funded in different ways by different states. Minnesota’s high risk pool, for example, was funded by a mix of revenue from premium payments, taxes on insurance companies, and the occasional state subsidy.

Minnesota’s high-risk pool, before Obamacare took effect, was considered successful: it was affordable, and with roughly 26,000 enrollees, contained one-sixth of all high-risk pool members in the U.S. (Other states had low enrollment due to high monthly premiums.)

High-risk pools have been prominent parts of Republican ideas for replacing of Obamacare, but House Republicans moved to shore them up in the AHCA with additional funding. Michigan Rep. Fred Upton introduced an amendment to provide $8 billion over five years from the federal government specifically to shore up high-risk pools in the states.

Beyond that $8 billion, states would have $130 billion spread out over a decade to stabilize insurance markets in the states, but they can do so in seven ways, only one of which is by funding high-risk pools.

So, can high-risk pools rescue people with pre-existing conditions from the problems posed by waiving community rating?

Ultimately, it comes down to how adequate the source of funding for high-risk pools turns out to be. To many experts, the AHCA falls short here.

Even if states use that $138 billion entirely for the purpose of relieving premium costs for sicker patients — which is not a guarantee, experts say — that comes out to $13.8 billion a year over ten years.

Another complication here is that the effectiveness of the money depends on how many states get waivers. If it’s two, the $8 billion in Upton’s amendment will go a long way; if it’s 30, not so much.

Proponents of the law could not provide a concrete answer to what would happen if many states opt to share a piece of a pie that’s a set size. “My guess is this is an experiment in fiscal federalism,” Lewis said.

Paulsen told MinnPost that, if this initial source of funding proves inadequate, “additional monies can be added… in two years, when appropriations are going, if it looks like we need to shore up a risk pool here, things will balance out.”

(Fiedler was skeptical of this reassurance: “If Congress were committed to providing adequate financing,” he said, “it could have written the AHCA in a way that would automatically provide the amount of funding that actually turned out to be required, rather than just setting an arbitrary dollar amount.”)

How much money would the feds realistically need to put into an insurance market that effectively covers those with pre-existing conditions on the individual market? Health care analysts have put forth varying estimates, and $15 billion a year is essentially the floor.

“We’re talking in tens of billions of dollars a year,” Fiedler says, saying the $8 billion over five years allocated in the House plan is “a drop in the bucket.”

If the federal subsidies don’t adequately fund insurers’ cost to cover high-risk individuals, they will simply raise premiums.

Others have pointed out that even a minor reduction in premiums may not be enough for older, lower-income people — those who are widely considered the losers in this bill. Washington and Lee’s Jost writes that “the reduction in premiums that would result from the program is unlikely to be sufficient… given the fixed-dollar, age-adjusted tax credits offered by the AHCA.”

What it means for Minnesota

Would Minnesota apply for a waiver, if the AHCA in its current form were to become law? Some doubt that a Democratic governor like Mark Dayton would apply to waive Minnesota from essential health benefits requirements.

But others say it is hard to anticipate how state leaders will react, and argue that their decisions may rest more on the particulars of the insurance market in their state rather than on ideology. (Plenty of red-state governors applied for the Medicaid expansion under Obamacare, after all.)

Indeed, Wisconsin Gov. Scott Walker — no fan of Obamacare — initially suggested support for the waivers, but quickly walked that support back in an argument with a Democratic county official last week.

According to the Kaiser Foundation’s Claxton, though, the financial pressures could win out: “I think we can expect that, for affordability reasons, states will take the waivers to reduce benefits… so that people with pre-existing conditions can be segmented out for some period of time.”

Lynn Blewett, a health care and insurance expert at the University of Minnesota, says that though Minnesota’s high-risk pool worked reasonably well before the ACA, replacing the law would not simply return things to the way they were before it took effect.

If the AHCA were to go forward, in Minnesota, the “high-risk pool is likely going to have a pretty high premium,” Blewett says, adding she isn’t sure how backers of the AHCA claim that those with pre-existing conditions are protected.

For now, the AHCA is far from being law. For it to advance, it must be taken up by the Senate, where Democrats hate the bill and even Republicans have some significant reservations with it, particularly its deep cuts to Medicaid.

House Republicans don’t claim this is a perfect bill, and expect it to be tweaked and adjusted as needed after it passes — something Democrats planned to do with the ACA before losing their congressional majority.

Republicans acknowledge, though that they still have some selling to do to the general public. Recent polls find that fewer than one-third of Americans support the GOP’s bill.

Lewis bemoaned to MinnPost what he called the “partisan demagoguery” surrounding the AHCA and its critics’ claims, such as the later-debunked claim that it classifies rape as a pre-existing condition.

It’s not the sensational kinds of claims that give experts pause, though — it’s the hard math. “I think it’s fairly hard to square what’s been said about the bill,” Brookings’ Fielder says, “with the analytic reality.”