The U.S. House of Representatives voted May 4 to reform the U.S. health system by replacing many of the key provisions of the Affordable Care Act (Obamacare). One of the key changes – and one of the most controversial – affects the Obamacare promise that anyone can get health insurance regardless of any preexisting health condition. Under the House bill, which still must be approved by the Senate, states would be able to get federal waivers to allow insurers to charge higher premiums to people with preexisting illnesses who have let their coverage lapse. The bill includes funding to subsidize states that create high-risk pools that would provide coverage for those not able to buy insurance in the traditional marketplace, but many experts worry it’s not enough.
In an effort to better understand how preexisting conditions and high-risk pools impact the entire health care market, HealthBasics asked several experts to explain pre existing conditions. Here’s what they had to say:
- What defines a preexisting condition? Why are they singled out?–
A preexisting condition is a medical condition that one has prior to gaining insurance coverage. What counts as a preexisting condition is determined by the insurer and is not defined in the House bill. Any medical condition is expensive to treat, so when someone who is sick joins a pool of healthy people, it raises the costs for everyone. But that is the basic premise of all insurance – people pooling resources and pay premiums to make very high costs affordable for a few. Insurers and policymakers are trying to find a way to care for people with serious medical conditions without making health care unaffordable for everyone else.
- How does treating people with preexisting conditions affect the cost and quality of care the rest of us receive? –
People with any medical condition, preexisting or otherwise, cost more to care for. There is a wide variation in the costs of treating various individuals. The idea of insurance is to even out that variation. Think of preexisting conditions like an outlier. If the average annual health care cost in the average pool is $100 and someone with a preexisting condition spends $100,000 or more, that outlier can throw the average significantly raising the costs for people who don’t use health care as often.
- What was health care like for those with preexisting conditions prior to the ACA? How did the ACA change that?
Typically, people with preexisting conditions could not buy insurance on their own in the individual market, or if they were able to, they paid more for their premium. To accommodate people with preexisting conditions, many states set up high-risk pools that would accept people with preexisting conditions. Minnesota’s high-risk pool was MCHA (Minnesota Comprehensive Health Association). The effectiveness of high-risk pools at providing affordable coverage for those with preexisting conditions varied a great deal by state. In some instances, the pools were not adequately funded to cover the cost of care for those with preexisting conditions. In other instances premium were quite high. Minnesota had one of the more successful high-risk pools. Premiums were capped at no more than 125 percent of a benchmark individual plan. The pool had a broad base of funding. With the passage of the ACA, no one can be turned down for individual coverage based on their health status.
- What is community rating?
Community rating means that one can’t be charged more on the basis of their health. Waivers in the new House proposal would allow states to effectively eliminate community rating protections for all people seeking individual market coverage, including people who had maintained continuous coverage. Should this become law, healthy people would have a strong incentive to “opt out” of the community-rated pool and instead pay a premium based on health status. With healthy enrollees opting out of the community-rated pool, community-rated premiums would need to be extremely high, forcing sicker individuals—including those with continuous coverage—to choose between paying the extremely high community-rated premium or being underwritten themselves.
- How did Minnesota attempt to fix these issues by creating one of the first high-risk pools? Was it effective?
Minnesota created one of the more successful high-risk pools in the country, known as MCHA (as discussed in question 3). Unlike other states, MCHA capped premiums at no more than 125 percent of a benchmark individual plan and the pool had a broad base of funding. In addition to premiums, insurers were assessed a fee and, in some cases, general tax dollars were used to subsidize MCHA. Unlike other states, MCHA was available to all eligible Minnesota residents. In other states, access was dependent on the availability of funding.
- How did the ACA change things for people living with preexisting conditions and the general cost of care for everyone?
ACA provided people with preexisting conditions assurance they could get coverage in the individual market. The effect of this on the risk pool for the individual market was to cause premiums to be higher. The ACA was designed to offset this increase by offering tax credits based on income, and by expanding Medicaid.
- How does the GOP’s new health care plan impact those living with preexisting conditions and is it a smart financial strategy for the rest of us?
We will have to wait and see. The HOUSE bill appears to allow states the ability to ask for waivers on various provision of the law, including the requirement that people with preexisting conditions be offered coverage in the individual market at the same rates as those without preexisting conditions. However, in order to obtain the waiver, a state must have created a high-risk pool for those with pre existing conditions. The effect on the market will depend on which states choose to implement the waivers and whether there is adequate funding for the high-risk pools.
- Should Minnesota reestablish the MCHA program if the GOP’s plan goes through?
It depends if Minnesota seeks a waiver or not. We have experience as a leader in high risk pools and MCHA was mostly an effective program, although costs were high. Legislators should be looking at all the options and planning now to make sure Minnesota remains a leader in health care.