By jeopardizing valuable consumer protections and allowing insurers to cherry-pick healthy plan members, the Senate health care bill could drag the individual insurance market back to its pre-Obamacare days as a selective provider of high-cost and low-benefit coverage.
Prior to the Affordable Care Act’s passage in 2010, buying individual health coverage outside the workplace was risky business.
High premiums, lean benefits and frequent premium hikes were commonplace as a lack of federal oversight created a patchwork of states with poorly regulated markets.
With no national rules governing what plans must cover, many offered very limited benefits.
A government report in 2011 found that 62 percent of individual plan members had no maternity coverage, 34 percent lacked coverage for substance abuse treatment, 18 percent had no mental health services and 9 percent lacked coverage for prescription drugs.
The Affordable Care Act changed that by requiring in 2014 that all individual health plans cover a list of 10 “essential health benefits,” including maternity and newborn care, rehabilitative services, mental health and substance abuse services, prescription drugs and outpatient care, like doctor visits.
Uniquely, among any piece of major legislation I can recall, it would produce many more losers than winners, which is pretty unusual.
Drew Altman, president and chief executive officer of the Kaiser Family Foundation
Although the benefits requirement is a popular provision of the Affordable Care Act, known as Obamacare, the Senate Republican health care bill would let states get federal permission, or “waivers,” to weaken or eliminate the essential benefit requirements.
And unlike the ACA, the Senate proposal requires Health and Human Services Secretary Tom Price to grant state waiver requests as long as they don’t increase the federal deficit. Under the Affordable Care Act, waiver requests must meet requirements for affordability, number of people covered and comprehensiveness.
Weakening the mandatory coverage requirements would, in essence, allow insurers to weed out sick plan members by limiting the scope of coverage in their plan designs.
For instance, people with HIV or diabetes wouldn’t enroll in a plan that didn’t cover prescription medications. And pregnant women wouldn’t select a plan that didn’t cover maternity services, said Karen Pollitz, senior fellow at the Kaiser Family Foundation.
Insurers could “design policies to strategically appeal to healthy portions of the marketplace and to discourage enrollment of people who are likely to have high-cost claims,” Pollitz said.
That’s good news for relatively healthy people who don’t require high-cost benefits. Their premiums would likely decline as they select less-comprehensive plans.
But people with pre-existing conditions would end up paying much higher rates to get the high-cost coverage they need, like maternity care, mental health services and specialty drugs.
Before the Affordable Care Act, those benefits were viewed as “magnets” known to attract sicker enrollees. Most plans didn’t cover them unless they were required to by law, Pollitz said.
In their analysis of the Senate legislation, the CBO projected that coverage for these and other high-cost services would become “extremely expensive” in some areas where essential benefits are substantially eroded through waivers.
“And when you get to that point, where they can be having different plans for different kinds of people, you’re back into a system, that for people with pre-existing conditions, looks a whole lot like it did before the Affordable Care Act,” said Jeanne Lambrew, a senior fellow at The Century Foundation.
Creating policies that strategically appeal to the healthy and discourage enrollment of people with medical conditions could lead to a “race to the bottom” where insurers are careful not to provide more benefits than their competition, Pollitz said.
And because the Senate bill repeals Obamacare’s individual mandate, individual coverage would become voluntary rather than required by law. That would lead only the sickest people to purchase coverage even though it would be far more expensive to do so.
And if they let their coverage lapse for more than 63 days, the Senate bill would impose a 6- to 12-month lockout period where they would be unable to purchase individual insurance as a penalty for failing to maintain “continuous coverage.”
Similar waiting periods for coverage also were common in the days before the Affordable Care Act.
The Senate bill has drawn nearly universal scorn from patient groups, health care providers and health experts.
“In all my time in the field, I’ve actually never seen legislation like this,” said Drew Altman, president and chief executive officer of the Kaiser Family Foundation. “Uniquely, among any piece of major legislation I can recall, it would produce many more losers than winners, which is pretty unusual” and “could come back to haunt Republicans in upcoming elections if it passes.”