Pre-Existing Confusion Here’s how the House health reform will cover high-risk patients.
https://www.wsj.com/articles/pre-existing-confusion-1493680248
Insurance coverage for pre-existing health conditions can be confusing, as President Trump and a journalist showed in a television interview over the weekend. Allow us to explain how the GOP reform would work in practice and why pre-existing conditions have been exaggerated as a political problem.
Mr. Trump told CBS ’s John Dickerson that “I watch some of the news reports, which are so unfair, and they say we don’t cover pre-existing conditions, we cover it beautifully.” Mr. Dickerson seemed surprised: “Okay. Well, that’s a development, sir. So you’re saying it’s going to be pre-existing to everybody?” Mr. Trump said the House bill had “evolved” but as usual didn’t explain how.
House conservatives rebelled over the original version of the American Health Care Act, which only partially deregulated insurance markets. The bill maintained the rule known as guaranteed issue, which requires insurers to cover all applicants regardless of medical history. It also relaxed community rating, which limits how much premiums can vary among beneficiaries.
The media and the left thus claim that conservatives want to allow insurers to charge sick people more, and some conservatives agree, which spooks the moderates. But the latest compromise between conservatives and centrists doesn’t repeal guaranteed issue or community rating. It keeps these regulations as the default baseline, and states could apply for a federal waiver if they want to pursue other regulatory relief.
But the waivers aren’t a license to leave cancer survivors without insurance. States can only receive a waiver if they avail themselves of the bill’s $100 billion fund to set up high-risk pools. These state-based programs, which were run in 35 states until they were pre-empted by ObamaCare, subsidize coverage for older and sicker patients. This helps these individuals and keeps coverage cheaper for everyone else.
Why might a Governor prefer such an arrangement over the ObamaCare status quo? Well, the law’s price controls are a raw deal for most consumers, which leads to a cycle of rising premiums and falling enrollment. Average premiums rose by 40% or more in 11 states this year, and insurance markets in states like Tennessee, Kentucky and Minnesota are in crisis.
Community rating and guaranteed issue also punish the sick by degrading quality. When insurers can profit by being the best plan for, say, cancer or diabetes, they invest in such care. When both the healthy and sick pay the same rates, the incentive is to load up on healthier people and discourage people with expensive ailments or chronic conditions from enrolling by using higher copays, narrow provider networks or tiered prescription drug formularies.
In a recent study of the Affordable Care Act, Daniel Prinz and Timothy J. Layton of Harvard and Michael Geruso of University of Texas-Austin conclude that insurers are using benefit designs to screen for unprofitable consumers. The result is that people with expensive conditions cannot obtain adequate coverage.
Pre-existing conditions are an understandably emotional issue, because people fear losing their plan or a financial catastrophe if they develop a serious health problem. But only about 4% of the population under age 65 is high risk. ObamaCare’s Pre-Existing Conditions Insurance Plan was created from 2010 to 2014 as a transition until the entitlement debuted nationwide: Anyone could sign up for heavily subsidized coverage if they were denied in the private market. Enrollment topped out at merely 115,000 people in 2013.
This debate is also distorted by a misunderstanding of health risks. The actuarial probability that a healthy person will become sick is already priced into premiums, meaning it is true insurance for unknown future health outcomes. People with pre-existing conditions don’t need insurance—they need help paying for expensive treatment that is already known.
High-risk pools are a fairer and more equitable solution to this social problem, rather than hiding the cost by forcing other people to pay premiums that are artificially higher than the value of the product. The waivers also include protections for people who renew continuous coverage from major premium increases if they become ill.
Liberals are inflating the pre-existing conditions panic with images of patients pushed out to sea on ice floes, but the GOP plan will ensure everyone can get the care they need. Republicans can win this argument, but first they need to join the debate and explain their ideas.
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