Friday, April 25, 2014

More than half the families in four deep red states have a member with a pre-existing condition

Remember the rate-shocked -- those folks who received cancellation notices on their insurance policies last fall and who were faced with steep rate hikes as the Affordable Care Act took full effect? They exist, for sure. But there are probably fewer of them than earlier estimates indicate.  And there can't be a lot of them in four red states spotlighted in the Times/Kaiser poll released this week.

The people in those states -- Arkansas, Kentucky, Louisiana and North Carolina -- disapprove of the ACA by margins ranging from 31 points (AR. 62-29)  to 16 points (NC, 54-38), according to the poll. At the same time, however, majorities in each state, ranging from 57-60%, reported that someone in their household has a pre-existing condition. Think about that for a moment.

The imperative to make insurance affordable for those with pre-existing conditions is the main driver of the "rate shock" experienced by a subset of the 10-12 million Americans who bought insurance in the individual market in 2013. In the pre-ACA market, insurers varied prices -- dramatically -- according to the past and present health of plan members. If you or someone in your family had a pre-existing condition, you might be denied coverage altogether, or you might be offered insurance with coverage for the pre-existing condition excluded, or you might be offered very expensive coverage.* In some states, you might end up in a viable but expensive state-run high risk pool.

The ACA banned medical underwriting -- that is, pricing based on applicants' medical history.  That's the main reason that its base rates are higher than the rates for healthy people in the pre-ACA market. Some critics complain that the mandated Essential Health Benefits are too rich and rigid. Reduced "age-banding" -- charging older customers more than younger ones -- also raised the price modestly for some young buyers, while reducing it for older ones. But the main cost driver is "community rating" -- the rule that every buyer of the same age pays the same price.

The higher base cost of insurance is offset for more than half of buyers in the individual market by the ACA's premium subsidies and subsidies reducing out-of-pocket costs. And as the Times/Kaiser poll indicates, it's offset for many, many more -- in these four states, for more than half -- by the ubiquity of pre-existing conditions. Whether they qualify for subsidies or no, those with pre-existing conditions who were buying insurance in the pre-ACA individual market have benefited dramatically from the law.

Median income is low in these four states -- $39k in Louisiana and Arkansas, $41k in Kentucky, $41.5k in North Carolina in 2012, versus a national median of $51k (U.S. census).  They are near the bottom nationally in life expectancy: Louisiana is ranked 48th, Arkansas 46th, Kentucky 45th, and North Carolina 37th.  Chronic disease rates, and thus pre-existing condition rates, are thus likely to be higher than the national average. As with most federal benefits, the people in these states are positioned to benefit disproportionately from the ACA -- though rejection of the Medicaid expansion by Republican governors and legislators in North Carolina and Louisiana severely crimps that benefit.

Notwithstanding the widespread need and eligibility in these states, in the Times/Kaiser poll, about twice as many people (ranging by state from 26-29%) said the law had hurt them or their family as said it helped them (13-15%). Of those who said they were hurt, by far the largest category said the law had increased their healthcare costs (51-61%). Since most respondents get their insurance from employers or public programs, that would appear to suggest that many are blaming the ACA for increased premiums or co-pays (as many employers do) or reduced benefits.

Those perceptions are also doubtless shaped in part by the relentless demonization of the law by Republicans and their corporate allies. In the four states, just 32-37% reported seeing political ads that mentioned the law in a positive way, while 52-63% said they saw ads that denigrated it.  In each state, a substantial minority -- 28-37% -- did not know that the ACA provides "financial help to low and moderate income Americans who don't get insurance at work." Only 31% of Kentuckians knew that the law had expanded Medicaid eligibility -- notwithstanding a vigorous public outreach campaign. In each state, percentages ranging from 49-56 said that the ACA had "caused many people to lose coverage."

I don't mean to discount the restrictive effect that the ACA may have had on employer-sponsored insurance or on employment -- e.g., reduced hours (though employer mandates were postponed this year). The data on that front is not in yet  But the widespread perception in these states that the law has harmed people is probably in substantial part the fruit of an extended disinformation campaign, and partisan loyalty.

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Those with pre-existing conditions who bought insurance in the individual market were often subject to dramatic yearly rate hikes. Larry Levitt of the Kaiser Foundation explained to me how this was done. Before the ACA took full effect, "It was uncommon (and arguably illegal) for insurers to raise an individual’s premium because of their health status. What was more common was for insurers to close certain product lines to new sales. People in those products who were healthy could get other coverage, often with the same carrier. People who were sick were stuck there and faced big premium increases, which applied uniformly to everyone in the product. The big premium increases you used to see in the individual market were often in these closed blocks of business."

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