Monday, January 23, 2017

Losers and winners under medical underwriting

This post is a by-product of my prior post de-gaslighting Betsy McCaughey's ridiculous claim that only 500,000 people would be affected by repeal of the ACA's protections for people with pre-existing conditions seeking insurance in the individual market.   I believe I have a sharpened view of who's been helped and who's been hurt in the post-ACA individual market.

Spoiler alert: in the pre-ACA individual market, more than half of those who needed insurance were either denied coverage, discouraged from applying, offered insurance that excluded coverage for their pre-existing condition, or offered coverage at above-market rates.

McCaughey's argument was built on misrepresenting a 2010 report issued by Henry Waxman and Bart Stupak, then-chairs of the House Energy and Commerce Committee, that drew on data elicited from the four large health insurers in the 2009 individual market , The main takeaways in this study were that coverage denials on the basis of applicants' prior medical history rose rapidly from 2007 to 2009, and that the denial rate reached 15.3% in 2009. That latter figure is roughly at the midpoint between the result of a 2009 AHIP survey of member insurers, which found a denial rate of 12.7%, and the Kaiser Family Foundation's 2013 estimate that 18% of applicants were denied (perhaps the denial rate continued to rise after 2009).

The Waxman-Stupak report  also cited an internal document from one of the insurers articulating a common assumption: that in reality about one third of applicants were effectively shut out of the market, as many were discouraged from applying by brokers, or past experience. The report further noted that one of the four insurers provided 15% of its customers with polices that excluded coverage for their pre-existing condition. While it did not provide an overall estimate for such targeted exclusions, the AHIP survey reports that 6% of coverage offers included such exclusions (and some participating insurers did not report on this question).

The AHIP study further reports that 34% of those who were offered  individual market coverage in 2008 were offered it at above-market rates, based on their health status (another 36% were offered below-market rates).  It's not clear to me whether all those who were "offered" coverage obtained it. Since there's a separate category for those applications that were not processed or were "withdrawn by the applicant," I'm inferring that "offers" equal enrollments, or nearly so.

Putting together estimates of those who were effectively shut out of the market by medical underwriting and those who could only obtain coverage at premium rates or with the treatment they needed lasered out of coverage gives a pretty good idea of the percentage of applicants (or discouraged would-be applicants) who were harmed by medical underwriting in the pre-ACA market.

As I noted in the prior post, The Kaiser Family Foundation estimates 2010 individual market enrollment at 10.7 million (with small variation in years following, and so probably in 2009 as well). Combined with the Waxman-Stupak data, that suggests approximately 2.3 million outright denials that year (15.3% of 13 million), and a total of 5.4 million effectively shut out of the individual market (33% of 16 million).

Add in, conservatively,  another 6% who were provided coverage with exclusions specific to their medical condition, and 34% who were offered coverage at above-market rates, and 4.2 million enrollees were harmed by medical underwriting.

Among 16 million who sought individual market coverage, then (or would have sought it had they not known that applying was hopeless), perhaps 9.6 million were either denied coverage, offered impaired coverage, or charged above-market rates for coverage. By this calculation, 60% of those who needed coverage in the individual market couldn't get full coverage (as then defined by various insurers under various state rules) at standard rates.

In the current individual market, approximately half of enrollees, 9 million as of mid-2016 and modestly more now, are subsidized in the ACA marketplace. 1-2 million are in pre-ACA "grandfathered"or "grandmothered" (don't ask..) plans, and perhaps seven million are in unsubsidized ACA-compliant plans. Those seven million do feel the pain of ACA rate increases -- first, the initial increase in median subsidies and deductibles experienced when the marketplace launched in 2014 -- increases due mainly to guaranteed issue -- and then again this year, when premiums spiked about 25% as the reinsurance and risk corridor program (previously mostly defunded by a hostile Republican Congress) phased out.

Of those seven million "exposed" enrollees, however, probably half would have been shut out entirely, subjected to targeted exclusions, and/or charged above-market rates. I say 50%, not 60%, because unsubsidized enrollees are mostly wealthier, and therefore probably healthier, than average -- though not perhaps wealthier/healthier than applicants in the pre-ACA market, which, in the absence of subsidies, probably priced out most of the lower-income enrollees currently subsidized in the marketplace.

Not all of those who were (or would be) harmed in some degree by medical underwriting are necessarily better off now. In some cases, premium and deductible hikes in the post-ACA market may outstrip the mark-up for some of the medically underwritten in the pre-ACA market, though their pre-ACA coverage may also have included exclusions for services such as mental health and pregnancy, To venture a rough estimate, perhaps 3-5 million of the current 18-20 million current individual market enrollees may have found coverage more to their liking in the individual market had the ACA never passed.

In the ACA beneficiary column, though, you also need to add an increase of 17 million in Medicaid enrollment, about 10-12 million of whom were rendered eligible by the ACA Medicaid expansion.

Like all major market reforms, the ACA produced some losers -- but far more winners. A normal political process would work to address the needs of those not well-served in the current marketplace -- for example, along the lines suggested by the Urban Institute's  Linda Blumberg and John Holahan. Their most recent proposal, released last week, combines major reforms attractive to conservatives, such as replacing the individual mandate with milder penalties, ending the employer mandate, and increased age rating, with increased subsidies for middle-income and even affluent buyers, as the authors proposed last summer.

But in a country capable of electing a vicious lifelong fraudster like Donald Trump, a normal political process is a distant memory.

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