Tom MacArthur gutted ACA protections for people with pre-existing conditions. Can Andy Kim make the charge stick?

Axios offers an interesting first look at a battle that will play out in a lot of Congressional districts defended by Republicans who voted for the ACA repeal bill, the American Health Care Act (AHCA) as amended by Tom MacArthur (NJ-3).

Democrats will say the incumbent voted to gut protections for people with pre-existing conditions -- that is, the ACA rules forbidding insurers in the individual market to base premiums on an applicant's medical condition or history. Incumbents -- e.g. MacArthur, who introduced the amendment that opened the door to medical underwriting -- will say not so:

Sen. Heidi Heitkamp of North Dakota, one of the most vulnerable Democrats up for re-election this year, is out with a new ad that claims her opponent, Rep. Kevin Cramer, voted to gut protections on pre-existing conditions. Axios' Caitlin Owens has the lowdown:

• Naturally, Cramer doesn't like the ad. The North Dakota GOP accused Heitkamp of telling "repeated lies" about his stance on pre-existing conditions.

• The party pointed out that the House repeal-and-replace bill, which Cramer voted for, included what was referred to as the "MacArthur amendment," which preserved the ACA's prohibition on insurers denying coverage based on someone's health status.

It may be hard to fight this out without getting into the weeds.  On the face of it, the MacArthur amendment just cracked the door for medical underwriting. Progressive health wonks, eventually backed by the Congressional Budget Office, argued that the cracked door would be blown open and coverage would be rendered unaffordable for many in the guaranteed issue market.

The MacArthur amendment empowered states to allow insurers to subject those who failed to maintain continuous coverage to medical underwriting. That penalty would replace the individual mandate, which Republicans have demonized.

It might seem that the amendment provided a double brake protecting the "guaranteed issue" market (where premiums are not affected by an applicant's health). First ,a state would have to seek a waiver to allow medical underwriting, and second, only those who were uninsured for more than 63 days in the previous year would be subject to underwriting.

But Matthew Fiedler of the Brookings Institute argued in convincing detail on April 27, the day after MacArthur's amendment was posted, that healthy people would opt for medical underwriting under the MacArthur Amendment, driving premiums way up in the guaranteed issue market -- and that many states, faced with premiums rendered unaffordable for many by the AHCA, would choose to open this door. Here's the short version of Fiedler's argument:

At first glance, it might appear that the community rating waivers allowed under this amendment would only allow insurers to charge premiums based on health status to people with a recent gap in coverage. Even that approach would significantly weaken community rating since coverage gaps are common, including for people with pre-existing conditions. In fact, however, the framework created by the waiver would allow states to effectively eliminate community rating protections for all people seeking individual market coverage, including people who had maintained continuous coverage.

In brief, 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. Either way, people with serious health conditions would face prohibitively high premiums. As a result, community rating would be eviscerated—and with it any meaningful guarantee that seriously ill people can access coverage.. 

The CBO adopted this logic-- albeit for an estimated one sixth of the population -- in an analysis released on May 24, three weeks after the AHCA passed the House:

However, the agencies estimate that about one-sixth of the population resides in areas in which the nongroup market would start to become unstable beginning in 2020. That instability would result from market responses to decisions by some states to waive two provisions of federal law, as would be permitted under H.R. 1628. One type of waiver would allow states to modify the requirements governing essential health benefits (EHBs), which set minimum standards for the benefits that insurance in the nongroup and small-group markets must cover. A second type of waiver would allow insurers to set premiums on the basis of an individual’s health status if the person had not demonstrated continuous coverage; that is, the waiver would eliminate the requirement for what is termed community rating for premiums charged to such people. CBO and JCT anticipate that most healthy people applying for insurance in the nongroup market in those states would be able to choose between premiums based on their own expected health care costs (medically underwritten premiums) and premiums based on the average health care costs for people who share the same age and smoking status and who reside in the same geographic area (community-rated premiums). By choosing the former, people who are healthier than average would be able to purchase nongroup insurance with relatively low premiums.

CBO and JCT expect that, as a consequence, the waivers in those states would have another effect: Community-rated premiums would rise over time, and people who are less healthy (including those with preexisting or newly acquired medical conditions) would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable to those under current law, if they could purchase it at all—despite the additional funding that would be available under H.R. 1628 to help reduce premiums. As a result, the nongroup markets in those states would become unstable for people with higher-than-average expected health care costs. That instability would cause some people who would have been insured in the nongroup market under current law to be uninsured. Others would obtain coverage through a family member’s employer or through their own employer.

It might be argued now that guaranteed issue under the ACA has been damaged as much by the Trump administration and the Republican Congress as it would have been under the MacArthurized AHCA. By enabling medically underwritten, lightly regulated "short-term" plans to be sold for 364-day terms and renewed twice, and by zeroing  out the individual mandate, Republicans are creating a parallel underwritten market for insurance that need not be comprehensive (and generally won't be). That sabotage, along with Trump's cut-off of direct federal reimbursement of insurers for Cost Sharing Reduction (CSR) subsidies, which are now priced into premiums, has indeed rendered coverage unaffordable for many who do not qualify for subsidies.

The difference, however, is the ACA's relatively generous subsidy structure, which has so far kept a hard core of 8-9 million subsidized enrollees in the ACA-compliant market, even as unsubsidized enrollment has shrunk. The AHCA had no equivalent to CSR, which makes marketplace coverage more comprehensive than the average employer plan for more some 5 million enrollees with incomes up to 200% of the Federal Poverty Level. The AHCA subsidy structure was flatter, less income sensitive, and especially hard on older enrollees, since subsidies did not adjust with age and the bill allowed insurers to increase the degree to which the oldest enrollees could be charged more than the youngest adults from the ACA's 3-to-1 to 5-to-1.

The AHCA also extended subsidies to a higher income threshold, so net enrollment may not have been radically different. But low income people would have been priced out, or left with insurance of limited value, designed to cover 65% of costs rather than the 94% or 87% that CSR provides to enrollees in the two lowest income groups under the ACA.

The AHCA also ended the ACA Medicaid expansion, which would ultimately have reduced Medicaid enrollment by some 15 million and left current expansion enrollees to the tender mercies of a market offering coverage with 65% actuarial value, compared to over 95% for Medicaid.  That's not directly a "pre-existing conditions" issue, and "protection for preexisting conditions" is the hot button politically. But the harm done to Medicaid -- also by capping the federal contribution to all Medicaid programs -- was the deepest harm the AHCA (revived by MacArthur) would have inflicted.

The argument over the extent to which Republicans who voted for the AHCA voted to undercut access to insurance for people with pre-existing conditions is hard to get down to a sound byte.  Axios' brand is compression - -their articles rarely if ever extend further than 400 words -- and here's their pass at explaining the result of the medical underwriting penalty:

That means that while people with pre-existing conditions couldn't be denied coverage outright, they could be offered coverage that was too expensive to be attainable or that excluded health benefits that they needed — making the remaining coverage guarantee relatively worthless.

If the argument goes beyond single sound bytes, it boils down to "if you allow medical underwriting, healthy people will go for it, leaving those with pre-existing conditions high and dry." Tricky.

Andy Kim, a national security adviser in the Obama administration, is the Democrat challenging MacArthur in NJ-3. Kim has promised from the outset to make healthcare a centerpiece of his campaign. At a recent forum in which both candidates appeared, Politico reports,  "MacArthur said Kim spoke in 'gauzy generalizations' about health care without putting forward any solutions and falsely claimed that his amendment would eliminate coverage for conditions."

MacArthur, who's been defending his revival of the AHCA for more than a year, is an experienced gaslighter. Kim's healthcare agenda, as presented on his website, is indeed gauzy.  Can he boil down the rap on MacArhtur and make it stick?

Update, 9/5/18: Similar gaslighting in Republican bill purporting to preserve protections for people with pre-existing conditions