Friday, October 19, 2018

Republicans have already undercut ACA protections for people with pre-existing conditions

As Republicans who voted for last year's ACA repeal bills in the House and Senate profess now that they are committed to protecting insurance access for people with preexisting conditions, it's important to keep in mind a current fact of life that both complicates and clarifies what they tried to do in those bills and the harm those bills would have wrought.

It's this: Republicans have already adulterated the ACA's individual market protections for people with preexisting conditions by means comparable to those stipulated in the House bill, the American Health Care Act (AHCA), and in the Senate bill, the Better Care Reconciliation Act (BCRA).

The AHCA nominally retained the ACA's core protections -- guaranteed issue, modified community rating, and the Essential Health Benefits that each plan must provide. But once adorned with the MacArthur Amendment that made passage possible, the bill enabled states to obtain waivers that allowed insurers to medically underwrite policies offered to people who had experienced a gap in coverage. States could also write their own EHBs. Critics pointed out that once a medically underwritten market was established, healthy people would opt in, leaving the ACA-compliant market to the sick and so driving up premiums. Rewritten EHBs could make mincemeat of caps on yearly out-of-pocket spending, as those caps apply only to services covered by EHBs.

The BCRA, similarly gilded with the Cruz Amendment, as described by the Kaiser Family Foundation, "would allow insurers in the non-group market to also sell some policies that would not be required to follow all of the ACA market rules. These noncompliant policies could turn people down or charge them more based on health status and could exclude coverage for pre-existing conditions. In addition, noncompliant policies would not have to meet ACA essential health benefit and cost sharing standards."

The ACA is still the law of the land. By administrative fiat, however, the Trump administration has created a market similar to the one envisioned by the Cruz Amendment. By extending the allowable term of short-term plans to 364 days, and allowing renewal for up to three terms, the administration is standing up a market of medically underwritten plans not subject to the ACA's coverage rules. By zeroing out the ACA's individual mandate penalty, the Republican Congress has enabled anyone who prefers that unregulated market to rely on the insurance offered there without penalty. That will draw some healthy people out of the ACA-compliant risk pool -- as may the parallel small group market enabled by loosening of the rules governing Association Health Plans.

The establishment of these parallel markets seems to have had a relatively modest impact on individual market premiums this year -- though the impact has been obscured by the fact that insurers massively overpriced last year and are correcting this year. (The impact may be felt more in 2020 and beyond if the ACA survives.) Some Republicans might say "See --we gave new options to unsubsidized healthy people and the sky didn't fall in."

But the difference between where we are with a damaged but more or less intact ACA and where we'd be if the AHCA or BCRA had passed is more instructive than the parallel market parallel. That's true even if you leave aside the Medicaid expansion, which the repeal bills would have ended, and which is arguably more consequential than the ACA-refashioned individual market, though the latter sucks up most of the political passion. Since full ACA enactment, Medicaid enrollment has grown by 17 million; individual market enrollment, after two years of retrenchment, has grown by a net 4 million since 2013.

The difference between the individual market we have now and the individual market Republicans would have created is that the ACA subsidy structure protects low-to-moderate income people -- i.e., those who are subsidy eligible -- even as it exposes the unsubsidized to premiums that are unaffordably high for too many buyers in some markets (particularly as premium hikes have been turbo-charged by Republican sabotage, recent and not-so-recent). ACA premium subsidies are calculated to leave an eligible enrollee paying a fixed amount of income (2-10%, rising with income) for a benchmark silver plan. When premiums rise, subsidies rise in tandem. Equally important for a bit more than 50% of marketplace enrollees are Cost Sharing Reduction subsidies, which render actual healthcare, as opposed to just health insurance, affordable.  The ACA marketplace has thus far proved resilient in retaining 8-9 million subsidized enrollees annually, even as unsubsidized enrollment has suffered under two years of steep premium hikes.

The AHCA and BCRA offered grossly inadequate subsidies in place of the ACA's -- though the AHCA extended them to higher incomes, and would therefore have replaced some priced-out lower income enrollees (and older ones, since the AHCA increased the degree premiums would rise with age) with wealthier and younger ones. The AHCA subsidies were flat -- not adjusting with income -- while the BCRA's subsidized coverage for benchmark plans with an actuarial value of just 58%, which CBO calculated would lead to $13,000 deductibles by 2026. The ACA, in contrast, offers benchmark silver plans with an AV of 94% or 87% to enrollees with incomes up to 200% FPL. That translates to deductibles generally under $500 at 94% AV and under $1000 at 87%.

The point here is that to protect people with pre-existing conditions you not only have to offer coverage on equal terms regardless of health status or history -- you also have to offer coverage that's affordable. That's where the AHCA and BCRA's most grotesque failure lay. The breaching of pre-ex protections only gilded the grotesquery. Republicans today can offer loophole-ridden pre-ex protections till their tongues cleave to the roofs of their mouths. To make coverage affordable, however, they'd have to disband.

UPDATE, 10/22: The undermining of pre-ex protections takes another large step today with CMS's new guidance inviting states to seek innovation waivers (certain to be granted) to restructure their marketplaces -- which could include, with CMS's active encouragement, allowing medically underwritten short-term plans to sell on the exchange, and enrollees to use premium subsidies to buy them. Because this guidance nullifies previous waiver guidance barring any redesign that would harm vulnerable populations (like older or low income enrollees), states also have a green light to eliminate Cost Sharing Reduction subsidies that make actual healthcare affordable for low income enrollees, and use the money to, say, extend subsidies to higher incomes. This move raises the stakes in state elections: Democratic governors or legislative majorities would block such moves.

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