Health Care

The Preexisting-Condition Trap

(Pixabay)
Use of the term is often deliberately misleading

On December 14, a Texas district-court judge revived political fights over the Affordable Care Act by ruling the legislation unconstitutional. Senate Minority Leader Chuck Schumer (D., N.Y) pounced, arguing that “it puts a lot of our Republicans in a box” because “they said they want to preserve preexisting conditions.” He was echoing the peculiar cheer of Nancy Pelosi, soon to be speaker of the House once again, last month: “Let’s hear it for preexisting conditions!”

But “preexisting condition” simply refers to someone trying to purchase insurance after they have become sick — not necessarily someone with a major illness that would have made them unable to find affordable coverage on the pre-ACA individual market.

Republicans should be careful not to conflate these two groups. They should support subsidies (as currently provided through the ACA exchange) for uninsurable individuals. But they should resist efforts by Democrats to suggest that those with “preexisting conditions” are necessarily uninsurable in an attempt to force all Americans into overpriced, highly regulated, and publicly subsidized ACA plans — especially now that more fairly priced alternatives are widely available.

A disqualifying preexisting condition is not merely an objective medical status, but also a behavioral response to insurance-market rules. The number of people disqualified by preexisting conditions depends on the incentives such rules provide individuals to sign up for coverage before they get sick.

Estimates of the number of people with preexisting conditions therefore vary immensely, including in different reports from the same organizations. Avalere Health, a major health-care-industry consulting firm, in 2017 estimated that 2.2 million out of 17.7 million individuals on the ACA’s individual market had preexisting conditions. A year later, they released an estimate that 50.3 percent of the American population outside of Medicare and Medicaid — 102 million people — had preexisting conditions and thus would “face higher premiums or significant out-of-pocket costs” if the ACA were repealed. Dan Mendelson, Avalere’s founder and a former Clinton-administration official, argued that “virtually every American has someone with an existing health condition in their family at any given time.”

Prior to the ACA, a segment of the American population — though a smaller segment than Avalere suggests — had medical risks that made them unable to get affordable insurance coverage. The bulk of Americans covered by employer-sponsored insurance could not be denied enrollment for having preexisting conditions, and even most of those enrolled in plans on the individual market were protected by the 1996 Health Insurance Portability and Access Act (which guaranteed the right of enrollees to renew plans on the same terms when they got sick). The gap in regulatory protections guaranteeing renewability was only for those transitioning from employer-sponsored plans to new plans on the individual market — a small fraction of the U.S. population.

For over a decade, Republicans have proposed protecting this cohort with guaranteed access to subsidized coverage through high-risk pools. But instead of targeting a subsidy at those falling through this gap in insurance protection, the ACA’s architects used the situation as a pretext to overhaul the entire insurance market — with disastrous consequences. As the ACA allows people with preexisting conditions to buy plans at the same price as the healthy, it greatly increases the likelihood that people will wait to get seriously ill before they purchase insurance. This caused premiums for ACA-regulated plans to soar by 105 percent in their first four years.

Thankfully, since Congress last year repealed the individual-mandate penalty, it has been possible for individuals to again be covered by affordable insurance plans exempt from ACA regulations — and the Trump administration has rightly allowed insurers to guarantee their renewability for up to three years. Congress can further bolster these protections by enacting legislation so that such renewability guarantees for non-ACA-compliant plans can be extended indefinitely.

Republicans should be willing to accept the ACA’s exchange as a safety net for those with major chronic conditions who are unable to find any other source of affordable insurance coverage. But in doing so, they should ensure that subsidies remain focused on those who are truly uninsurable, by expanding non-ACA plans — which are allowed to exclude those who sign up only after they get sick.

Chris Pope is a senior fellow at the Manhattan Institute.

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