One of the most popular components of the Affordable Care Act (ACA) is the prohibition on preexisting condition exclusions, eliminating the practice in which insurers exclude coverage for health problems that people had prior to enrolling in an insurance plan. People do not like the idea that an insurer does not have to pay for care that people need due to a previously known health problem. But prohibitions on preexisting condition exclusions alone are insufficient to protect those with health problems and ensure their affordable access to necessary care. Meaningful protections require a package of policies: guaranteed issue of all insurance products, essential health benefit requirements, modified community rating, cost-sharing standards, plus prohibitions on preexisting condition exclusions. Policy proposals that maintain the prohibition on preexisting condition exclusions without the other protections are providing an empty promise to those with health problems and those who may suffer a health problem in the future.
Why is that? Let’s take each policy in turn.
Guaranteed Issue Of All Products
If insurers can deny coverage outright based on the health status or expected health status of the applicant, then coverage for preexisting conditions are not guaranteed, because someone with a health problem may not even be able to buy insurance, regardless of the price. If only certain products are guaranteed issue, the limited options in which people with health problems can enroll may be priced so high (due to attracting those with high needs) as to make them effectively inaccessible.
Essential Health Benefit Requirements
If insurers are not required to provide coverage for a particular type of service, competition with other insurers will generally mean that no insurer will offer coverage for that service voluntarily. If, for example, an insurer is the only insurer that offers coverage for brand-name and specialty pharmaceuticals, those individuals needing high-cost drugs will tend to enroll in coverage with that insurer, driving its costs upward and making it unable to be price competitive. As a result, in the vast majority of cases, no insurer would offer potentially costly benefits that are not required.
If you have cancer and are sold an insurance plan, but there is no requirement that the plan cover chemotherapy or radiation treatments, for example, then an insurance policy issued to you does not protect you for having a preexisting condition. The required benefits do not necessarily need to be identical to those provided for in the ACA, but some standard must be set that includes the services needed by those with serious health conditions.
Modified Community Rating
Modified community rating prohibits insurers from charging enrollees different premiums for the same coverage based on their health status or expected health status. Under the ACA, for example, within a geographic area, premiums are only allowed to vary by age and tobacco use, and variation on both those factors is limited. If preexisting conditions are not explicitly excluded, but insurers are allowed to charge those they expect to use more health care higher premiums, then premiums can be set to effectively exclude enrollees with health problems.
For example, a recent analysis indicated that people with rheumatoid arthritis incur health care costs at a level approximately 6.5 times that for a healthy person of the same age. If insurers are allowed to charge enrollees premiums based on their expected health care costs, many people with health conditions would be unable to afford coverage. Faced with a premium the person cannot possibly pay due to health status-related pricing, a requirement that insurers cover expenses related to the person’s conditions is meaningless.
The higher the out-of-pocket payment requirements (also known as cost sharing) that are imposed on enrollees, the more expensive it is to access health care services when they are needed. Since people with health problems need more services than others do, high cost-sharing requirements fall most heavily on them. If there are no meaningful limits or standards placed on cost-sharing requirements, insurers can use high deductibles, copayments, or co-insurance to push a larger percentage of the costs of care back on the sick, and for many people this could make care necessary to treat their conditions unaffordable. If there are no regulatory limits or oversight, insurers can design cost-sharing requirements to fall heavily on services that people with particular high-cost conditions are likely to need, reducing the value of the coverage available to them and making preexisting condition protections of little value. As a result, standards are necessary that ensure that cost-sharing requirements are reasonable relative to the income of the enrollee, and there is effective oversight that prevents discriminatory plan designs.
Adding a high-risk pool would not be enough to solve the problems created by eliminating these protections. The number of people affected by peeling back these policies would be much larger than could be effectively accommodated in high-risk pools, given the levels of funding offered in recent legislative proposals (for example, the American Health Care Act) or the levels of funding historically devoted to such pools.
The popularity of preexisting condition protections is the perception that they provide a guarantee that people have access to necessary health care services, if and when they have a serious health problem. Yet there are many ways in which insurers can make it difficult or even impossible for their enrollees to obtain treatment for serious medical conditions. The prohibition on preexisting condition exclusions is a necessary component of a bundle of policies that provide the type of protection sought, but it is only one component of the necessary policies. Policy makers that promise to provide one piece without the others are not being honest about the protections they are offering.