A Head Scratcher of a Bill: Revised Senate Health Care Legislation Likely to Undermine Pre-existing Condition Protections, Upend Insurance Markets

When campaigning to repeal the Affordable Care Act (ACA), President Trump and congressional leaders promised to replace it with something better. New reforms would ensure “insurance for everybody,” coupled with lower premiums and “much lower deductibles.” Constituents would get “great health care for much less money” and people with pre-existing conditions would be protected. A rescue mission is needed, we are told, because the ACA marketplaces are “collapsing.”

It turns out, of course, that campaigning is different than governing, and the revised Senate bill floated by Majority Leader McConnell delivers on exactly none of these promises. As is well documented elsewhere, what it does do is impose massive cuts to Medicaid and reduce subsidies for low income families to buy private insurance, while repealing some of the ACA’s more unpopular provisions such as the individual mandate and some industry taxes.

Let’s take a look at a few things that the American people have been promised under this repeal effort, and whether the current Senate bill measures up.

Insurance for “everybody”?

The last version of the “Better Care Reconciliation Act” (BCRA) reduced the number of people with insurance by 22 million. This version is unlikely to improve on that figure and could, in fact, be worse. Although not yet scored by the non-partisan, independent Congressional Budget Office (CBO), the bill retains the last version’s significant cuts to the Medicaid program ($772 billion) and the federal subsidies for private coverage ($408 billion). Further, a new provision added to this bill by Senator Ted Cruz (R-TX) would allow insurers to sell stripped down policies that are not required to comply with the ACA’s consumer protections. Because these “Cruz plans” would not need to cover a minimum set of benefits or cap enrollees’ out-of-pocket expenses, CBO may determine they do not qualify as “insurance,” and therefore those who buy them would not be considered insured for scoring purposes.

Lower premiums?

Some people will likely pay lower premiums under this bill, but not all. Rather than tackling the underlying reason why health insurance premiums are so high, this bill does little more than “rearrange the deck chairs on the Titanic.” First, it reallocates premium subsidies to help make coverage slightly more affordable for young people, but at the expense of older individuals. For example, a young person under 18 who makes about $25,000 a year will see a reduction of about 4 percent in their premiums under BCRA, while a 56 year old making the same will see a 96 percent increase. Further, the Cruz proposal, if enacted, would result in as many as 1.5 million people with pre-existing conditions paying higher premiums. By allowing insurers to sell plans that do not need to comply with ACA rules alongside ACA-compliant plans, the Cruz proposal all but guarantees that premiums for ACA-compliant plans will skyrocket. Insurers won’t be required to accept people with pre-existing conditions into Cruz plans; the only coverage option available to them will be the more expensive ACA-compliant plans.

Lower deductibles?

Opponents of the ACA have been critical of the high deductibles in plans on the ACA’s marketplaces, and indeed, currently the average deductible for a silver-level plan is over $3500 per year. However, under BCRA, consumers are likely to face even higher deductibles and, if they live in a state that uses a 1332 waiver to roll back the ACA’s protection against high out-of-pocket costs, they could face almost unlimited financial liability if they get a serious illness or injury.

First, people eligible for subsidies will see those subsidies buy less generous coverage, as the BCRA reduces the value of the benchmark plan from silver-level coverage to the equivalent of a bronze-level plan. The average deductible for bronze-level plans today is over $6000 per year. Second, the bill ends the ACA’s cost-sharing subsidies for people between 100-250 percent of the poverty line, beginning in 2020. So low-income people who buy a bronze-level plan with their premium tax credit will face significantly higher deductibles than they did under the ACA.

Protections for people with pre-existing conditions?

Even without the addition of the Cruz proposal, the BCRA is devastating for people with pre-existing conditions. States are given the option of waiving many of the ACA’s consumer protections, including the requirements to cover a minimum set of benefits and to cap consumers’ annual out-of-pocket costs. While this option exists under section 1332 of the ACA, the BCRA would eliminate the ACA’s “guardrails,” which require, among other things, that states prove their waiver won’t adversely impact the comprehensiveness of coverage. Under BCRA, states would be under tremendous pressure from insurers to pursue a 1332 waiver and roll back the ACA’s benefit protections. Once given more flexibility over benefit design, insurers will undoubtedly use that flexibility to deter enrollment among people with high cost, pre-existing conditions. Benefits such as prescription drugs, mental health and substance use treatment, and maternity will likely be the first to disappear. The American Academy of Actuaries, not exactly a radical progressive group, projects that the BCRA, before the Cruz proposal was even included, will result in a “deterioration in pre-existing condition protections.”

The Cruz proposal just makes a bad situation worse for those who have a pre-existing condition. In effect, it creates two markets. One for healthy people who can pass insurers’ medical underwriting and a second market for sicker people who cannot, making it effectively a high-risk pool. These “high risk pool” plans would have very high premiums, making them unaffordable for anyone not eligible for subsidies. This is one of the rare proposals on which both the insurance industry and patient advocates can agree, with the advocacy arms of both groups condemning it for undermining the ACA’s pre-existing condition protections.

Stabilizing insurance markets?

The CBO projected that the BCRA, absent the Cruz proposal, could lead some insurers to depart some markets, and leave some rural areas with the prospect of no participating insurers or very high premiums. To be sure, states that had limited insurance company competition before the ACA have continued to lack competition. But this bill doesn’t do anything at all to improve that problem, particularly for rural and frontier communities.

Once you add the Cruz proposal, the markets are likely to be even more unstable. The two major insurance industry lobbies, America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association call the proposal “unworkable in any form.” The bottom line is that, any time you allow insurers to offer different types of plans that do not have to meet the same set of rules, it results in an uneven playing field. Healthy people will migrate to the unregulated plans and those with pre-existing conditions will be forced into the regulated plans. Not only will premiums “skyrocket” in the regulated plans, as discussed above, but high cost consumers will also face reduced choices and poor customer service as insurers do everything they can to discourage their enrollment.

In ordinary political times, it would be reasonable to assume that a bill that achieves literally none of what its sponsors have promised is doomed to be defeated. But we do not live in ordinary times.

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