By Sabrina Corlette and Justin Giovannelli
This summer, a federal appeals court in New Orleans will hear arguments in a lawsuit, brought by 18 state attorneys general and governors that seeks to strike down the Affordable Care Act (ACA). (To date, 21 other states and the US House of Representatives have intervened to defend the ACA.) In light of the grave risks to consumers and insurance markets posed by the case, Texas v. Azar, a number of states have adopted, or are considering whether to adopt, the ACA’s consumer protections into their own law. In this post, we examine efforts by some Louisiana legislators to respond to the lawsuit.
Before enactment of the Affordable Care Act (ACA), insurance companies used a range of tactics to avoid paying for the care of people with health care needs. These included:
- Denying coverage to applicants who had a preexisting condition;
- Charging higher premiums to people viewed as having a greater health risk;
- Excluding from the insurance policy any services needed to treat a preexisting condition (called a “preexisting condition exclusion”);
- Offering products that didn’t cover critical benefits like prescription drugs or mental health; and
- Designing plans with extremely high deductibles ($10,000 or more was not uncommon).
The ACA prohibited insurers’ discriminatory practices and required them to meet minimum standards for benefits and enrollee cost-sharing.
These consumer protections, as well as federal financial help to make coverage more affordable, have all been placed in jeopardy by the recent litigation. (Although Louisiana’s Governor opposes the lawsuit, the state’s attorney general is a plaintiff in the case.) Should the law be struck down, it’s likely 20 million people would lose insurance, including almost 500,000 Louisianans. Nationwide, millions more could face insurance company denials, premium surcharges, or higher out-of-pocket costs because of their health status. In Louisiana, as many as 849,000 people would lose these preexisting condition protections.
Several states have stepped up to enact laws to protect people with preexisting conditions. If done right, these efforts can be important, but they don’t come remotely close to fixing the damage that would be caused should the plaintiffs get their way. First, ending the ACA would end the Medicaid expansion, which extended coverage to 465,000 Louisianans, as well as federal funding for premium subsides for private coverage (the ACA’s premium tax credits). Few, if any, states have the financial resources to offset the lost dollars on which these programs depend; for Louisiana alone, a win for the plaintiffs means a loss for the state of $3.6 billion per year. Second, states are preempted from requiring self-funded employer health plans to comply with preexisting condition protections under ERISA, a federal law governing employee benefits. Since 61 percent of US workers with health insurance are covered by a self-funded plan, most employees would need an act of Congress to restore protections taken away by the lawsuit. Third, some state bills would codify only some of the ACA’s consumer protections into state law, leaving consumers vulnerable to a return to insurance company discriminatory practices. One such example is SB 173, currently pending in the Louisiana legislature.
Louisiana’s SB 173: Codifies Some ACA Provisions, But Would Leave Louisianans Vulnerable to Insurance Company Denials, Higher Premiums
Senate Bill 173 doesn’t have an answer for individuals who have gained coverage through Medicaid expansion or who rely on premium tax credits to afford coverage. The bill does incorporate some important provisions of the ACA, such as the ban on preexisting condition exclusions and the requirement that plans cover essential health benefits, but even here the bill contains large loopholes that insurance companies will be able to exploit.
Most critically, the bill does not include the ACA’s guarantee that insurers issue coverage to all applicants, regardless of their health status. This means that if the ACA is overturned, insurers will go back to the pre-ACA practices of requiring applicants to fill out lengthy health questionnaires. People who report chronic conditions like diabetes, heart disease, or cancer (even if in remission) will likely find their applications denied. Before the ACA, as many as 40 percent of applicants were denied a policy based on their health status. Second, the ACA and underlying Louisiana law restricts insurers from charging an older person more than 3 times the premium of a younger person. SB 173 would allow insurers to charge an older person as much as 5 times more than a younger one. This would mean painful price hikes for many older Louisianans, particularly early retirees and others who live on a fixed income.
The bill also includes something called the Louisiana “Guaranteed Benefits Pool,” a vaguely worded section that purports to create a type of reinsurance program. Typically, reinsurance would partially compensate insurers for covering people with high health care costs, a recipe for successfully lowering premiums in other states. But unlike the programs in other states, SB 173 can’t leverage federal dollars (federal monies provided under the ACA that have helped fund other states’ programs wouldn’t, of course, be available if the law were struck down) and does not commit any state funding either. With no money in the pool, there’s unlikely to be any premium relief for consumers. To the extent the bill’s vague provisions allow the insurance commissioner to establish, instead, an old fashioned high risk pool, there’s still less room for optimism. For example, Louisiana’s own pre-ACA high risk pool was costing the state roughly $2 million a year in appropriations, yet covered only 1 percent of people in the individual market. This is likely because enrollees were charged premiums as much as twice the amount as healthy people, and faced waiting periods of up to 6 months for coverage of preexisting conditions, annual and lifetime dollar limits on their coverage, and extremely high ($5000) annual deductibles.
As the future of the ACA’s preexisting condition protections hang in the balance in federal court, several states have attempted to “bake in” those protections in their own state laws. But piecemeal legislation, such as SB 173, can do little to give Louisianans true peace of mind.