What’s at Stake: The World of Health Insurance for People with Pre-Existing Conditions before the ACA

With the death of Supreme Court Justice Ruth Bader Ginsburg comes renewed concerns about the future of the Affordable Care Act (ACA). The latest attempt to bring down the ACA, California v. Texas, comes before the Supreme Court one week after the presidential election. This ongoing litigation, led by the Texas Attorney General and joined by the Trump administration, relies on the argument that the ACA’s individual mandate is unconstitutional and as a result, the entire law must be struck down. Legal experts across the political spectrum have found this case to be without merit, yet such are the politicized times we live in that a new majority on the Supreme Court could wipe away a 10-year-old law that has become intertwined with our health care system and fundamentally changed people’s expectations of health insurance coverage.

The confirmation hearings for Supreme Court nominee Judge Amy Coney Barrett have begun in front of the Senate Judiciary committee. While no one knows how a Justice Barrett might rule in the case, her previous writings indicate she believes the ACA is unconstitutional.

What would this mean? We have all seen the numbers. Twenty-one million people could lose their health coverage. Health care providers could lose $50 billion as their uncompensated care costs increase. States would lose $134.7 billion in federal funds that support Medicaid expansion and premiums tax credits. As many as 2.3 million young adults could no longer be able to stay on their parents’ plans. An estimated 133 million people could face discrimination by insurance companies because they have a pre-existing condition.

Today, people take pre-existing condition protections for granted. They forget what it was like before the ACA’s reforms went into effect, just 7 years ago.

Those with Pre-Existing Conditions were Routinely Rejected for Health Insurance

Some of the most significant changes have been made to the individual market. This is where people seek health insurance who are not otherwise covered by an employer or eligible for public coverage from Medicare or Medicaid. This population includes self-employed entrepreneurs or gig workers, farmers and ranchers, early retirees, part-time workers, widows, and young people aging off of their parents’ plan.

Before the enactment of the ACA, insurers were not required to cover pre-existing conditions. But what does this mean? When shopping for coverage in the individual market, insurers would require people to fill out lengthy applications detailing the entirety of their health history, prescription drugs they take, and current health status. If insurers decided it was too risky to take someone on because of potential health needs, they could simply reject them. In fact, average denial rates in the individual market before the ACA were nearly 20 percent. This number is thought to have been much higher in practice because many insurance agents would informally discourage people they deemed risky from submitting an application.

People were rejected for some very minor health conditions. For example, asthma, high blood pressure, sleep apnea, anxiety, even acne or ear infections could trigger a rejection for coverage. Even once someone successfully enrolled in a plan and started using health care services, insurers were able to investigate claims submitted to see if any of the conditions they were getting treatment for were “pre-existing.” Today, 54 million people have a pre-existing condition that would have led an insurer to reject their application, before the ACA.

Insurers also routinely dropped individuals’ coverage if they got sick. Sometimes plans even retroactively canceled policies, leaving people with thousands in unpaid medical bills when they thought they were covered. In light of the pandemic, there are increasing concerns that those who have suffered from COVID-19 could face pre-existing condition barriers to enrolling in coverage, if the ACA is struck down.

For People with Preexisting Conditions, Health Insurance was Unaffordable

Not only did the ACA prohibit insurers from denying people coverage based on health status, it barred them from charging them a higher premium. The ACA instituted rating requirements that prohibit insurers from imposing higher premiums for people based on their health status, as well as other factors that served as proxies for health status, such as gender and occupation. Before the ACA, people in their early sixties could be charged as much as 6 times as someone in their twenties purchasing the same health plan. The ACA limits insurers to charging older enrollees no more than 3 times the premium a younger person is charged.

In addition to limiting insurers’ rating practices, the ACA provides subsidies to help low- and moderate income afford premiums and cost-sharing. Those in the individual market do not have the benefit of an employer paying for a significant proportion of their premium, nor do they have the tax advantages of those with employer-based coverage. Without these subsidies, even if pre-existing condition protections were somehow maintained, many would find it nearly impossible to pay their premium. In 2009, 73 percent of people who tried to buy coverage on the individual market did not purchase a plan because the premiums were out of reach.

The reforms to improve affordability do not stop at private health insurance. The expansion of Medicaid, which provides free health coverage for low income people expanded coverage to 12 million low income adults. Cuts to this program would send these individuals back to the individual market where they would almost certainly not be able to afford the premiums. As many as 3 million children who were eligible for Medicaid before the ACA would also likely lose coverage as their parents drop off. This loss of coverage would reduce preventive screenings and would be devastating to safety-net hospitals that rely heavily on Medicaid to combat uncompensated care.

Coverage was Inadequate

Before the ACA, individual market coverage was often full of holes and left enrollees at significant financial risk if they got sick. The coverage often excluded important benefits, set a cap on coverage, and/or came with very high out-of-pocket cost sharing. For individuals with preexisting conditions, it was common for plans to refuse to cover the care they needed to treat their condition. And important benefits were often missing. For example, 20 percent of adults with individually purchased insurance before the ACA lacked coverage for prescription drugs. Maternity services were routinely excluded. In 2013, 38 percent of plans did not cover mental health services. Preventive care was not always covered and many women reported that they postponed or went without preventive care because of the financial obligation before the ACA. Now, plans are required to cover preventive services at no cost to the member.

Before the ACA, 102 million people were enrolled in plans with a lifetime limit on benefits and approximately 20,000 people hit those limits every year. Those limits could be a matter of life and death. This was often the case for babies born prematurely who need extensive treatments from the moment they are born. Timmy Morrison, born six days after the lifetime limit provision of the ACA was implemented, demonstrates the real life impact these consumer protections can have. Timmy was born prematurely, with NICU bills exceeding $2 million. If he had been born a week earlier, he would have hit his lifetime limit before he even left the hospital.

Beyond the skimpy benefits and restrictive coverage, plans also had significant out of pocket burdens for enrollees and underinsurance was rising. Nineteen percent had no limit on their out of pocket cost-sharing. People enrolling in coverage on the individual market faced higher deductibles, copayments and coinsurance than those who got coverage through their employer. Of Americans who reported medical debt before the ACA, 40 percent of them had some form of health insurance. The ACA set limits on the total out of pocket spending plans could require, and required plans to issue rebates to policyholders if their administrative costs and profits exceeded a maximum threshold. Without those protections and subsidies, insurers would be free to continue to shift the health care cost burden onto consumers.

Individuals buying coverage on their own often had a very hard time finding out what services were actually covered and had a very limited ability to “shop” for plans. Plans made it difficult for shoppers to compare plans on an apples-to-apples basis. The marketplace now provides a place for consumers to be able to shop for plans that are required to cover essential health benefits. Consumers have the peace of mind that all the plans they are reviewing have a minimum standard of coverage adequacy for benefits and cost sharing.

We Cannot Go Back

Before the ACA, the individual market was an inhospitable place for people with health conditions. If the ACA is struck down by the Supreme Court, the protections that these individuals have come to rely on will fall away. Furthermore, racial disparities in insurance coverage and health outcomes would worsen. States would lose significant revenue while they are struggling with challenging state budgets due to the pandemic. Hospitals, many of them an economic lifeline for their communities, may have to reduce staff or even close as their uncompensated care costs rise.

After 10 years many may have forgotten what life was like before the ACA, but it’s important to remember the “bad old days” and how far we’ve come.

2 thoughts on “What’s at Stake: The World of Health Insurance for People with Pre-Existing Conditions before the ACA

  1. Thanks for an excellent piece! Here are two small observations:

    1. Many smaller hospitals are losing money already, due to cutbacks in non-COVID care. Without the ACA-insured and Medicaid patients, the hospitals will be in even worse financial condition.

    2. The ACA requirement to maintain a three times limit between old and younger insureds has not worked well. In many markets you now have a $300/month premium for a 27 year old and a $900/month premium for a 62 year old. Without large subsidies, neither one of them can afford a policy. It would be better to bring the 62 year old onto Medicare.

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