June 5, 2017 - Weekly Legislative Update
American Health Care Act Update
As you probably know, last month, the House passed an Affordable Care Act repeal and replace bill (the American Health Care Act or AHCA). A few key amendments were made to the bill at the last minute in order to assemble the votes necessary to pass the bill. These amendments included changes to the way that the AHCA would treat pre-existing conditions.
To help shed some light on this complex issue, we wanted to share with you the below piece by Alson Martin, who is a health law expert and the Vice President of Health Care for the Small Business Council of America (which is an SBLC member with TIA).
The American Health Care Act: Pre-Existing Conditions, State Waivers & High-Risk Pools
Twenty-five percent (25%) of adult non-elderly persons in US have a pre-existing health condition. Under the Affordable Care Act ("ACA" or "Obamacare"), insurers had to charge people the same age the same amount, regardless of their health status. The AHCA, as passed by the House, would change that, allowing states to apply for waivers to allow insurance companies to charge sicker people (those with pre-existing conditions) insured through the individual market more if those people had a gap in their insurance coverage of more than 63 days, subject to whatever protections they could obtain by their state's high-risk pool.
Persons With Individual Health Insurance.
A person with a pre-existing condition getting individual health insurance (not employer provided insurance) would not be affected by the AHCA unless he or she had a lapse in health coverage for longer than 63 days. Then, the degree to which he or she is affected will depend on whether he or she is the resident of a state that has gotten a waiver.
If the individual in question resides in a state that has not gotten a waiver, then for a period of one year, an insurance company can charge the individual 30% more for his or her premium.
If the individual in question resides in a state that has gotten a waiver, then for a period of one year, that person would face insurance rates that could be based on his or her individual condition after health status underwriting, subject to whatever high-risk pool protections are available in that state.
States with waivers can opt out of Obamacare's list of 10 essential health benefits, meaning certain types of drugs or procedures could be excluded from coverage, in effect making coverage of pre-existing conditions, such as pregnancy or mental health benefits, very expensive for those with more than a 63-day gap in coverage. The AHCA's inclusion of high-risk pools demonstrates that the GOP is providing states with the option of removing Obamacare's protections for people with preexisting conditions because it is only once those protections are gone that high-risk pools become necessary.
Persons With Employer Coverage.
For those individuals with a pre-existing condition who are covered through an employer plan, there is less risk. Most employers will want good plans to attract and retain good employees. However, the AHCA allows employers to pick any state to "match" in terms of benefits, including one that waived the essential health benefits requirements. In that way, people who get insurance through work might once again be exposed to high out-of-pocket costs or limits on what their insurance companies will pay. For example, if a company in Ohio decided to match Delaware, and Delaware had a waiver and did not require prescription-drug coverage, the Ohio company could provide no such coverage or impose a limit on prescription-drug coverage for its employees.
The other concern is the 63-day lapse when a new employer's plan has a longer waiting period requirement for plan entry. For example, suppose an employee quits Old Employer to take a better position with New Employer. Old Employer only has 15 employees (now 14 employees) and thus isn't required to offer COBRA coverage. New Employer has a standard 90-day waiting period for entry into its plan. Unless the employee is able to purchase individual coverage for the gap period (and hopefully doesn't live in a county for which there are no insurers on the public Exchange/Marketplace), the employee will have a gap in coverage that is greater than 63 days. Depending upon the state where New Employer is located, it is possible that, because of the gap, the employee would be subject to pre-existing condition health status underwriting and New Employer and employee paying substantially higher rates for one year.
High-Risk Pool Individual Health Coverage In States With Waivers.
Those states seeking waivers would collectively receive $138 billion from the federal government over 10 years to help defray costs for sick people by creating high-risk pools. The more states that seek a waiver, the less each of those states would receive, since the dollars available are fixed in amount. In states with a waiver, health insurance would be cheaper for people who are relatively healthy, while sicker people would be in their own subsidized risk pool if they had a gap in coverage over 63 days. Removing sicker people from the individual market and waivers from covering all 10 essential health benefits would allow policies with skimpier options and not covering the sickest people, thus resulting in lower premiums.
Studies from the Center for American Progress and Avalere Health suggest the funds provided for these high-risk pools under the AHCA would only be enough to cover a small percentage of people with preexisting conditions. States would be able to design their high-risk pools in different ways and it is likely that they would not offer the same protections that Obamacare does for those with pre-existing conditions, experts say. This high-risk pool funding likely wouldn't go far, especially if many states apply for waivers. Further, the money is only guaranteed for five years. States could use their chunk of the $138 billion in various ways, such as to set up a risk pool. Alternatively, they could just use it to subsidize insurance in other ways, like by paying insurers to offset the cost of sick patients, which could benefit healthy insureds as well.
Prior to the ACA, states with high-risk pools only covered a small fraction of those who were potentially eligible, the Kaiser Family Foundation found. The high-risk pools' strict rules and high costs dampened enrollment by those who were sick and needed coverage. Andrew W. Gurman, president of the American Medical Association, has stated: "The history of high-risk pools demonstrates that Americans with pre-existing conditions will be stuck in second-class health care coverage -- if they are able to obtain coverage at all." Their condition might not be covered for a several month waiting period and may have a lifetime dollar limit.
Our View From Bowie
Whether the AHCA elements described above will ever become law remains to be seen. Some Republican Senators, including Maine's Susan Collins, have already raised concerns that the funding for the risk pools is inadequate. As the protections for pre-existing conditions is one of the most popular parts of Obamacare, many of the more moderate Senators may also be concerned about the political ramifications of such a bill. We anticipate seeing many of these provisions modified significantly by the Senate. Whether the Senate and the House are able to finally reach agreement and pass the same healthcare bill in both chambers remains unclear.