Repeal of ACA pre-existing condition rules could leave millions of newly insured without coverage

The Republicans’ proposals to replace the pre-existing condition rules (sections 1101, 1331, 1341, and 1501) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) with states’ high-risk pools for individuals who would be denied insurance coverage or charged higher rates in the individual insurance market “will be insufficient to maintain the health care access gains made since 2010,” according to an Issue Brief (Brief) published by The Commonwealth Fund. The Brief, which compared coverage and access gains for people with pre-existing conditions after passage of the ACA with state high-risk-pool enrollment prior to the ACA, concluded “[i]f the ACA’s pre-existing conditions rules are repealed, millions of Americans could find it difficult to obtain affordable health care.”

Pre-existing conditions defined

The definition of pre-existing conditions includes a range described narrowly and broadly, the Brief explained. “The narrow definition includes very costly health conditions” that could result in the denial of coverage for individuals prior to the ACA provision, while “the broad definition includes sight less expensive chronic health conditions” that, without the ACA provisions, could result in unaffordable health insurance costs for most individuals with pre-existing conditions.

Key findings

A prior study conducted by The Commonwealth Fund concluded that there had been significant improvements in people with pre-existing conditions to purchase health insurance coverage on their own in 2016 relative to 2010. In this Brief, The Commonwealth Fund determined that people with pre-existing conditions gained coverage and had increased access to care and found that improvement of access to care was greatest in states where coverage gains were the greatest. The data indicated that 16.5 million more people were insured in 2015 than from 2011 – 2013. The newly insured population included 16 percent of individuals that fell into the narrow definition and 57 percent that fell into the broad definition.

High-risk pools

The Brief examined the relationship between the increase in insurance coverage and access to care among individuals with pre-exiting conditions and prior enrollment in pre-existing condition insurance plans (PCIPs) and high-risk pool programs. According to the Brief, “there was no relationship between enrollment in the PCIP or the share of the nongroup market enrolled in high-risk pools and gains in coverage or access post-2014.”

MA and Part D benefit administration not always straightforward

Although the idea that private insurers can be more efficient than the government in offering health plans may be a matter of opinion, over 17 million Medicare beneficiaries have taken “advantage” of the option by enrolling in Medicare Advantage (MA). At the American Health Lawyers Association (AHLA) Fundamentals of Health Law conference, Thomas Barker, partner at Foley Hoag LLP, noted that MA enrollment has steadily increased over the past 10 years. Medicare Part D coverage is also an important benefit for those taking outpatient medications. Despite beneficiaries’ reliance on these programs, administration of the benefits still has some kinks.

Medicare Advantage

MA plans are available to those entitled to Part A or eligible to enroll in Part B. MA plans are required to offer all original Medicare benefits, but may implement their own cost-sharing and benefit designs as long as they are actuarially equivalent to original Medicare. For example, original Medicare only covers skilled nursing care under Part A if the beneficiary has been in an inpatient hospital for three days prior to nursing facility admission. Most MA plans do not impose this rule.

MA plans are required to implement the same cost sharing for four particular categories: chemotherapy administration, renal dialysis, skilled nursing care, and “other benefits specified by CMS” (of which there are none to date). Congress reasoned that this would provide for predictability in benefit design.

Local and national coverage decisions

Original Medicare may not pay for items and services that are not reasonable and necessary for diagnosis or treatment. CMS issues national coverage decisions on reasonableness and necessity of certain therapies and technologies, which apply to MA plans. If a national coverage decision has not been issued for a certain item or service, local CMS contractors have the power to issue their own decisions. Barker explained that this is when MA plan design starts to get complicated.

If an MA plan is only operating in a regional market, it must apply the local coverage decisions. However, if multiple markets are covered, the MA plan has the option of applying the coverage decision even to enrollees who are outside of the decision’s jurisdiction. In cases where no decision has been issued, nationally or locally, MA plans have some discretion. Although CMS has not clarified its position, Barker interprets the available information to mean that MA enrollees are entitled to the same benefits as original Medicare beneficiaries living in their area. Yet at the same time, CMS seems to give MA plans some discretion to use the medical necessity criteria of other local plans or develop their own evidence-based criteria.

Part D

Medicare Part D is completely offered through private plans, which are extremely competitive (compared to MA plans’ requirement to bid against an established benchmark). Part D operation also differs from MA due to the increased flexibility in benefit design. Although there is a statutorily established design, fewer than 10 percent of Part D enrollees are in such a plan. Almost all plans offer a different coverage design that is actuarially equivalent to the standard benefit. Most commonly, these plans have no deductible and have a three-tiered cost-sharing amount as opposed to coinsurance.

Beneficiaries who choose to enroll in Part D are entitled to “coverage of covered Part D drugs.” Although the definition is basic, some challenges have emerged. The drug must be FDA approved and only dispensed pursuant to a prescription, can be a vaccine and insulin, can be used for a “medically-accepted indication,” and must not be expressly excluded from coverage or covered by Parts A or B. Although Part B covers some drugs, such as those that are physician-administered, CMS contractors can make differing determinations over whether a Part B-covered drug is usually self-administered. This results in some drugs covered under Part B in some jurisdictions and under Part D in others.

The “medically-accepted indication” phrase in the statute has also presented some challenges. Barker noted that this entire issue turns on grammar as much as it does administrative law. After establishing that the drug must be prescribed and FDA approved, it says “and such term includes…any use of a covered Part D drug for a medically accepted indication.” In a relevant lawsuit, a physician prescribed a drug approved as a fertility drug to treat a rare form of ovarian cancer. Although there was compendia support, it would not have met the “medically accepted indication” definition and the Part D plan denied coverage. The court rejected the government’s argument that the phrase “and includes” is definitional, finding that reading the phrase as illustrative was more logical. Therefore, according to the court, a Part D drug does not have to be prescribed for a medically accepted indication in order to be covered.