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ACA with state high-risk-pool enrollment prior to the ACA, concluded “[i]f the ACA’s pre-existing conditions rules are repealed, millions of Americans could find it difficult to obtain affordable health care.”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.”

When ACA costs are too high, consumers turn to short-term insurance

When prices for insurance under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) get too high, consumers are more often turning to short-term coverage as a more cost-effective option, according to a report by CBS News.  The monthly premium for a short-term plan is on average about $500 less for a family of three than that of a plan purchased on the ACA’s health insurance exchanges, which makes sort term coverage an attractive option for those who can’t afford ACA coverage.

On average, a family of three will pay a monthly premium of $283 for a short-term plan, which is about $500 less per month than coverage through a major medical plan, according to (non-ACA) online health insurance marketplace eHealth. Before the ACA, eHealth sold about 60,000 short-term policies per year, a number that more than doubled in 2014 and 2015, with approximately 140,000 policies sold over both years.

Lower costs, higher risks

While the cost of short-term plans may be more effective, consumers are making compromises in other areas. Some short-term plans lack coverage for prescription drugs, for example, and other exclude specialized coverage, such as maternity care. Most notably, unlike health insurance under the ACA, short-term policies refuse to cover preexisting conditions. Moreover, consumers must reapply for coverage annually and may be denied if their health care costs are too high—a concept that is also forbidden under the ACA.

“This is exactly the kind of coverage the ACA was designed to get rid of,” said Kaiser Family Foundation Senior Vice President Larry Levitt to the Wall Street Journal (WSJ). Consumer advocates worry that buyers do not understand the limits and risks involved with short-term policies, or that consumers do not realize they may qualify for subsidies that can dramatically reduce the cost of a plan purchased on the ACA marketplace.

Even though short-term plans such as these do not qualify as individual coverage under the ACA, triggering the tax penalty for lack of coverage, the cost of a short-term plan plus the tax penalty may still be less expensive than paying for a marketplace plan. In 2015, an individual who went without coverage for more than three months can expect to pay the higher of a percentage of his or her taxable income or a flat rate, with a maximum penalty of $975 for the 2015 tax year, CBS News reported.

Causing trouble for the ACA business

Short-term plans can put the ACA marketplaces at risk, as they can draw away healthy consumers who are needed to keep the marketplaces running as expected. Then, they add to the costs of ACA plans by buying coverage only when they have health needs. This can “cause some real problems for the market,” said Timothy S. Jost, a professor at Washington and Lee University, to WSJ. Increasingly, insurers, such as Anthem Inc. and UnitedHealth are beginning to sell short-term plans, saying that the plans fill gaps in coverage.