Removing two rules from the individual market could very
easily disrupt many others.
June
12, 2018
A new Trump administration court
challenge is explicitly aiming to remove a
central promise of Obamacare — its protections for people with
pre-existing health conditions. But it could also make it much harder for any
individual to obtain health insurance on the open market.
The administration’s brief, filed in Federal District Court in
Texas on Thursday, focuses on the core Obamacare provisions that make
insurance available to people with prior illnesses. Those
protections — which President Trump once
praised and Republicans in Congress vowed not to disrupt last
year — don’t exist in a vacuum.
Undoing them could also undo other programs in the health law, making
insurance harder to obtain for people who buy their own insurance or get it
through a small company, and possibly making it unaffordable for many
middle-income people who receive financial assistance with their health
insurance premiums under the law.
The Justice Department’s brief argues
that last year’s tax reform bill has rendered Obamacare’s individual mandate —
the requirement that a vast majority of Americans buy health insurance —
unconstitutional. If the individual mandate is stripped away, it argues, two
other key parts of Obamacare should necessarily fall with it.
Those provisions are called guaranteed issue and community
rating. Guaranteed issue means that insurance companies need to sell insurance
to any customer who wants to buy it, regardless of age, gender, health history,
profession or any other individual factor. Community rating means that everyone
who buys similar insurance should pay similar prices; under the health law,
premiums can vary based only on the age of customers and the place they live,
and, in some states, whether they smoke.
Those two provisions are what make it possible for people to buy
insurance if they have pre-existing health conditions. Without guaranteed
issue, a customer with multiple sclerosis could be denied health insurance.
Without community rating, a customer with acne could be charged a much higher
price than one without.
Before the Affordable Care Act established Obamacare, few states
had guaranteed issue or community rating, which means we
know how such a market would work. Many people with serious health
problems would be unable to buy insurance. People with more minor ones could
face high prices if they wanted coverage. In the years before Obamacare, people
were routinely turned down for coverage if they worked in a risky job like
roofing, had a blood cholesterol level above 260, or had a history of asthma.
Because of Obamacare’s design, community rating is important in
making sure lots of other parts of the health law work. The subsidies to help
middle-income Americans buy health insurance, for example, are calculated based
on the assumption that there is a standard price for insurance that everyone is
charged.
The Trump administration brief doesn’t speculate on what would
happen to such subsidies if it won the case.
It is possible that regulators could devise a new way to
calculate the subsidies. But in my conversations with several experts on the
law, no one was quite sure how. When Congress considered repealing the
Affordable Care Act last year, most of the plans changed rather than eliminated
those subsidies. Taking them away altogether would mean millions fewer people
would have health insurance, according to estimates from
the Congressional Budget Office.
(Even if regulators found a way to preserve the subsidies, the
subsidies would be useful only for Americans healthy enough to qualify for
insurance. For the sick, “it’s a Groupon that’s expired,” said Mark Hall, the
director of the health law and policy program at Wake Forest University.)
Community rating is also important for Obamacare’s online
insurance marketplaces. Now, people who want health insurance can go to one
website and shop for plans, comparing benefits, deductibles and prices. They
can choose a plan and sign up within hours.
But with no guaranteed coverage and no standard premiums, it
would be impossible to know whether you could buy any particular plan, or at
what price. Customers would need to apply to each plan separately, filling out
detailed medical histories — and in some cases submitting blood and urine
samples — to find out what they would be allowed to buy. Those steps would make
shopping much more difficult. Obamacare currently limits the period during the
year when people are allowed to shop for insurance, meaning that customers
might have to submit multiple applications at once in order to be able to buy
insurance before the shopping period closed.
There’s also reason to think that, in a world where community
rating and guaranteed issue disappear but the rest of Obamacare remains, many
more people would be turned down for insurance than in the pre-A.C.A. days.
That’s because the Trump administration wants to leave other insurance
regulations in place that didn’t exist before the health law. Obamacare says
that all health plans need to cover a standard set of health benefits and can’t
limit the amount they will pay in a year. In the old days, plans often didn’t
cover prescription drugs or treatment for mental illness. Those strategies
helped weed out customers who had expensive health needs and limited the
companies’ risk.
In a system where the plans would need to cover expensive drugs
for H.I.V. or inpatient treatment for schizophrenia, they might be more leery
of taking on any customers at risk of needing such services. “I would think
that insurers would end up being stricter in their exclusions of people because
they couldn’t limit benefits,” said Larry Levitt, a senior vice president at
the Kaiser Family Foundation, a health research group.
There is no guarantee that the lawsuit will turn out the way the
Trump administration wants, of course. And any final answer is probably a long
way away, since the case is likely to be appealed once it is decided. A group
of Republican states that brought the lawsuit initially argued that the
entirety of Obamacare should be invalidated. A decision for those litigants
would mean changes not just to the individual market but to Medicare, Medicaid
and a
broad array of other health programs.
But if the court rules in the way the Justice Department has
requested, the result will be a world in which it is much more difficult for
individuals and small businesses to buy health insurance. The health law is
complicated, with interlocking parts. It will be hard to remove just two rules
from the individual market without disrupting many others.
Margot
Sanger-Katz is a domestic correspondent and writes about health care for The
Upshot. She was previously a reporter at National Journal and The Concord
Monitor and an editor at Legal Affairs and the Yale Alumni Magazine. @sangerkatz
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