Linda J. Blumberg is a senior fellow at the Urban Institute’s Health Policy Center.
In the wake of projections warning that the Republican health-care legislation would lead to 23 million more people not having health insurance, some might find comfort in the thought that progressive states would have the option to preserve some of the Affordable Care Act’s protections for people with health problems in their states.
That comfort is unwarranted. The structure of the American Health Care Act is such that all states would find themselves under tremendous pressure to adopt the bill’s waivers of regulations, steps that would reduce premiums but also systematically hurt patients with higher health needs — especially those in low-income households.
The AHCA ostensibly gives states the choice to make dramatic changes in nongroup — or individually purchased — health insurance. But the AHCA also replaces the ACA’s tax credits and cost-sharing subsidies, based on income and local insurance prices, with a new set of tax credits based on the age of patients (although they do phase out to zero at high income levels). At the same time, the bill significantly increases premiums for older adults to lower costs for younger people.
As a result, federal financial assistance for insurance would fall for people with low incomes, older adults and people living in higher-cost insurance markets. That means people of modest means would have less to spend on health insurance across the country, translating to an increased demand for lower premiums. This pressure would likely lead states to use at least one of three strategies.
The first strategy would take advantage of an AHCA waiver that allows states to eliminate the requirement for insurers to cover “essential health benefits,” such as prescription drug coverage, mental-health or substance-use-disorder care. As people’s health insurance subsidies decrease under the AHCA, insurance that covers such benefits becomes less affordable — a problem that would worsen over time, since the AHCA’s subsidies would grow significantly slower than health-care costs. Cutting essential health benefits via a waiver is therefore one strategy to lower premiums.
The second strategy is for states to apply for the AHCA waiver that allows insurers to charge higher premiums to applicants with preexisting health conditions who have a gap in their health insurance coverage greater than 62 days. This would be a surefire way to decrease premiums. There is nothing in the AHCA that would prohibit states from allowing extremely high premium surcharges for those with significant health needs, so they could price these people completely out of the market. With many others in a state facing unaffordable insurance premiums, the pressure would likely mount from insurers and healthy consumers to take this approach to lower premiums as well.
The final strategy would be to increase premiums charged to an older adult relative to that charged to a young adult. Under current law, a 64-year-old cannot be charged more than three times what is charged the youngest adult buying the same coverage. The AHCA would increase that ratio to 5-to-1, and it allows states to request even higher ratios, making coverage even more expensive as people age. Since people tend to use more medical care as they get older, making insurance unaffordable for older adults, and thus pushing them out of the insurance pool, is another way to lower premiums for the healthy.
Any of these three approaches — selling policies that don’t cover needed benefits, pricing people with health problems out of the market or making coverage increasingly unaffordable as we age — would have the same practical effect: lowering premiums in general but raising costs for people when they need medical care.
As subsidies fall, making coverage less affordable for many, pressure to permit lower-premium insurance options would intensify. It would leave state governments and state residents, regardless of political preferences, between a rock and a hard place: many more uninsured vs. many more underinsured.
No insurer wants to be the only one offering a broad benefit or low-cost sharing plan in a market because that plan would attract sicker people. Consequently, it could quickly become difficult to find more comprehensive plans, even for those willing to spend more.
State choice is a facile and attractive talking point. But the components of the AHCA must be taken in their entirety to understand its implications. Overall and before long, the pieces of this bill are unlikely to leave any state — progressive or conservative — with more than a “Sophie’s choice.”