Ensuring that people with preexisting conditions will continue to have access to health insurance has become a central issue in the presidential campaign — all the more so because the Supreme Court is set to hear oral arguments one week after the election in a lawsuit to nullify the Affordable Care Act.
Democratic presidential nominee Joe Biden has been hammering home the points that the Trump administration backs that suit, that a Supreme Court with Amy Coney Barrett on it might be sympathetic to the challenge and that the ACA is what stands between voters and the old days when preexisting conditions could disqualify you from coverage.
President Trump, however, continues to insist that although the ACA is bad and should go, “we’re always protecting people with preexisting conditions.”
“I can’t say that more strongly,” he said during his town hall last week.
Republican Senators up for reelection have been making the same claim. “You know, preexisting conditions is something we all agree should be covered,” Sen. John Cornyn (R-Tex.) said in a campaign ad this month.
There’s a danger that the two talking points will cancel each other out. (Both sides agree!) That’s why it’s important to understand the facts about why protections for preexisting conditions — the part of the ACA everyone seems to like — cannot be so easily saved if the rest of the law is overturned.
The ACA’s various taxes, subsidies and regulations make it possible for insurance companies to cover people with preexisting conditions (whose health care is generally more expensive). You can’t protect those people without the ACA or a substitute system — and the Republican opponents of the ACA have not offered a viable alternative.
Trump says that he has a competing plan, but what he’s done so far is the equivalent of waving a magic wand. Campaign-trail slogans aside, he issued an executive order saying it is the “policy of the United States” to “ensure that Americans with preexisting conditions can obtain the insurance of their choice at affordable rates.” But the president’s order carries no force of law.
Even if it did, you need a health insurance system, not a simple command from on high to achieve that goal. The details matter a lot here. First, truly protecting people with preexisting conditions requires a whole array of insurance regulations, not just one that generally prohibits discrimination against them. The ACA goes into significant detail to make sure there are no loopholes: It prohibits insurance companies from denying coverage, charging people higher premiums based on their health or gender, limiting benefits tied to preexisting conditions and capping insurance payouts for people who are very sick (either in one year or throughout their lifetimes).
Just as importantly, a plan to protect people with preexisting conditions has to contend with the economic forces that make doing so such a challenge. A key danger is what actuaries ominously call a “death spiral.”
If you guarantee comprehensive insurance to everyone, with no strings attached, people will tend to wait until they’re sick and need the insurance before buying it. With mostly sicker people in the insurance pool, premiums would go up, causing an even larger number of healthier people to drop their coverage. This process would continue and premiums would spiral out of control. The insurance market would become unsustainable. Imagine if you could buy insurance for your house any time, including when it was on fire. Everyone would just wait to see if their houses caught fire, no one would be paying premiums in the meantime, and the cost of that last-minute insurance would be astronomical.
The ACA was designed to address that problem. Specifically, it was built on the premise that to maintain a stable and affordable health insurance market, you need healthy as well as sick people to buy coverage. Healthy people’s premiums end up being much more than their current health care expenses, which helps subsidize the costs for people who are sick at the moment.
The ACA included both a carrot and a stick to encourage currently healthy people to buy insurance. The stick was the individual mandate penalty, which has since been repealed by Republicans in Congress and Trump.
The carrot is a system of premium subsidies given to low- and middle-income people buying their own insurance. Although insurance bought independently can still be quite expensive, the subsidies help to make it more affordable. About 70 percent of people in the individual insurance market receive an ACA premium subsidy. For people receiving subsidies, the subsidy covers 85 percent of the total premium on average. (The subsidies phase out at four times the poverty level, or approximately $105,000 for a family of four.) Subsidies of that size make insurance a very good deal and have maintained a balance of healthy and sick people in the insurance markets, even now that the individual mandate penalty is gone.
Without these subsidies — which would be eliminated if the Supreme Court overturns the entire ACA in the lawsuit supported by the Trump administration — healthier people would drop out of the market in droves, and the death spiral would begin.
Trump has said nothing about the subsidies that keep the insurance market stable: He’s neither said how he’d keep them nor presented a system that would sustain insurance markets in their absence. Other Republican opponents of the ACA have been similarly vague on the details. A bill by Sen. Thom Tillis (R-Tex.) would guarantee some, but not all, of the ACA’s preexisting condition protections. But it, too, is silent on the premium assistance.
The ACA’s subsidies cost the federal government over $50 billion per year, so the question of what happens to them is no small matter. When the ACA was originally enacted, these subsidies were financed through reductions in Medicare payments to health-care providers and a variety of taxes on high-income people, on “Cadillac” benefit packages and on health industries; some of those taxes have since been repealed.
To be clear, the ACA is not the only way to protect people with preexisting conditions. A universal health coverage system such as Medicare-for-all, financed through taxes, could also guarantee affordable health care for people with preexisting conditions. So could a high-risk pool available to people who are turned down by private insurers. Historically, most states provided such pools, but they were not adequately financed and as a result often had high premiums, limited coverage and waiting lists. (And almost all pre-ACA state high-risk pools excluded coverage for preexisting conditions for six to 12 months — a suboptimal “solution.”)
The ACA, Medicare-for-all and high-risk pools each would solve the problem in different ways. Each, however, requires significant government spending and regulation to work. You can’t just sprinkle magic pixie dust and wish away the complications and trade-offs — which, so far, is Trump’s approach.