— Rep. Kevin Cramer (R-N.D.), candidate for Senate, in a radio interview, Aug. 22, 2018
In the battle for control of Congress, the health-care table has turned. For years, Republicans bashed Democrats for passing the Affordable Care Act, a.k.a. Obamacare. But the failed GOP effort to repeal it has opened the door for Democrats to attack Republicans on the bills that would have replaced the law. One of the law’s most popular provisions bars insurance companies from charging higher prices or refusing coverage to people with existing health conditions.
A case in point is the tight Senate race in North Dakota between incumbent Heidi Heitkamp (D) and her challenger, Rep. Kevin Cramer (R). Heitkamp is running an ad in which a North Dakota resident point-blank asks Cramer why he voted to allow insurance companies to go back to denying coverage for preexisting conditions. The replacement bills did try to deal with that issue, as we will discuss below. The Heitkamp campaign says she is referring to the many bills passed by House Republicans without a replacement in hand, with Republicans knowing President Barack Obama would veto the legislation.
For the purposes of this fact check, we are going to examine Cramer’s statement that the American Health Care Act (AHCA), passed in the House, had safeguards that prevented price discrimination as a result of preexisting conditions. (The bill never advanced in the Senate.) Cramer serves on the House Energy and Commerce Committee and has said, “I have read the 200-page bill in its entirety and debated nearly every section of it during a 27-hour hearing.” So he certainly should understand the nuances. Indeed, we received a long and detailed explanation from his campaign.
The Affordable Care Act operates on the theory that, in the individual market, costs could be spread among a community of people with insurance, in what is called the “community rating.” In other words, healthier people help subsidize the costs for sicker people. (People who get insurance from their employers — about half of Americans under 65 — already participate in a group that spreads the risk.)
Before Obamacare, insurance companies could consider a person’s health status when determining premiums, sometimes making coverage unaffordable or even unavailable if a person was sick with a problem that required expensive treatment. The ACA prohibited that, in part by requiring everyone to purchase insurance, in what was known as the individual mandate.
Republicans, as part of Trump’s tax bill, in effect eliminated the individual mandate. But their law still needed an incentive to encourage people to buy insurance. As a replacement, the AHCA included a continuous-coverage provision that boosted insurance rates by 30 percent for one year if a person has a lapse in coverage for more than 63 days.
Tim Rasmussen, Cramer’s communications director, said that Cramer in his remarks was referring to the MacArthur Amendment, crafted by Rep. Tom MacArthur (R-N.J.). Rasmussen said that because of the amendment, “under no circumstance can someone be denied coverage because of a preexisting condition.”
However, a state could seek a waiver as long as that state “had chosen to take care of the people through other risk-sharing or reinsurance mechanisms.” (The bill would have made $8 billion available for six years to help fund high-risk pools.) Rasmussen noted that “to be charged based on individual status, one would have to be in a state that obtained a waiver, purchase insurance in the non-group market, and have a lapse in coverage for 63 days or more.”
There were other possible waivers, such as allowing a state to replace a federal essential-benefits package with a more narrowly tailored package of benefits. It is important to keep in mind that the changes were limited to the individual and small-group markets. (That’s about 6 percent of the population in North Dakota.) Someone who got insurance through an employer presumably would not have been affected.
In a waiver state, the 30 percent late-enrollment penalty would not apply, but a person’s health status would be considered. The theory was that removing sicker people from the insurance market and allowing policies with skimpier options would result in lower overall premiums.
But there’s often a difference between how things are described on paper and how they might work in practice. The waiver system designed under the AHCA was criticized by health-care experts. The nonpartisan Congressional Budget Office sketched a scenario that described unraveling insurance markets and spiraling health-care premiums if the AHCA had become law.
“The bill allowed states to waive community rating for people without continuous coverage,” said Larry Levitt, senior vice president at the Kaiser Family Foundation. “People with preexisting conditions who had a gap in coverage would have been guaranteed insurance, but depending on what their state did, the premiums could have been astronomical. The bill also allowed states to alter the benefits insurers are required to cover, which could affect people with preexisting conditions who need certain types of services or medications.”
Matthew Fielder of the Brookings Institution, who had been chief economist of the Council of Economic Advisers under Obama, said that under the MacArthur Amendment, he believed the higher premiums would extend even to people without coverage gaps. That’s because healthy people would have an incentive to drop out of community-written pools and just buy insurance based on their health status, as premiums would be lower. Thus the community pools would be filled with increasingly sicker people facing increasingly higher premiums.
“In principle, people with preexisting conditions could have been protected against these high premiums if the AHCA had provided sufficient funding for high-risk pools,” Fielder said, but he said the $8 billion over six years was insufficient. “For comparison, aggregate individual market claims spending under current law (nationwide) was on track to be several hundred billion dollars over that six-year period, of which a large share would have been accounted for by people with preexisting conditions.”
The CBO, in its report, said that states that took advantage of these provisions could perversely end up blowing up their insurance markets, leaving spiraling costs for people with preexisting conditions, even as average premiums might end up lower. About one-sixth of the U.S. population was estimated to live in states that would face this problem.
Eventually, the CBO said, community-rated “premiums would be so high in some areas that the plans would have no enrollment. Such a market would be similar to the nongroup market before the enactment of the ACA, in which premiums were underwritten and plans often included high deductibles and limits on insurers’ payments and people with high expected medical costs were often unable to obtain coverage.”
The CBO was highly skeptical that the GOP legislation provided enough funding for states to offer assistance to people who could not afford insurance. “The funding would not be sufficient to substantially reduce the large increases in premiums for high-cost enrollees,” the agency said, so over time, less-healthy people “would be unable to purchase comprehensive coverage with premiums close to those under current law and might not be able to purchase coverage at all.”
“If you truly want to protect people with preexisting conditions, you really need a whole series of interconnected insurance regulations or adequate funding to cover people in some kind of high-risk pool,” Levitt said. “Insurers will take advantage of any leakage in the regulations and find ways to avoid people with expensive preexisting conditions.”
Rasmussen said the CBO report was “static” and “doesn’t address potential beneficial actions at the state level, especially considering the resources and flexibility provided to states under the AHCA,” including another $130 billion for innovation. He noted that North Dakota had kept a high-risk pool known as CHAND, established before Obamacare, and the money could be used “to innovate and fund programs such as CHAND to lower costs for their unique patient populations.” Most other states abandoned their high-risk pools after the enactment of the ACA.
Fielder said the money in the $130 billion fund had already been earmarked for other purposes, so “if those funds were used to address premium increases experienced by people with preexisting conditions due to the MacArthur Amendment, then the bill had an undisclosed funding hole somewhere else.”
Rasmussen added that the AHCA would have provided a tax credit of between $2,000 and $14,000 a year for low- and middle-income individuals and families who do not receive insurance through work or a government program. (The credit would phase out at incomes above $75,000 for individuals and $150,000 for families.) The ACA provided hefty premium subsidies and cost-sharing subsidies for people and households up to 400 percent of the poverty level (about $50,000 for an individual and $100,000 for a family of four).
The Pinocchio Test
In many ways, the GOP pledge on preexisting conditions is the equivalent of Obama’s infamous pledge that under Obamacare, “if you like your plan you can keep it.” It may look great on paper, but the reality is that it is not a sustainable pledge. That was apparent with Obama’s promise when the ACA was being debated — as The Washington Post highlighted three times in 2009 and 2010 — and that’s also the case here. The problems inherent in the structure are well documented in the CBO report.
Thus Cramer goes too far to claim that in the AHCA, there are “safeguards to make sure that there’s not price discrimination as a result of preexisting conditions.” In a state that did not seek a waiver, that might have been correct. But the proposed law gave states the option to seek waivers that would in effect nullify those promises, and it is quite possible North Dakota would have been one of those states. He earns Three Pinocchios.
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