I Have a Pre-Existing Condition—Do I Need to Worry About Trump's Plan?

The AHCA Passed the House. What Does it Mean for Pre-Existing Conditions?

Senior woman talking to doctor in waiting room
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The future of the Affordable Care Act and healthcare reform are uncertain under the Trump Administration and a Republican Congress. One of the issues that has been front and center is pre-existing conditions, and how Republican efforts to repeal and replace the ACA would impact people with medical conditions.

The AHCA and Pre-Existing Conditions

On May 4, 2017, House Republicans passed the American Health Care Act (AHCA), and sent it to the Senate.

The AHCA is the result of January's budget resolution that instructed Congressional committees to draft reconciliation legislation to repeal spending-related aspects of the ACA (things like subsidies, Medicaid expansion, the individual and employer mandates).

Reconciliation bills are filibuster-proof, so they only need a simple majority in the Senate. But they are limited to provisions that directly impact federal spending, and therefore cannot address all aspects of the Affordable Care Act. Legal scholars doubt that a provision to erode the ACA's pre-existing condition protections would be allowed to proceed in the Senate as a reconciliation bill.

However, the MacArthur Amendment to the AHCA, added in the House in April in an effort to win over conservative representatives, does just that. As such, the bill may have to be significantly changed in order to pass the Senate, and the House may not agree with the changes made in the Senate (the Senate has indicated that they are writing their own bill, rather than amending the AHCA; a lot is still up in the air with regards to this legislation, and the CBO score that's expected in late May will be an important consideration in terms of whether the House version of the AHCA can proceed).

For the time being, however, the bill that the House passed does roll back some of the ACA's blanket protections for people with pre-existing conditions.

The MacArthur Amendment

On April 25, Rep. Tom MacArthur (R, New Jersey) introduced an amendment to the AHCA intended to win support from the ultra-conservative House Freedom Caucus.

It was successful, and support from the Freedom Caucus ultimately resulted in enough votes to pass the AHCA.

The MacArthur Amendment lets states seek waivers—under what appears to be a lenient approval process—that would allow them to change several of the ACA's consumer protections:

  • People with pre-existing conditions who enroll in individual market plans with a gap in coverage (at least 63 days in the preceding 12 months) would be subject to premiums based on their medical history for the first 12 months under the new policy. There is no limit to how high these premiums could be, which could result in unaffordable coverage for some applicants, depending on their medical histories. This waiver would be in lieu of the 30 percent premium increase for one year (regardless of medical history) that the AHCA implements when individual market applicants seek coverage after a coverage gap.
  • The AHCA calls for premiums that are five times higher for older adults (50 - 64 years) than for younger adults. The MacArthur Amendment would allow states to waive this ratio and create a higher one instead. For perspective, the ACA limits the ratio to 3:1, meaning that older people cannot be charged more than three times as much as younger people.
  • The MacArthur Amendment also lets states seek a waiver to change the definition of essential health benefits. That would mean that some things that are required to be covered under the ACA might not have to be covered in certain states if the AHCA were to be enacted. For people with pre-existing conditions, this is certainly a significant concern, as their necessary medical treatment might no longer be covered by insurance. Under the ACA, essential health benefits are only required to be covered by individual and small group plans, and Medicaid. Large group plans are not required to cover them, although most do.

    What's All the Disagreement About?

    If you watched Republicans and Democrats argue about the AHCA after the introduction of the MacArthur Amendment, you likely saw Democrats saying that the law would eviscerate pre-existing condition protections, while Republicans said that the law specifically protected people with pre-existing conditions. So which is it?

    Technically, the MacArthur Amendment says that people cannot be denied coverage based on a pre-existing condition. That's the clause the Republicans have been referencing when they say that the law includes pre-existing condition protections. Sometimes they also skim over the problem by saying that people with pre-existing conditions would not see any adverse impact as long as they maintain continuous coverage.

    But the devil is in the details. Under the MacArthur Amendment, it's true that an application could not be declined altogether (which used to happen in most states prior to the ACA, when people had serious pre-existing conditions and applied for individual market coverage). But insurers would be able to charge much higher premiums in the individual market in states with a waiver, if applicants had pre-existing conditions and had experienced a gap in coverage in the prior 12 months.

    That could essentially make coverage unaffordable. So although the application wouldn't be denied, the consumer's access to coverage wouldn't be realistic. We all have "access" to Lamborghinis. But that doesn't mean we can all have Lamborghinis.

    The MacArthur Amendment also introduces a complication with regards to essential health benefits. If a state opts to loosen the rules that apply to prescription drugs, for example (one of the current essential health benefits), we could see plans that don't cover the full range of brand name and specialty drugs. That's a serious problem for people with pre-existing conditions that require expensive medications.

    Similarly, if a state opts to make maternity coverage optional (it's currently one of the essential health benefits and thus mandatory), most insurers in the individual market simply wouldn't offer it anymore, as was the case prior to the ACA.

    So while Republicans are technically correct in saying that the amended AHCA doesn't let insurers deny applications based on pre-existing conditions, the MacArthur Amendment absolutely does reduce protections in the individual market for people with pre-existing conditions. And as a result of the potential changes to the definition of essential health benefits, the impact could extend into the employer-sponsored market as well.

    What Else Does the AHCA Do?

    The AHCA would repeal the ACA's individual mandate penalty back to the beginning of 2016, removing one of the incentives that currently keeps healthy people in the insurance pool (insurance only works if there are enough healthy people in the pool to balance out the claims of people who need health care). But coverage would still be guaranteed-issue, regardless of an applicant's medical history.

    In order to incentivize people to maintain coverage, in states that don't seek a waiver under the MacArthur Amendment, the AHCA would instead rely on a premium surcharge for people who don't maintain continuous coverage. For enrollments after the 2018 open enrollment period (ie, anyone enrolling during a special enrollment period in 2018, or during the open enrollment periods for 2019 and beyond), applicants would be assessed premiums 30 percent higher than the standard rate if they had a gap in coverage of 63 days or longer during the 12 months prior to enrolling. The higher premiums would remain in place for the remainder of the plan year.

    It's important to note that the higher premiums would apply to anyone enrolling in an individual market policy following a gap in coverage. It wouldn't matter whether the applicant was healthy or sick. In a way, this essentially discourages healthy people from enrolling after a gap in coverage, and could further tilt insurance pools towards sicker enrollees. 

    The AHCA is very much up in the air as of early May. It has passed the House but faces a considerable challenge in the Senate. If more than two Republican Senators oppose it (or a new version written by the Senate), it will not pass.

    What to Expect for 2017

    Nothing is changing in terms of 2017 coverage, regardless of whether the AHCA passes or not. If the legislation passes and the individual mandate penalty is retroactively eliminated, the Congressional Budget Office projects that 4 million people would drop their coverage for 2017, mid-year. 

    That could exacerbate the current uncertainty facing the individual insurance market, resulting in significantly higher premiums and fewer available plans for 2018. But plans that remain available would have to continue to provide coverage for pre-existing conditions, and would not be able to discriminate against applicants based on their medical history.

    What If the AHCA Doesn't Pass and the GOP Tries Something Else?

    Recent Kaiser Family Foundation data indicates that 27 percent of non-elderly adults in the U.S. have pre-existing conditions that would make them uninsurable in the individual market if we returned to the medical underwriting standards that were in place in nearly every state prior to 2014.

    Although the AHCA has passed the House, it's likely that the Senate's version will be substantially different, and Republican lawmakers may have to go back to the drawing board. But while the AHCA absolutely does roll back some of the pre-existing condition protections that were created by the ACA, it does not go as far as returning things to the way they were pre-ACA. Although there are some very conservative lawmakers who have proposed doing so, a return to full medical underwriting in the individual market is a politically untenable proposition.

    But even if the ACA's pre-existing condition protections were to be eliminated, most Americans would still be protected, thanks to rules that pre-date the ACA. Let's take a look at how they work:

    Pre-ACA: Rules Varied Based on Type of Insurance

    There are four main ways that Americans get health insurance: Employer-sponsored coverage, Medicare, Medicaid, and the individual market. You can expect different things for each of them under the Trump Administration.

    If the ACA's pre-existing condition protections were to be repealed, the impact would not be uniform across those four groups. The primary changes wrought by the ACA in terms of pre-existing conditions were in the individual market, where about 7 percent of the U.S. population gets their health insurance.

    HIPAA Would Still Protect Group Plan Enrollees

    HIPAA (the Health Insurance Portability and Accountability Act) dates back to the mid-90s, and has long provided significant protection for people who obtain coverage from an employer (about 49 percent of the U.S. population has employer-sponsored coverage). Even full repeal of the ACA—as opposed to a reconciliation bill like the AHCA—would not eliminate HIPAA provisions, so people who get coverage from their employers would still have coverage for pre-existing conditions.

    But prior to the ACA, under HIPAA regulations, employer-sponsored plans could impose waiting periods for pre-existing condition coverage (except maternity, assuming the plan provided maternity benefits) if the enrollee had not maintained continuous coverage prior to enrolling in the plan.

    As long as the person had maintained continuous coverage for at least 12 months without a gap of 63 days or more, pre-existing conditions were covered as soon as the overall coverage became effective. But if the enrollee had a gap in coverage of more than 63 days prior to enrolling in the employer-sponsored plan, the plan could impose a waiting period of up to 12 months for pre-existing conditions.

    The ACA eliminated that provision. Under the ACA, pre-existing conditions are covered on every employer-sponsored plan, and on all non-grandfathered (and non-grandmothered) individual market plans, as soon as the person's coverage under the plan takes effect.

    The ACA also prohibited insurers from charging small groups extra premiums based on their employees' medical history. Small group coverage was already guaranteed-issue under HIPAA, but carriers could charge higher premiums to groups with poorer overall health. Once the ACA took effect, this was banned, and small group premiums could only be based on enrollees' ages, geographic location, family size, and tobacco use.

    If the ACA were repealed and a replacement didn't include a provision banning waiting periods for pre-existing conditions, the rules would revert to the way they were prior to 2014. People who maintained continuous coverage would have no waiting periods for pre-existing conditions when joining an employer's health plan. But people with a gap in coverage would potentially be subject to waiting periods for pre-existing conditions. And small groups with employees in poor health could face higher overall premiums than small groups with healthy employees.

    But the AHCA does not eliminate those ACA provisions (keeping in mind that it's a reconciliation bill, and is thus limited in terms of what it can change). Under the AHCA, the ban on pre-existing condition waiting periods for employer-sponsored plans would remain in effect, and premiums would not be dependent on the health status of the employer group.

    Medicare and Medicaid Would Still Cover Pre-Existing Conditions

    Medicaid and Medicare cover pre-existing conditions. There are some caveats with Medicare, however, which do not have anything to do with the ACA:

    • In most states, people enrolling in a Medigap plan after their initial enrollment window (and without access to one of the very limited Medigap special enrollment periods) are subject to medical underwriting. Their applications can be denied, they can be offered a plan with a higher-than-standard premium, or the carrier can impose a pre-existing condition waiting period.  
    • In most cases, if you have end-stage renal disease (ESRD), you cannot enroll in Medicare Advantage

    Although the ACA didn't change anything about pre-existing condition coverage under Medicare and Medicaid, it did substantially expand access to Medicaid. Total enrollment in Medicaid/CHIP has increased by nearly 18 million people since the end of 2013, thanks in large part to the ACA's expansion of the eligibility rules for Medicaid.

    Prior to the ACA, Medicaid (which included coverage for pre-existing conditions) was available in most states only for low-income pregnant women and children, some very low-income parents, along with low-income residents who were disabled and/or elderly.

    Under the ACA, 31 states and the District of Columbia have expanded Medicaid to all adults with household income up to 138 percent of the poverty level, which is a little more than $16,000 in annual income for a single person. 

    If the ACA is repealed and the replacement isn't as robust, millions of people who currently have Medicaid could lose realistic access to coverage. They would be able to purchase coverage in the individual market (likely with some type of tax subsidy), but that might not be financially feasible for those with the lowest incomes. If they were to become uninsured, their pre-existing conditions would no longer be covered, nor would any unforeseen medical care they might need.

    The AHCA calls for freezing enrollment in expanded Medicaid as of 2020, and switching Medicaid to a per-capita allotment or block grant rather than the current open-ended federal matching system used today. 

    Pre-Existing Conditions and the Individual Market

    As described above, the AHCA—with the MacArthur Amendment—does roll back some of the pre-existing condition protections that were created by the ACA. But there's the MacArthur Amendment may not pass the test for a reconciliation bill under Senate rules, since reconciliation bills can only address issues that directly impact federal spending. So the Senate's version of the health care reform bill might restore pre-existing condition protections—which then might not garner enough support in the House.

    But understanding how pre-existing conditions were handled pre-ACA is an important part of understanding why the ACA was necessary in the first place, and what's at stake if the pre-existing condition protections are altered.

    Coverage in the individual market in all but five states was medically underwritten prior to 2014, when the ACA banned that practice (individual market coverage is the kind you buy for yourself—through the exchange or off-exchange—rather than obtaining it from an employer).

    There are more than 20 million people who have coverage in the individual market. Many of them already had individual market coverage pre-ACA, but some were only able to obtain coverage when the ACA's rules took effect and carriers were no longer able to deny applications based on applicants' medical history. 

    Medical underwriting meant that individual market health insurance applications included long lists of questions about applicants' medical history. Coverage eligibility depended on the answers, and for people who were allowed to enroll despite their pre-existing conditions, premiums were often higher than the standard rates.

    Pre-existing conditions included basically any medical diagnosis. Being overweight, having elevated cholesterol or blood pressure, a history of visits to the chiropractor... everything was analyzed by medical underwriters to determine whether the applicant was eligible for coverage, and if so, at what price.

    The ACA changed all that. For the individual market, the ACA's pre-existing condition rules were a game-changer. Rejected applications and increased premiums due to medical history became a thing of the past, as did pre-existing condition waiting periods. 

    In addition to the AHCA, several other pieces of ACA repeal/replace legislation have been introduced by GOP lawmakers in the 2017 session. Many of them call for retaining the ACA's current protections for people with pre-existing conditions.

    But if the ACA's guaranteed issue requirements are not retained, there are two main avenues for covering pre-existing conditions that have been included in most of the proposals put forth over the last few years: high-risk pools or a "continuous coverage" requirement, or both.

    Both are included in the Empowering Patients First Act, introduced by Rep. Tom Price (R, Georgia), who was confirmed by the Senate in February 2017 to be the Secretary of Health and Human Services. Both are also included in A Better Way, the healthcare reform proposal put forth by House Republicans in June 2016.   

    High-Risk Pools

    Most of the Republican proposals also include a return to high-risk pools for insuring people who aren't able to obtain coverage in the individual market (in proposals that include continuous coverage provisions, high-risk pools would be needed to insure people who don't maintain continuous coverage, and whose pre-existing conditions are significant enough that they're not able to obtain medically underwritten coverage).

    High-risk pools were established in 35 states during the 90s and 00s. But the overall shortcomings of the high-risk pool model were part of the reason the ACA was needed in the first place. The plans tended to be expensive, and typically had high out-of-pocket exposure and limited lifetime maximum benefits. In addition, some high-risk pools had to limit enrollment over the years due to budget constraints.

    High-risk pools mostly ceased operation when guaranteed-issue individual market coverage became available in 2014. But some states still have functional high-risk pools. With adequate federal funding, high-risk pools could be a viable solution going forward. But without adequate funding, it's unlikely that they'd be any more successful than they were in the years leading up to the implementation of the ACA.

    The AHCA allocates federal funding that states could use for high-risk pools, but they could also use it for other market stabilization efforts. High-risk pools are not a required part of the AHCA in the form that passed the House on May 4.

    Continuous Coverage

    Under the ACA, coverage is guaranteed issue, period. It doesn't matter how long you've been uninsured when you enroll, and it doesn't matter what pre-existing conditions you have.

    Under the various GOP replacement proposals that call for continuous coverage, the idea is to basically extend some of HIPAA's protections to the individual market. People who maintain continuous coverage (either in a group plan or an individual plan) would be able to enroll in a new plan at the standard premium, regardless of pre-existing conditions (ie, with no medical underwriting).

    But people who experience a gap in coverage would be subject to penalties. The idea is to incentivise people to maintain continuous coverage without resorting to the ACA's unpopular individual mandate.  

    In states that don't seek a waiver under the MacArthur Amendment, the AHCA includes a premium surcharge for people who don't maintain continuous coverage. The additional premiums would apply uniformly, to both healthy and sick applicants.

    This is different from a continuous coverage provision that would allow insurers to use medical underwriting when applicants enroll following a gap in coverage. That's the approach that would be used under the AHCA in states that seek a waiver to do so. In those states, healthy people with a gap in coverage would be able to enroll in individual market coverage with standard rates. But people with pre-existing conditions (which is a very broad list) would be subject to sharply higher premiums if they apply for individual market coverage without a history of continuous coverage during the previous year.

    Do I Need to Worry?

    Possibly. The version of the AHCA that passed the House is absolutely detrimental to people with pre-existing conditions who seek coverage in the individual market. It's also problematic in terms of the possibility that essential health benefits could be watered down, making it harder for people with small group plans to obtain coverage for their pre-existing conditions.

    And even in the large group market, the ACA's provisions the ban lifetime and annual benefit maximums and limit out-of-pocket costs are only applicable to essential health benefits (which aren't required to be covered under large group plans, but if they are—and they usually are—the lifetime/annual benefit limit ban and the cap on out-of-pocket costs apply).So if essential health benefits are rolled back, people with ongoing medical needs who have employer-sponsored plans could be impacted too.

    But the bill is likely to undergo significant alterations in the Senate. And for the time being, nothing has changed. If you've already enrolled in coverage for 2017, it will still be effective (and covering pre-existing conditions) even if Congressional Republicans ultimately pass legislation to repeal portions of the ACA during the 2017 legislative session. And Medicaid expansion will remain in place throughout the year, as proposed changes (including those called for in the AHCA) wouldn't take effect until a few years down the road.

    Republican lawmakers have repeatedly said that the AHCA would continue to protect people with pre-existing conditions. But this is simply not true. The future of the legislation remains to be seen, but the concerns regarding pre-existing conditions are absolutely valid.

    Sources:

    Congressional Budget Office, American Health Care Act, March 13, 2017.

    HealthCare.gov, Grandfathered Health Insurance Plans.

    Kaiser Family Foundation, Health Insurance Coverage of the Total Population. 2015.

    Kaiser Family Foundation, Pre-existing Conditions and Medical Underwriting in the Individual Insurance Market Prior to the ACA. December 12, 2016.

    United States Department of Labor, Health Benefits Coverage Under Federal Law. September 2014.

    United States Department of Labor, Health Insurance Portability and Accountability Act (HIPAA) Portability Of Health Coverage And Nondiscrimination Requirements FAQs.

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