The last-minute addition of $8 billion won’t make a difference.

By Jonathan Gruber
May 4, 2017

The recent debate over repealing and replacing the Affordable Care Act, more commonly known as Obamacare, has centered on the question of protecting Americans who have preexisting conditions. Republicans’ new bill, which is on the verge of passing the House of Representatives on Thursday, strips away those protections.

Even though the GOP’s latest proposal adds $8 billion to cover people with preexisting conditions, it won’t be enough to guarantee coverage for all Americans. Furthermore, in order to win the votes of the most conservative members of the House, this law would allow states to opt out of these vital insurance protections, returning the U.S. to the bad old days of insurer-led discrimination.

For most Americans, this is an irrelevant concern. They have employer- or government-provided insurance. Under this system, Americans, their employers, and the government all pay in, and in return they are covered if they get sick. They don’t have to explain where an illness came from: If they are sick, they get the health care they need.

But before 2014, for the roughly 70 million Americans without such coverage, it wasn’t that simple. If they got sick, the insurer got to decide if their illness was the result of something wrong with them before they bought insurance. If the insurer decided this was the case, they didn’t have to cover treatment.

And insurance companies were very good at finding reasons why this might be the case. For example, Sarah Kliff at Vox writes about the case of a woman in Tennessee whose house was infested with Asian beetles. Unbeknownst to her, she had a debilitating allergy to these beetles. But when she went to the doctor for treatment, the insurance company would not pay her bills, claiming that this was a preexisting condition. She had no idea about it, since she had never met an Asian beetle before!

Banning the exclusion of such preexisting conditions was perhaps the most popular element of Obamacare. It ensured that all Americans, regardless of their life circumstances, could not be bankrupted by some genetic flaw beyond their control.

The sponsors of the law have put forth two false arguments to claim that this isn’t the case. First, they argue that even in those opt-out states, the law would maintain mandated coverage of preexisting conditions. But the law would also allow insurers to simply price those individuals out of the insurance market because it would remove “community rating,” or the mandate that sick individuals be charged no more than healthy individuals for insurance. So insurers would have had to cover the Tennessee woman’s beetle allergy—but they could have charged her 10 times as much for her insurance if they knew about it beforehand. This was a common practice before 2014, as insurers would use discriminatory pricing to keep the sick out of the insurance market.

The second argument is that the law sets up high-risk pools that provide an alternative means of coverage for individuals with preexisting conditions. But if such pools have only sick people in them, then insurers will want to charge enormous premiums; when such pools were set up under Obamacare as a transition mechanism in 2010, the average annual cost of an enrollee was $32,000. Most individuals can’t afford a premium at that level, so to make this affordable would require enormous government subsidies. But the law—even with the last-minute addition of $8 billion in subsidies—includes only a small portion of the funds that would be required by even the most conservative efforts. This is not a high-risk pool: it is a high-risk puddle.

In order to pass their Obamacare alternative, Republicans want to return Americans to a world where someone can be priced out of insurance because of a genetic defect that they might have not even known about. Even Americans who won’t be directly affected by this change should be disgusted by the GOP’s dangerous new plan.

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