The protection of pre-existing conditions is a very popular theme during this mid-term election. Perhaps this should not be surprising due to the strong popularity of such policies with the public. In the absence of specific detail about what any given candidate means by ‘protection of pre-existing conditions’ or how he or she might make such a policy work economically with (or without) other supporting policies, claims to support these policies are fairly empty and voters/constituents should be very skeptical of them.
Standing on their own, protections for pre-existing conditions in the individual health insurance market will not result in outcomes like widespread availability of low-cost, high-value health insurance. They must be supported by other supporting policies. Protections for pre-existing conditions were built into the ACA, but other components of the ACA, including income-based subsidies, the individual mandate, and benefit design requirements were included because protection for pre-existing conditions as a policy change made in isolation would lead to significant adverse selection against the individual market and increasing prices. Ultimately, protection for pre-existing conditions without other supporting policies would lead to the dynamic that health policy wonks refer to as a ‘death spiral’, where high prices lead healthier (cheaper) people to leave the market, which causes prices to go higher still, in a positive feedback loop until only the sickest (most expensive) are still in the market. More likely, insurers would just leave the market before it got to such a point because of the inherent unpredictability of that type of situation.
So, what do people mean when they say they support protections for pre-existing conditions? There are three related factors that could potentially be considered as protections for pre-existing conditions – issuance, pricing, and benefits. Issuance refers to whether a health insurance company is required to offer you coverage even though you have a pre-existing condition. Pricing refers to whether the health insurance company can charge you more because of the pre-existing condition. Benefits refers to the coverage of health issues related to the pre-existing condition. A narrow claim of supporting protections for pre-existing conditions with respect to issuance but not pricing will result in a very expensive insurance market and, depending on how it is structured, potentially put carriers in the position of effectively being able to refuse to offer coverage to people based on pre-existing conditions by pricing it at a level that almost nobody would be able to afford. Similarly, a narrow claim of supporting protections for pre-existing conditions with respect to issuance but not benefits will result in carriers being able to offer plans that exclude coverage of services associated with the pre-existing condition. Supporting protections for pre-existing conditions with respect to issuance, pricing, and benefits is probably what most people mean when they claim to support the policy. Even so, protection of pre-existing conditions with respect to issuance, pricing, and benefits, but without other supporting policies would lead to high costs and a lack of affordability.
The additional supporting policies in the ACA include the individual mandate (which keeps more healthy people in the market), benefit design requirements (which prevent denial of coverage for certain services based on condition), and income-based subsidies (which keep premiums within a certain percentage of income). The additional policy supports included in the ACA are not the only way to prevent high costs and/or a breakdown of the individual market. Alternatives include high risk pools and reinsurance. High risk pools were common before the ACA and enabled individuals who had been turned down by health insurance companies to buy from a state-sanctioned carrier that did not discriminate based on pre-existing conditions, with prices kept affordable in the high-risk pool because they were subsidized by a tax applied to all private carriers or other state funds.
Publicly-funded reinsurance programs have been implemented by some states to stabilize their individual markets under the ACA, even with the other supporting policies in place. With publicly-funded reinsurance, public funds cover the cost of health insurance claims above a certain threshold per member. For example, once an individual member’s claims costs for a year surpass $100,000, the reinsurance pays for all costs for that member above that amount.
Given its popularity, support for protecting pre-existing conditions is politically expedient, however it is only half of the picture. Without identifying: (a) what is meant by ‘protecting pre-existing conditions’; and (b) which (if any) other supporting policies would be included, promises to protect pre-existing conditions are incomplete and should be viewed skeptically. If this is an issue that matters to voters and/or constituents, they should demand more specifics from their candidates and/or elected officials, especially when their past actions were less than supportive of protections for pre-existing conditions.