The U.S. House of Representatives has passed a version of the American Health Care Act (AHCA) that would repeal major sections of the Affordable Care Act (ACA) and let states opt out of certain Obamacare mandates responsible for making health insurance more expensive.
Lawmakers approved the bill 217 to 213 on May 4, with amendments sponsored by Rep. Fred Upton (R-MI), centrist GOP leader Rep. Tom MacArthur (R-NJ), and House Freedom Caucus Chair Rep. Mark Meadows (R-NC).
The bill is under consideration by the Senate.
The Macarthur-Meadows amendment would allow states to apply for a federal waiver exempting them from ACA’s community rating and essential health benefits (EHB) mandates. The mandates were main reasons for the House Freedom Caucus’ opposition to an earlier version of AHCA.
The ACA community rating mandate limits insurance plan pricing criteria to age and smoker status, to prevent insurers from charging unhealthy individuals more. The EHB mandate requires insurers to cover a list of 10 health care services some individuals cannot or will not use.
Insurers in the individual market in waiver states would be allowed to charge higher premiums for one year for those with pre-existing conditions who have not maintained continuous coverage. The Upton amendment would allot an additional $8 billion to help those individuals pay for health insurance.
Theory vs. Practice
Chris Jacobs, founder and CEO of Juniper Research Group, says whether a waiver system would improve on Obamacare is up to Congress and state lawmakers.
“In theory, the waivers could lower premiums, depending upon how they are implemented,” Jacobs said. “But that depends on what the waivers look like and how many [states] step up to the plate.”
Linda Gorman, director of the Health Care Policy Center at the Independence Institute, says some states would use the waivers to pass market-oriented policies.
“The [states] who care about responsible people who purchase health insurance to protect their assets will,” Gorman said. “The blue states will probably continue creating the equivalent of the Canadian provincial insurance plans, where everyone but the wealthy are on something that looks a lot like Medicaid.”
Jacobs says few states are likely to apply for waivers.
“Based on everything I’ve seen and heard, I don’t think many states will take up the waiver option,” Jacobs said.
State officials could delay waiving the mandates until after running for reelection in 2020, Jacobs says.
“Some governors don’t have explicit authority or may not be able to get such authority from their legislatures,” Jacobs said. “The timing doesn’t really work to implement the waivers for 2018, and governors may not want to implement them for 2019, i.e., to take effect right before the midterms.”
Mandates Raise Costs
Gorman says leaving Obamacare’s community rating and EHB mandates intact would keep insurance premiums high and innovation low.
“Community rating makes policies more expensive,” Gorman said. “Essential health benefits requirements end up making people buy bloated policies that they wouldn’t have purchased with their own money. It also stifles innovation, as it prevents insurers from coming up with new products that people might like better.”
Obamacare pairs community rating with a guaranteed-issue mandate, which requires insurers to sell plans to customers they know will be unprofitable.
Restricting how insurers price products they are forced to sell increases premiums for everyone, Gorman says.
“If policies are required to be issued and there is no limit on the premium, then coverage becomes a sickness pool,” Gorman said. “Premiums are so high that only people who expect higher than average expenses will purchase a policy. Health insurance becomes unaffordable for those who won’t have large expenses, because premiums basically have to equal the costs of treatment.”
Allowing states to opt out of ACA instead of opt in undermines the constitutional principle of federalism, the division of power between the federal and state governments, according to Ben Shapiro, editor in chief at The Daily Wire.
“[T]his reverses the federalism polarity: normally, the federal government does not get to participate in a cramdown of federal policy, giving states the option of cancelling it,” Shapiro wrote on April 27. “Instead, the federal government does not get to occupy an area, and states have the obligation to fill it if they so choose.”
Jacobs says the waiver system merely shifts the burden of ACA repeal to state lawmakers.
“The waiver option turns federalism on its head,” Jacobs said. “Not only does the provision promise, ‘If you like your Obamacare, you can keep your Obamacare,’ it makes Obamacare the default option unless and until someone takes an affirmative action to undo the Obamacare regime in a state.”
Letting states opt out of ACA falls short of devolving control of health care policy to the states, Jacobs says.
“Keeping a federal default, and a bad federal default at that, doesn’t strike me as consistent with the principles of federalism,” Jacobs said.
‘Budgets Are Being Ravaged’
Gorman says federal government intervention has made health insurance unaffordable.
“The federal government imposed Obamacare,” Gorman said. “It broke individual markets that had been functioning pretty well. The minority who get policies in the individual market are getting killed. Congress doesn’t seem to care. Premiums have risen by 200 percent, out-of-pocket costs are up, networks are inadequate, and policy choice is nil. People’s household budgets are being ravaged.”
Instead of continuing to saddle states with mandates, Congress should reward states that deregulate their individual health insurance markets, Gorman says.
“The goal should be to create space for the individual market to revive and private individuals to recover the ability to enter into health care arrangements that help them,” Gorman said. “Subsidy money for states that set up high-risk pools, for example, but none for states that keep guaranteed issue.”
Failure to reform regulation of individual health insurance plans will prompt additional government takeovers, Gorman says.
“The bottom line is that if the individual market isn’t revived, we will inexorably move toward more government [and] big-employer control of health care arrangements,” Gorman said. “It’s boiling the frog slower, which is better than faster, but the frog still dies in the end.”
Matthew J. Bolduc ([email protected]) writes from Washington, DC.
Chris Jacobs, “Summary of Repeal and Replace Amendments,” Chris Jacobs on Health Care, May 4, 2017: http://www.chrisjacobshc.com/2017/05/04/summary-of-repeal-and-replace-amendments/
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