Policy Tip Sheet: Pre-Existing Conditions

Published November 2, 2018


Over the past five years, the Affordable Care Act (ACA), better known as Obamacare, has wreaked havoc on health insurance markets in the name of protecting patients with pre-existing conditions. As a result of the law, the cost of coverage has skyrocketed, millions have lost their health insurance, and patients have seen their choice of doctors decline. Obamacare’s regulations especially harmed patients with pre-existing conditions. Since Obamacare forbids insurers from charging sick patients high enough premiums to cover their medical bills, the law incentivizes carriers to control costs by reducing health care access. Insurers have responded to the law’s rules by increasing out-of-pocket fees on medications, eliminating specialists from their networks, and adding more barriers to medical care.

Policy Solution

There are far more effective ways to protect people with chronic illnesses than keeping Obamacare in place. Instead of Obamacare’s failing approach, states can deliver better and more targeted relief to vulnerable patients with pre-existing conditions by establishing reinsurance programs and high-risk pools. Reinsurance programs cover the medical bills of extremely expensive patients when costs exceed a defined baseline. Since 2017, seven states have received approval from the federal government to use reinsurance to support sick patients. By shifting the costs of the most expensive patients off the balance sheets of insurers, reinsurance programs have reduced premiums in Obamacare exchanges by up to 25 percent in Alaska and 27 percent in Minnesota. Additionally, prior to Obamacare, 35 states operated high-risk pools to cover individuals with pre-existing conditions who had been rejected by private insurers.

These programs remove the most expensive patients out of the individual market and allow private insurers to lower premiums for everyone purchasing insurance in the Obamacare exchanges. While reinsurance funds and high-risk pools would provide secure coverage to patients with pre-existing conditions, the long-term solution to curbing the high costs of health care is for states and the federal government to permit new and innovative providers to offer low-cost health care. This can be done by eliminating certificate of need laws, enhancing and greatly encouraging direct primary care models, creating scope of practice reforms, and instituting price transparency, among many other reforms.

Policy Message

1. Obamacare Increases Costs: Obamacare insurance regulations dramatically increased premiums and deductibles and destabilized state health insurance markets. 

2. Obamacare Hurts Sick Patients: Only nine of Obamacare’s 961 pages pertain to pre-existing conditions and all of them made it harder for sick patients to access medications and medical care.

3. Sick Patients Need Targeted Support: Just one out of every 2,800 Americans suffer from uninsurable medical conditions.

4. Reinsurance Protects Pre-existing Conditions: A more effective way to deliver targeted relief to patients with pre-existing conditions is to allow states to establish (or re-establish) reinsurance programs and high-risk pools.

5. Reinsurance Reduces Premiums: Reinsurance and high-risk pools reduce premiums for everyone in the Obamacare exchanges by shifting the costs of pre-existing conditions out of the individual health insurance market