Betsy Querna Cliff: AHCA distorts insurance markets, drops protections

I grew up in Spokane and now study how to design health insurance in the most equitable and efficient way. That’s why I’ve been particularly disheartened to see the amount of misinformation being spread about the protections for people with pre-existing medical conditions written into the health care bill passed by the Republicans in the U.S. House of Representatives.

Such is my concern about the column written by Rep. Cathy McMorris Rodgers (May 4 edition). I admire her conviction to help people like her son, Cole, who was born with Down syndrome and her concern over providing health care to vulnerable citizens. However, she is wrong that the bill she voted for will maintain protections for people with pre-existing conditions. If it becomes law, it will become harder for people with pre-existing medical conditions to access the health care they need.

To explain why, look at how insurance works. Let’s take something like car insurance. Car owners pay each year, with the understanding that the majority of people are not going to use their policy. The insurer collects premiums and helps pay claims for the minority of policyholders in accidents each year. Think of what would happen if you could buy car insurance after you got in an accident. Because the insurer would be paying claims out for everyone who enrolled, they’d have to charge an exorbitant amount just to break even. We all pay in a moderate amount each year because, even though some years you don’t use it, next year you might.

Health insurance is a bit more complex because many people need care year after year, though when it comes to covering pre-existing conditions the same principles apply. Serious medical care is often too expensive for a single family. We use health insurance to spread the cost and protect us from the risk of big medical bills. Just like you don’t know when you’ll get into a car accident, you never know when an illness or accident may strike.

The way that Obamacare dealt with this reality was to try to induce healthier people to buy insurance policies alongside people who had pre-existing conditions. That law made two major changes to how insurance could be issued for those who did not get a policy from an employer or on the state and federal exchanges: It prohibited insurers from denying coverage to those with a pre-existing condition and it did not allow insurers to use medical information to set insurance rates. To make sure it wasn’t just sick people who tried to purchase policies, Obamacare offered both premium and out-of-pocket subsidies to low- and middle-income people to purchase care, and imposed a tax penalty on those who chose to go without health insurance.

The Republican health care bill takes a different tack. It retains some Obamacare protections for people who never lose health insurance, though once you go without it, people with pre-existing conditions may be charged more or their conditions may not be covered for a period of time. It also removes much of the cost-sharing help, particularly for older and poorer Americans. Then, it widens the gap that Obamacare created between the premiums that older (and as a group sicker) adults can be charged relative to younger Americans, with the idea that lower premiums may encourage more young people to buy insurance. Last, it allows states to opt in to covering some of the people with pre-existing conditions through programs that essentially subsidize the costs of their care with taxpayer dollars –the high-risk pools Rep. McMorris Rodgers mentioned in her column.

In theory, high-risk pools can be effective, they’re just very expensive. However, the Republican bill allocates very little money – about $3.2 billion per year for the first five years – to pay for it. There are approximately 2.2 million people with a pre-existing condition who get insurance on the individual market and cost about $32,000 each year to insure. With the money in the new bill, it’s as if the car insurer decided to pay for only one of every 20 accidents.

The question then is, who makes up the difference?

Neither the AHCA nor Rep McMorris Rodgers’ column answers that question, though in the past it has been the sick themselves, and their families. High-risk pools like the ones proposed in the AHCA existed before Obamacare, but were largely considered failures because they were underfunded. Premiums were much higher than in the traditional insurance market and the plans themselves sometimes had deductibles of $7,500 or more.

The simple fact is we can rewrite laws governing insurance markets, but we cannot change how insurance works. If we agree that children and others with a pre-existing condition are important populations to protect, then we need to pay for it. We can do it through taxes, and offer adequate federal resources to subsidize the medical claims for sicker and more expensive cases, or we can use insurance as it is traditionally conceived, where everyone pays into a pool through premiums and some people, at some times, draw out more in claims.

Instead, the AHCA creates a system to shield healthy people from the health care costs of those with pre-existing conditions and yet does not allocate money to pay for them. The likely result is the sick will bear much of the burden.

There’s policy and economics involved here, but it really comes down to a moral choice. Are we going to help support those who bear the burdens of medical conditions or are we going to tell them they’re on their own?

My oldest child spent time in the neonatal-intensive care unit when he was born. It was before Obamacare passed and when we tried to obtain insurance on the individual market for him, we were told we needed to wait to make sure he was insurable. Luck was on our side that time; I worry about what could have happened to my family if it had not been. I worry about what will become of children who, like Cole Rodgers, who are born with medical conditions or develop them young, if we, as a society, say you’re on your own.