I Have a Pre-Existing Condition—How Will Health Care Reform Affect Me?

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2017 was a tumultuous year for health care reform, but virtually all of the GOP-led efforts to dismantle the Affordable Care Act (ACA, often referred to as Obamacare) were unsuccessful. The sort of repeal and replace bills that were introduced in 2017 did not reappear in 2018, and Democrats gained control of the House in the 2018 election, making the ACA safe from repeal efforts for at least the next couple of years.

But the Trump Administration has taken various regulatory actions that affect health insurance rules, and can continue to do so. One of the issues that has been front and center in the ACA repeal debates is pre-existing conditions. The ACA eliminated medical underwriting in the individual and small group health insurance markets, so individual and small group plans are now issued to all applicants regardless of medical history, and with no pricing variations based on health status.

This has been a boon to people with pre-existing conditions and small businesses with significant medical claims histories, and it also provides peace of mind for people without pre-existing conditions, as medical conditions can arise at any point, sometimes with no warning. 

It's easy to see why coverage for pre-existing conditions has been one of the most popular aspects of the ACA. But it's also one of the provisions that has driven up the cost of individual market coverage. Premium subsidies offset those costs for the vast majority of people with coverage through the exchanges, but for those who don't get subsidies (including everyone who buys coverage outside the exchanges), the premiums can certainly be a heavy burden.

So despite the popularity of the ACA's rules requiring health plans to cover pre-existing conditions, the issue remains somewhat controversial. Some of the legislation that GOP lawmakers have proposed over the last few years—which could be re-introduced if Republicans again gain control of both chambers of Congress—would roll back various aspects of the ACA's blanket protections for people with pre-existing conditions. It's important to understand how this would work, especially given that the official statements about these pieces of legislation generally offer platitudes about how people with pre-existing conditions would still be covered.

The AHCA and Pre-Existing Conditions

On May 4, 2017, House Republicans passed the American Health Care Act (AHCA) and sent it to the Senate. The AHCA was a reconciliation bill, so it only needed a simple majority in the Senate. But reconciliation bills are limited to provisions that directly impact federal spending, so the AHCA could not address all aspects of the Affordable Care Act. Legal scholars doubted that a provision to erode the ACA's pre-existing condition protections would be allowed to proceed in the Senate as a reconciliation bill.

However, the MacArthur Amendment to the AHCA, added in the House in April 2017 in an effort to win over conservative representatives, would have done just that. As such, there were assumptions that the bill would have to be significantly changed in order to pass the Senate. Ultimately, Senate Republicans proposed four different versions of the bill, all of which failed to pass ("skinny" repeal, the Better Care Reconciliation Act, the Obamacare Repeal Reconciliation Act, and the Graham-Cassidy-Heller-Johnson amendment).

As a result, the 2017 efforts to repeal and replace large portions of the ACA were unsuccessful. GOP lawmakers did succeed in repealing the ACA's individual mandate penalty as part of their tax bill that was enacted in December 2017, but the repeal didn't take effect until 2019 (there was still a penalty for being uninsured in 2018, assessed on 2018 tax returns filed in 2019).

The rest of the ACA remains intact in 2019, including the ACA's provision that requires insurers to reduce out-of-pocket costs for lower-income enrollees. These cost-sharing reductions (CSR) are no longer being directly funded by the federal government (that has been the case since the fall of 2017), but the benefits are still available to eligible enrollees.

But health care reform continues to be a heavily debated topic, and is sure to feature prominently in the 2020 presidential race. So it's important to understand previous efforts to change the rules regarding pre-existing conditions, as we could see similar efforts in the future.

The MacArthur Amendment

In April 2017, Rep. Tom MacArthur (R, New Jersey) introduced an amendment to the AHCA intended to win support from the ultra-conservative House Freedom Caucus. It was successful, and support from the Freedom Caucus ultimately resulted in enough votes for the AHCA to pass in the House.

The MacArthur Amendment would have let states seek waivers—under what appeared to be a lenient approval process—that would have allowed them to change several of the ACA's consumer protections:

  • People with pre-existing conditions who enrolled in individual market plans with a gap in coverage (at least 63 days in the preceding 12 months) would have been subject to premiums based on their medical history for the first 12 months under the new policy. There was no limit to how high these premiums could be, which could have resulted in unaffordable coverage for some applicants, depending on their medical histories. This waiver would have been in lieu of the 30 percent premium increase for one year (regardless of medical history) that the AHCA would have implemented when individual market applicants applied after a coverage gap.
  • The AHCA called for premiums that would have been five times higher for older adults (50 - 64 years) than for younger adults. The MacArthur Amendment would have allowed states to waive this ratio and create a higher one instead. For perspective, the ACA limits the ratio to 3:1, meaning that older people cannot be charged more than three times as much as younger people.
  • The MacArthur Amendment also would have let states seek a waiver to change the definition of essential health benefits. That would have meant that some services that are required to be covered under the ACA might not have to be covered in certain states if the AHCA had been enacted. For people with pre-existing conditions, this was certainly a significant concern, as their necessary medical treatment might no longer have been covered by insurance. Under the ACA, essential health benefits are only required to be covered by individual and small group plans, and Medicaid. Large group plans are not required to cover them, although most do.

What's All the Disagreement About?

If you watched Republicans and Democrats argue about the AHCA after the introduction of the MacArthur Amendment, you likely saw Democrats saying that the law would eviscerate pre-existing condition protections, while Republicans said that the law specifically protected people with pre-existing conditions. So which was it?

Technically, the MacArthur Amendment said that people could not be denied coverage based on a pre-existing condition. That's the clause the Republicans were referencing when they said that the legislation included pre-existing condition protections. Sometimes they also skimmed over the problem by saying that people with pre-existing conditions would not see any adverse impact as long as they maintained continuous coverage.

But the devil is in the details. Under the MacArthur Amendment, it's true that an application could not have been declined altogether (which used to happen in most states prior to the ACA, when people had serious pre-existing conditions and applied for individual market coverage). But insurers would have been able to charge much higher premiums in the individual market in states with a waiver, if applicants had pre-existing conditions and had experienced a gap in coverage in the prior 12 months.

That could have essentially made coverage unaffordable. So although the application wouldn't have been denied, the consumer's access to coverage wouldn't have been realistic. We all have "access" to Lamborghinis. But that doesn't mean we can all have Lamborghinis.

The MacArthur Amendment also introduced a complication with regards to essential health benefits. If a state opted to loosen the rules that apply to prescription drugs, for example (one of the ACA's essential health benefits), we might have seen plans that didn't cover the full range of brand name and specialty drugs. That's a serious problem for people with pre-existing conditions that require expensive medications.

Similarly, if a state opted to make maternity coverage optional (it's another one of the essential health benefits and thus mandatory under the ACA), most insurers in the individual market simply wouldn't offer it anymore, as was the case prior to the ACA.

So while Republicans were technically correct in saying that the amended AHCA wouldn't have let insurers deny applications based on pre-existing conditions, the MacArthur Amendment absolutely would have reduced protections in the individual market for people with pre-existing conditions. And as a result of the potential changes to the definition of essential health benefits, the impact could have extended into the employer-sponsored market as well.

What Else Would the AHCA Have Done?

The AHCA would have repealed the ACA's individual mandate penalty back to the beginning of 2016 (with regards to the individual mandate, it's important to understand that insurance only works if there are enough healthy people in the pool to balance out the claims of people who need health care). But coverage would still have been guaranteed-issue, regardless of an applicant's medical history.

[Note that the individual mandate penalty was repealed in the GOP tax bill that was enacted in late 2017, but the repeal didn't take effect until 2019. All of the legislative efforts to repeal and replace the ACA in 2017 included retroactive repeal of the individual mandate, but the tax bill pushed out the repeal into the future instead.]

In order to incentivize people to maintain coverage, in states that didn't seek a waiver under the MacArthur Amendment, the AHCA would have instead relied on a premium surcharge for people who didn't maintain continuous coverage. For enrollments after the 2018 open enrollment period (ie, anyone enrolling during a special enrollment period in 2018, or during the open enrollment periods for 2019 and beyond), applicants would have been assessed premiums 30 percent higher than the standard rate if they had a gap in coverage of 63 days or longer during the 12 months prior to enrolling. The higher premiums would have remained in place for the remainder of the plan year.

The higher premiums would have applied to anyone enrolling in an individual market policy following a gap in coverage. It wouldn't have mattered whether the applicant was healthy or sick. In a way, this would have discouraged healthy people from enrolling after a gap in coverage, and could have further tilted insurance pools towards sicker enrollees. 

Could ACA Repeal Efforts Cause a Return to Pre-ACA Insurance Rules?

Recent Kaiser Family Foundation data indicates that 27 percent of non-elderly adults in the U.S. have pre-existing conditions that would make them uninsurable in the individual market if we returned to the medical underwriting standards that were in place in nearly every state prior to 2014.

The AHCA was ultimately unsuccessful because all of the Senate versions of it failed to pass. But even if the AHCA had passed, it did not go as far as returning things to the way they were pre-ACA. Although there are some very conservative lawmakers who have proposed doing so, a return to full medical underwriting in the individual market is a politically untenable proposition.

But even if the ACA's pre-existing condition protections were to be eliminated, most Americans would still be protected, thanks to rules that pre-date the ACA. Let's take a look at how they work:

Pre-ACA: Rules Varied Based on Type of Insurance

There are four main ways that Americans get health insurance: Employer-sponsored coverage, Medicare, Medicaid, and the individual market.

If the ACA's pre-existing condition protections were to be repealed, the impact would not be uniform across those four groups. The primary changes wrought by the ACA in terms of pre-existing conditions were in the individual market, where about 7 percent of the U.S. population obtains their health insurance.

HIPAA Would Still Protect Group Plan Enrollees

HIPAA (the Health Insurance Portability and Accountability Act) dates back to the mid-90s, and has long provided significant protection for people who obtain coverage from an employer (about 49 percent of the U.S. population has employer-sponsored coverage). Even full repeal of the ACA—as opposed to a reconciliation bill like the AHCA—would not eliminate HIPAA provisions, so people who get coverage from their employers would still have coverage for pre-existing conditions.

But prior to the ACA, under HIPAA regulations, employer-sponsored plans could impose waiting periods for pre-existing condition coverage (except maternity, assuming the plan provided maternity benefits) if the enrollee had not maintained continuous coverage prior to enrolling in the plan.

As long as the person had maintained continuous coverage for at least 12 months without a gap of 63 days or more, pre-existing conditions were covered as soon as the overall coverage became effective. But if the enrollee had a gap in coverage of more than 63 days prior to enrolling in the employer-sponsored plan, the plan could impose a waiting period of up to 12 months for pre-existing conditions.

The ACA eliminated that provision. Under the ACA, pre-existing conditions are covered on every employer-sponsored plan, and on all non-grandfathered (and non-grandmothered) individual market plans, as soon as the person's coverage under the plan takes effect.

The ACA also prohibited insurers from charging small groups extra premiums based on their employees' medical history. Small group coverage was already guaranteed-issue under HIPAA, but carriers could charge higher premiums to groups with poorer overall health (unless state rules forbid it). Once the ACA took effect, this was banned, and small group premiums could only be based on enrollees' ages, geographic location, family size, and tobacco use.

If the ACA were repealed and a replacement didn't include a provision banning waiting periods for pre-existing conditions, the rules would revert to the way they were prior to 2014. People who maintained continuous coverage would have no waiting periods for pre-existing conditions when joining an employer's health plan. But people with a gap in coverage would potentially be subject to waiting periods for pre-existing conditions. And small groups with employees in poor health could face higher overall premiums than small groups with healthy employees.

But the AHCA would not have eliminated those ACA provisions (keeping in mind that it was a reconciliation bill, and was thus limited in terms of what it could change). Under the AHCA, the ban on pre-existing condition waiting periods for employer-sponsored plans would have remained in effect, and premiums in the small group market would not have been dependent on the health status of the employer group.

Medicare and Medicaid Will Continue to Cover Pre-Existing Conditions

Medicaid and Medicare cover pre-existing conditions. There are some caveats with Medicare, however, which do not have anything to do with the ACA:

  • In most states, people enrolling in a Medigap plan after their initial enrollment window (and without access to one of the very limited Medigap guaranteed-issue rights) are subject to medical underwriting. Their applications can be denied, they can be offered a plan with a higher-than-standard premium, or the carrier can impose a pre-existing condition waiting period. 
  • In most cases, if you have end-stage renal disease (ESRD), you cannot enroll in Medicare Advantage (this will change as of 2021, under the terms of the 21st Century Cures Act). 

Although the ACA didn't change anything about pre-existing condition coverage under Medicare and Medicaid, it did substantially expand access to Medicaid. Total enrollment in Medicaid/CHIP has increased by 16 million people since the end of 2013, thanks in large part to the ACA's expansion of the eligibility rules for Medicaid.

Prior to the ACA, Medicaid (which included coverage for pre-existing conditions) was available in most states only for low-income pregnant women and children, some very low-income parents, along with low-income residents who were disabled and/or elderly.

Under the ACA, 33 states and the District of Columbia have expanded Medicaid to all adults with household income up to 138 percent of the poverty level, which is a little more than $17,200 in annual income for a single person in 2019.

The AHCA called for freezing enrollment in expanded Medicaid as of 2020, and switching Medicaid to a per-capita allotment or block grant rather than the current open-ended federal matching system used today. 

That did not come to pass, but the Trump Administration has taken a different approach to limiting Medicaid enrollment by relaxing the rules on waivers that states can seek for their Medicaid programs (Medicaid is jointly funded by the state and federal government, so states have a hand in crafting some of the rules). Things like work requirements and lifetime coverage caps were not allowed under the Obama Administration, but are being approved or considered by the Trump Administration. Ultimately, the goal of the Trump Administration and GOP lawmakers is to have fewer people covered by Medicaid. Unfortunately, there is not a clear picture of how those people should obtain alternate coverage, and many will simply become uninsured without access to Medicaid. Arkansas was the first state to implement a Medicaid work requirement, which took effect in June 2018. By the end of 2018, more than 18,000 Arkansas residents had lost their health coverage as a result.

Pre-Existing Conditions and the Individual Market

As described above, the AHCA—with the MacArthur Amendment—would have rolled back some of the pre-existing condition protections that were created by the ACA. 

Understanding how pre-existing conditions were handled pre-ACA is an important part of understanding why the ACA was necessary in the first place, and what's at stake if the pre-existing condition protections are altered.

Coverage in the individual market in all but five states was medically underwritten prior to 2014, when the ACA banned that practice (individual market coverage is the kind you buy for yourself—through the exchange or off-exchange—rather than obtaining it from an employer).

There are more than 15 million people who have coverage in the individual market. Many of them already had individual market coverage pre-ACA, but some were only able to obtain coverage when the ACA's rules took effect and carriers were no longer able to deny applications based on applicants' medical history. 

Medical underwriting meant that individual market health insurance applications included long lists of questions about applicants' medical history. Coverage eligibility depended on the answers, and for people who were allowed to enroll despite their pre-existing conditions, premiums were often higher than the standard rates.

Pre-existing conditions included basically any medical diagnosis. Being overweight, having elevated cholesterol or blood pressure, a history of visits to the chiropractor... everything was analyzed by medical underwriters to determine whether the applicant was eligible for coverage, and if so, at what price.

The ACA changed all that. For the individual market, the ACA's pre-existing condition rules were a game-changer. Rejected applications and increased premiums due to medical history became a thing of the past, as did pre-existing condition waiting periods. 

In addition to the AHCA, several other pieces of ACA repeal/replace legislation were introduced by GOP lawmakers in the 2017 session. Many of them called for retaining the ACA's protections for people with pre-existing conditions.

But if the ACA's guaranteed issue requirements are not retained, there are two main avenues for covering pre-existing conditions that have been included in most of the proposals put forth over the last few years: high-risk pools or a "continuous coverage" requirement, or both.

High-Risk Pools

Most of the Republican health care reform proposals have included a return to high-risk pools for insuring people who aren't able to obtain coverage in the individual market (in proposals that include continuous coverage provisions, high-risk pools would be needed to cover people who don't maintain continuous coverage, and whose pre-existing conditions are significant enough that they're not able to obtain medically underwritten coverage).

High-risk pools were established in 35 states during the 90s and 00s. But the overall shortcomings of the high-risk pool model were part of the reason the ACA was needed in the first place. The plans tended to be expensive, and typically had high out-of-pocket exposure and limited lifetime maximum benefits. In addition, some high-risk pools had to limit enrollment over the years due to budget constraints.

High-risk pools mostly ceased operation when guaranteed-issue individual market coverage became available in 2014. But some states still have functional high-risk pools. With adequate federal funding, high-risk pools could be a viable solution going forward. But without adequate funding, it's unlikely that they'd be any more successful than they were in the years leading up to the implementation of the ACA.

The AHCA would have allocated federal funding for states to use for high-risk pools, but they could also have used it for other market stabilization efforts. And experts generally noted that the funding for high-risk pools in the AHCA would not have been adequate to allow the high-risk pools to function properly.

Continuous Coverage

Under the ACA, coverage is guaranteed issue, period. It doesn't matter how long you've been uninsured when you enroll, and it doesn't matter what pre-existing conditions you have (but you can only enroll during the annual open enrollment period, or during a special enrollment period if you experience a qualifying event).

Under the various GOP replacement proposals that have called for continuous coverage, the idea is to basically extend some of HIPAA's protections to the individual market. People who maintain continuous coverage (either in a group plan or an individual plan) would be able to enroll in a new plan at the standard premium, regardless of pre-existing conditions (ie, with no medical underwriting).

But people who experience a gap in coverage would be subject to penalties. The idea is to incentivize people to maintain continuous coverage without resorting to the ACA's unpopular individual mandate. 

In states that didn't seek a waiver under the MacArthur Amendment, the AHCA would have included a premium surcharge for people who didn't maintain continuous coverage. The additional premiums would have applied uniformly, to both healthy and sick applicants.

This is different from a continuous coverage provision that would allow insurers to use medical underwriting when applicants enroll following a gap in coverage. That's the approach that would have been used under the AHCA in states that sought a waiver to do so. In those states, healthy people with a gap in coverage would have been able to enroll in individual market coverage with standard rates. But people with pre-existing conditions (which is a very broad list) would have been subject to sharply higher premiums if they applied for individual market coverage without a history of continuous coverage during the previous year.

Short-Term Health Insurance Plans

Short-term health plans have always used medical underwriting, and they're exempt from ACA rules. The Obama Administration took action in 2016 to limit short-term plans to three months in duration and prohibit renewals. But the Trump Administration reversed that rule—and then some—in 2018. Under the new rules, short-term plans can have initial terms of up to a year, and they can be renewed for a total duration of up to three years, if the insurer offers that option.

About two-thirds of the states have more restrictive rules, however (some of which have been implemented in response to the new federal rules), so three continuous years of coverage under a short-term plan is only available in limited areas, and some states don't allow short-term plans to be sold at all.

But in areas where short-term plans are available, they're almost always medically underwritten and specifically exclude coverage for pre-existing conditions. The Trump Administration has actively encouraged enrollment in short-term plans as an affordable alternative to ACA-compliant plans. And while it's true that these plans are more affordable than ACA-compliant plans for people who aren't eligible for premium subsidies, it's important to understand that the lack of coverage for pre-existing conditions is a big part of the reason for the lower premiums.

Do I Need to Worry?

For the time being, with Democrats in control of the House, there is no chance that legislation curtailing pre-existing condition protections could pass.

But the version of the AHCA that passed the House in 2017 would absolutely have been detrimental to people with pre-existing conditions who sought coverage in the individual market. It was also problematic in terms of the possibility that essential health benefits could have been watered down, making it harder for people with small group plans to obtain coverage for their pre-existing conditions.

And even in the large group market, the ACA's provisions that ban lifetime and annual benefit maximums and limit out-of-pocket costs are only applicable to essential health benefits (which aren't required to be covered under large group plans, but if they are—and they usually are—the lifetime/annual benefit limit ban and the cap on out-of-pocket costs apply). So if essential health benefits are ever rolled back, people with ongoing medical needs who have employer-sponsored plans could be impacted too.

In 2017, Republican lawmakers repeatedly said that the AHCA would continue to protect people with pre-existing conditions, although that was not really true. The future of health care reform remains to be seen, and concerns regarding pre-existing conditions are absolutely valid. But for the time being, nothing has changed about essential health benefits and coverage for pre-existing conditions, and nothing is likely to change in the near future.

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