Five Pre-Existing Condition Myths Debunked

What happens when Obamacare mandates drive insurance companies out of the marketplace? One breast cancer survivor in Maricopa County, Arizona—which lost all but one Obamacare exchange insurer—found out the hard way. Lacking in-network access to her cancer specialist through the exchange, she had no choice but to pay out-of-pocket for her out-of-network care and pay for expensive high deductible exchange insurance at the same time.

Contrary to popular belief, Obamacare’s mandate that insurance companies offer coverage to everyone, called “guaranteed issue,” can harm the sick and the healthy. Below we debunk five common myths to show we’d be better off leaving guaranteed issue behind.

MYTH #1: The Problem of Pre-Existing Conditions is Widespread

For most Americans, the real emergency is high insurance costs. Roughly 90 percent of Americans are covered through an employer or government program that cannot deny coverage based on health status. Before Obamacare, the number of Americans with a pre-existing condition that fell outside these categories was estimated to be fewer than one million—less than one half of one percent of the population.

In the first two years of the Pre-Existing Condition Insurance Plan, an Obamacare program designed to cover the uninsured with pre-existing conditions, only 115,000 signed up.

MYTH #2: Guaranteed Issue Mandates Help the Sick

When insurance companies are forced to cover everyone, the quality of care declines. Michael Cannon from the Cato Institute explains:

Research published by economists from Harvard and the University of Texas shows these regulations effectively penalize insurers who offer the best coverage for conditions like multiple sclerosis. The researchers found Obamacare forces insurers to take a $14,000 loss for every MS patient they enroll. Those penalties mean insurers must try to avoid those patients by slashing MS coverage, or risk going out of business.

In other words, this mandate precipitates a race to the bottom. Insurance companies are more likely to exclude specialists, procedures or drugs used by the chronically ill. So much for no more “junk plans” under Obamacare.

MYTH #3: There is No Alternative to Protecting People with Pre-existing Conditions.

Alternative ways to provide affordable care for high-cost patients include high risk pools, targeted subsidies for insurers, special HSA provisions, and protections for maintaining continuous coverage.

The American Health Care Act (AHCA), passed by the House on May 4, includes a federal invisible high-risk pool, which gives people with pre-existing conditions access to the same plans as healthy individuals, but subsidizes insurers for covering those patients. In 2011, Maine’s invisible high-risk pool cut premiums in half and revived the individual market.

Traditional high-risk pools can work too when they are properly funded. In 2011, 35 states ran high-risk pools with mixed results. These pools received $1.2 billion in federal funding, but under the AHCA consultants estimate pools will receive $10 to $11 billion in 2018. This boost will leave all state pools funded at levels surpassing the successful high-risk pools of 2011.

MYTH #4: Americans want this Mandate, even if it Increases Insurance Costs

A Cato Institute/YouGov poll shows people oppose a guaranteed issue mandate when they get the entire story. Voters support a guaranteed issue mandate by 2 to 1 if they are asked only about the supposed benefits. However, the results flip when the negative impact on the quality of care is demonstrated.

MYTH #5: The AHCA is a Step Backward

The AHCA maintains Obamacare’s guaranteed issue mandate unless a state seeks a waiver. Even then, insurers must offer coverage to individuals with pre-existing conditions that maintained continuous coverage. And those who didn’t maintain coverage will still be covered with a higher premium for the first year.

The AHCA’s softened guaranteed issue rules resemble HIPAA rules governing employer-based insurance. Specifically, HIPAA rules prohibit denying coverage if an individual has maintained insurance over the last year. To discourage “gaming of the system,” an individual can be denied insurance for no more than 12 months if they failed to maintain continuous coverage.

In short, the hysteria over the AHCA's changes to pre-existing condition rules is misplaced. Eliminating the mandates that are driving away insurers is best way to help those with chronic health conditions access affordable and high quality health care.