Earlier this month I passed along a note from Matthew Fiedler of the Brookings Institution. Long story short, he suggested that the Republican health care bill would do more than eliminate community rating only for folks who failed to maintain continuous coverage.1 He theorized that once a separate set of rates was set up, insurers could open it up to anyone. Since this second rate schedule would be medically underwritten—i.e., based on health status—it would be very cheap for young, healthy folks. In the end, healthy consumers would all gravitate to the medically-underwritten rates while unhealthy consumers would be stuck with the higher community-rated prices. Over time, the difference between these rates would grow, which means that anyone with a pre-existing condition would end up paying much higher rates than similar healthy people.
This was an interesting suggestion, but since then I haven’t heard anyone else support Fiedler’s argument. Until today, that is. AHCA allows states to apply for waivers from two provisions of Obamacare. The first is the requirement to provide essential health benefits. The Congressional Budget Office describes the other waiver:
A second type of waiver would allow insurers to set premiums on the basis of an individual’s health status if the person had not demonstrated continuous coverage; that is, the waiver would eliminate the requirement for what is termed community rating for premiums charged to such people. CBO and JCT anticipate that most healthy people…would be able to choose between premiums based on their own expected health care costs (medically underwritten premiums) and premiums based on the average health care costs…(community-rated premiums).
….CBO and JCT expect that, as a consequence, the waivers in those states would have another effect: Community-rated premiums would rise over time, and people who are less healthy (including those with preexisting or newly acquired medical conditions) would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable to those under current law, if they could purchase it at all….As a result, the nongroup markets in those states would become unstable for people with higher-than-average expected health care costs.
So the CBO expects precisely the result that Fiedler predicted. This is genuinely big news and deserves wider reporting. For all practical purposes, AHCA eliminates the requirement that insurers charge the same rates to everyone, even those with pre-existing conditions. They still can’t flatly turn you down, but they can do the next best thing: make insurance so expensive for those with pre-existing conditions that most people can’t afford it. That’s especially harmful since the subsidies under AHCA are so skimpy.
This provision of AHCA has no direct budgetary impact, so it ought to get tossed out by the Senate parliamentarian.2 We’ll have to wait and see how that turns out.
1“Community rating” is the requirement that everyone pays the same price for insurance, even if they have a pre-existing condition.
2AHCA is being passed as a reconciliation bill. These bills are only allowed to address issues that directly affect the federal budget.