It goes like this: Thanks to an amendment to the American Health Care Act introduced this past week, states would ultimately have discretion over whether to keep two of the Affordable Care Act’s most popular and important provisions: a prohibition on charging higher premiums to people based on health status and a requirement that all plans cover an “essential” set of benefits.
Conservatives argue that these provisions make insurance premiums more expensive. Moderates worry that without these requirements, people with pre-existing conditions would lose access to comprehensive coverage.
Under the amendment, the two requirements would technically remain in place, but states could seek permission from the federal government to waive them.
The measure was formally introduced by Rep. Tom MacArthur (R-N.J.), who negotiated the terms with Rep. Mark Meadows (R-N.C.), head of the ultra-conservative House Freedom Caucus.
“If a governor of New Jersey wants to keep Obamacare just like it is, with the very few exceptions that were in the base bill, they can do that,” said Meadows on MSNBC’s “Morning Joe” on Friday. “But a governor of another state, whether it be Texas or Nebraska or Florida, can waive out some of those things that drive up premiums. It’s the best of both worlds.”
In other words, states that like Obamacare would get to keep its best parts.
But could they really?
What’s Not Clear: Whether States Would Seek Waivers
In the old days, before Obamacare, only a small handful of states had laws prohibiting insurers from charging higher premiums to people with pre-existing medical problems. None mandated that all plans cover a set of essential benefits.
A big reason for that was a recognition that these requirements don’t work well on their own. They need generous subsidies (so lower-income people can afford coverage with reasonable benefits) and financial penalties for declining coverage (so people won’t wait until they get sick before they buy insurance). In states that introduced the requirements on their own (without the subsidies and penalties), premiums skyrocketed ― leading states like Kentucky to abandon the reforms and others like New York to end up with deeply dysfunctional insurance markets.
That experience loomed large in the minds of the Affordable Care Act’s architects. It’s why the law introduced both an individual mandate to obtain insurance and a set of subsidies that offer the most help to people who would otherwise struggle the most with insurance costs. The GOP replacement would eliminate the mandate, while shifting financial assistance away from people with low incomes or high insurance costs. And it would do that in all states, not just the ones seeking waivers.
The cumulative effect of all these changes is far from clear-cut. Chris Jacobs, a former Heritage Foundation analyst who is now CEO of Juniper Research Group, is among those experts who doubt that many states would even try for waivers from the pre-existing conditions and essential benefits requirements. But other analysts believe states would find it difficult to resist the pressure from insurers, who would fear a replay of what happened in Kentucky and New York.
If “you dramatically scale back subsidies and have no individual mandate to avoid adverse selection and keep premiums down,” said Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, then states would be under “immediate pressures to roll back more and more” of those protections.
What’s Clear: Millions Would Lose Coverage
More important, even states that didn’t seek waivers would be subject to the rest of the American Health Care Act’s changes ― which would be every bit as severe as they were a month ago, when support for the bill crumbled following a Congressional Budget Office estimate of its likely effects on health insurance.
It’s gotten a bit lost in the last few weeks, with all the focus on pre-existing conditions, but the most consequential part of the GOP bill is arguably the way it yanks financial aid away from people who can’t get health insurance simply because they can’t afford it on their own.
This includes the proposed change in the formula for calculating tax credits, which currently offer much more assistance to people with lower incomes, higher insurance costs or both. It also includes a massive cut to Medicaid that, according to the CBO, would reduce federal spending by $839 billion over 10 years ― and drive up the number of people without coverage by 14 million.
These cuts would devastate not just poor people who, without Medicaid, have no way to pay their medical bills. They would also devastate hospitals, which depend on those Medicaid dollars to finance care for the poor.
Consider how this would play out in a state like New York, where the number of uninsured residents fell by 259,000 because of Obamacare’s Medicaid expansion, according to the Center on Budget and Policy Priorities. New Yorkers might think their state officials could protect them from the worst effects of the GOP bill. But they couldn’t. The state would lose the federal support it gets for expanded Medicaid, forcing it either to come up with a lot of extra money or (more likely) to cut the program, so that many more people would end up uninsured.
Meanwhile, New Yorkers buying coverage on their own would face total annual costs ― that is, premiums plus out-of-pocket costs ― that were $2,708 higher on average, according to a report from the Center on American Progress. That’s because of the way the GOP bill’s changes to insurance regulations and financial assistance would interact with each other: There would be savings for some people, particularly the young and the healthy, but big new costs for others.
Earlier this week, when Rep. Chris Collins (R-N.Y.) appeared on CNN to defend his support of the GOP bill, he said, “Some aspects of this are troublesome to a few of our members ― not me, because this would not impact New York in the least.”
It wasn’t clear whether Collins was speaking specifically about the new amendment or the bill as a whole. But the idea that people in districts like his could avoid serious pain from the American Health Care Act is fanciful ― as he and his fellow Republicans will discover if it becomes law.