The Truth about Preexisting Conditions

There is a lot of talk about medical “preexisting conditions” in politics these days. But what is the truth about how preexisting conditions are treated under current law? What protections will be in jeopardy if the Affordable Care Act (ACA) is fully or partially repealed?

Like most issues with health care… it’s complicated. Here are some details and background that should help clarify the discussion:

What are preexisting conditions anyway?

Preexisting conditions are previously diagnosed or treated health issues that existed before an individual enrolled in an insurance plan. A lot of Americans have preexisting conditions. The Kaiser Family Foundation (a program independent of Kaiser Permanente) estimated in 2016 that about 52 million people, or about a quarter of the population under 65 have preexisting conditions. These numbers make it clear why people are concerned that they keep their coverage without any exclusion for their preexisting conditions.

Health insurers have struggled with how to price for preexisting conditions for decades. Health “insurance” couldn’t exist if everyone could wait until they were sick to enroll in coverage. Can people wait until their house is on fire to buy a homeowner’s policy? – Of course not. But that is what health plans are asked to do if some protections aren’t in place that keep healthy people paying premiums. There is a delicate balance between what is financially viable, and what is needed to protect people with preexisting conditions.

Preexisting protections have been in place since 1996

There is a good deal of ambiguity about whether Americans are at risk of losing coverage for preexisting conditions if the ACA is changed or overturned. The majority of Americans get health coverage at work through employer-sponsored health benefit plans. Since the passage of the Health Insurance Portability and Accountability Act (HIPAA) in 1996, Americans have been protected from losing their pre-existing coverage status.

This law banned applying waiting periods for preexisting conditions for any employee who has been continuously covered without a break in coverage of more than 63 days. This provision addresses the concern of people simply jumping in and out of coverage whenever they may need health care. Of course, insurance can’t work for anyone if healthy people don’t pay for coverage.

This provision was designed to protect workers changing jobs from the application of new preexisting waiting periods. This has been largely successful in eliminating preexisting exclusions in group health plans. HIPAA also prohibited denying coverage or raising premiums for individuals and small groups based on health status or medical history. This has been the law for 24 years.

So, what’s the problem?

HIPAA has been less successful at protecting the minority of Americans in the individual health insurance market. Although individuals couldn’t be declined for coverage, there were no limits on the premiums companies could charge on these policies. This resulted in some unhealthy people being charged incredibly high premiums that effectively priced them out of coverage for their medical conditions.

The Affordable Care Act (ACA), passed in 2010, directly addressed these concerns by barring all health insurers from excluding people based on preexisting conditions, placing waiting periods on conditions, or charging higher premiums. The ability of Americans to enroll in individual health plans that are guaranteed through the federal marketplace is what most people think of as “ObamaCare”.

These “ObamaCare” provisions of the ACA provide for premium reductions and tax credits for people below certain income levels.

The downside of this has again been high premiums. Relatively few insurers have stayed in the individual health insurance market due to losses they claim while attempting to insure individuals under these rules. The result in many states has been few plan choices, or only one choice of plan, very high deductibles and high premium rates. Many would argue that people, who don’t qualify for a premium reduction, can’t afford individual coverage in most states.

What is the current debate about?

Neither Democrats nor Republicans have been completely honest about preexisting condition protections. Democrats have successfully raised concern about the future status of preexisting conditions in discussions of health care solutions. On the other side, while current law protects most Americans from preexisting condition exclusions, Republicans have proposed dismantling parts of the ACA, and it is conceivable that preexisting conditions could be collateral damage if the law were totally repealed.

A 2019 Senate Republican bill would have required insurers to offer coverage to people with preexisting health conditions, but would not have required coverage of the conditions themselves. This is likely the source of much of the debate.

There have been half-truths and incomplete arguments coming from both political sides of this issue. It seems neither side wants to clarify exactly what they are proposing. This creates speculation and anxiety from the 52 million Americans with preexisting conditions. This uncertainty is also frustrating for the health care benefits community as we advise clients on what’s next in this debate.

It now seems unlikely that health care proposals from either side will allow preexisting conditions to be excluded from coverage. It has become a flashpoint issue in the presidential election. Time will tell if there is more clarity about this during the upcoming election season.

 

Gregg Kennerly is the President at Advanced Benefit Strategies of Virginia, which designs and implements innovative corporate health care plans. Reach him at [email protected] or 757-536-4554.

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