On the eve of the scheduled vote in the U.S. House of Representatives on a bill to repeal Obamacare, the Department of Health and Human Services (HHS) issued a report yesterday entitled: “At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans: 129 Million People Could Be Denied Affordable Coverage Without Health Reform.”
The report’s “findings” are misleading and wildly inaccurate.
The report implies that without Obamacare’s prohibition on insurers applying preexisting-condition exclusions, nearly half of the entire U.S. population would be at risk of being denied health insurance because they already have a preexisting medical condition.
But claiming that, because millions of people have preexisting medical conditions today, they risk being denied coverage if Congress repeals Obamacare is like saying that, because millions of Americans live within five miles of the seacoast, they risk being killed by the next hurricane if Congress cuts funding for the Army Corps of Engineers. Such simplistic and superficial methodologies deliberately ignore all the other relevant factors that might lead a reasonable person to question their outlandish conclusions.
In the case of hurricanes, costal communities have emergency preparedness plans, evacuation routes, and shelters designed to withstand hurricanes—all of which make the probability of anyone being killed by a hurricane vastly lower than some scary estimate of potential casualties derived by simply counting the number of individuals living near the seacoast.
In the same way, when it comes to individuals being denied health insurance coverage based on a preexisting medical condition, the HHS report vastly overstates the effect of repealing Obamacare because, implicitly, it vastly overstates the benefit of enacting Obamacare. Put another way, if the report’s assertion that over 100 million Americans with preexisting medical conditions risk being denied coverage if Obamacare is repealed, then why weren’t 100 million American’s with preexisting medical conditions denied coverage, say, five years ago, before Obamacare was enacted?
The truth is that if Obamacare were repealed, very few Americans would be at risk of being denied health insurance because of a preexisting medical condition for the same reason that very few individuals face such a risk today. The reason is that laws enacted years ago already protect those individuals, and those laws would still exist if Obamacare were repealed.
Today, over 90 percent of Americans with private health insurance are covered by employer group plans where existing rules governing the application of preexisting condition exclusions are not an issue. Before passage of Obamacare, the law specified that individuals with employer-sponsored insurance cannot be denied new coverage, be subjected to preexisting condition exclusions, or be charged higher premiums because of their health status when switching to different coverage. Thus, in the employer group market, preexisting condition exclusions apply only to those without prior coverage or those who wait until they need medical care to enroll in their employer’s plan.
Those existing rules represent a fair approach: Individuals who do the right thing (getting and keeping coverage) are rewarded; individuals who do the wrong thing (waiting until they are sick to buy coverage) are penalized.
The one small, legitimate remaining problem is that the same kinds of rules do not currently apply to the “individual” (non-group) market—about 9.4 percent of the total market for private health insurance. Thus, an individual can have purchased non-group health insurance for many years and still be denied coverage or face preexisting-condition exclusions when he or she needs or wants to pick a different plan.
The obvious, modest, and sensible reform is to simply apply to the individual health insurance market a set of rules similar to the ones that already govern the employer group market.
Instead, Obamacare prohibits the application of preexisting-condition exclusions under any circumstances, thus encouraging everyone to wait until they are sick before buying health insurance. That perverse incentive is a recipe for disaster. So, in order to limit the effects of that disaster (of their own making), Congress then included in Obamacare an unpopular individual mandate to buy health insurance.
Indeed, as John Goodman of the National Center for Policy Analysis notes, if preexisting-condition exclusions are such a huge problem, then why have only 8,000 people nationwide so far signed up for the new high-risk pools included in Obamacare to provide coverage to those denied insurance until the new rules take effect in 2014?
The truth is that the issue of preexisting-condition exclusions is yet another example in Obamacare where Congress focused on a small (though legitimate) problem with the current health system and, rather than enacting a modest and sensible solution, instead used the problem to justify an ideologically motivated, sweeping, and disruptive policy change that creates new and bigger problems than the one Congress claimed to be solving.
This latest report from HHS should be seen for what it really is: a wild and desperate last-ditch attempt to defend an indefensible policy.