ACA/Obamacare: Before and After the Waiver of Pre-existing Conditions and the Advent of Community Rating

“As Republicans continue to debate the specifics of their plan to repeal and replace the Affordable Care Act (ACA or ObamaCare), two provisions have taken center stage: “Guaranteed Issue,” the requirement that insurers offer policies to all applicants, and “Community Rating,” the requirement that they offer all policies at the same price, regardless of risk factors like health, lifestyle, or even gender.

These rules were obviously designed to allow people with pre-existing conditions to purchase health coverage, and to equalize the premiums paid by everyone. But as nice as that sounds, the experience of different states shows that these rules don’t benefit many consumers and aren’t the best way to foster functional and fair insurance markets.”

“Before the ACA, everyone was guaranteed a policy in every state. First, employer-based or group carriers could not deny you coverage due to a pre-existing condition. Second, if you kept continuous coverage and followed the requirements of the 1996 Health Insurance Portability and Accountability Act (HIPAA), you had the right to buy an individual insurance policy with no exclusions for pre-existing conditions.

HIPAA required that a carrier could not raise your rates nor drop you if you developed a condition after the policy was in place. Sadly, the architects of the ACA misled people about these protections, saying they didn’t exist, and many people still believe that today.”

“While guaranteed issue and community rating may sound nice in theory, in reality, they don’t work out as intended. Unfortunately, these rules can create bad incentives. By raising the cost of insurance for healthy people, these rules can discourage some people from buying insurance until they become sick, when they will still be guaranteed a policy.”

“Before the ACA, 43 states allowed the sale of “true insurance.” Rates were based on your potential of claims, so carriers could inquire about your health conditions, occupation, and lifestyle choices. This provided an incentive to practice a healthy lifestyle because your premium would be lower if you did. Most applicants received very affordable rates since most people are healthy. Unlike the proponents of the ACA claimed, scores of common conditions like mild allergies and even elevated blood pressure and cholesterol were accepted. In fact, 87 percent of applicants received coverage, even with their pre-existing conditions.

Others who had delayed applying until they developed a serious condition or were expecting an expensive claim were offered a guaranteed plan through a carrier or through a high-risk pool. High-risk pools offer a variety of plans from different insurers to high-risk customers at subsidized rates. Those rates were typically up to 150 percent of standard rates and were funded partially through a state tax on carriers, the premiums of enrollees, and an occasional grant from the federal government.


These higher rates were only charged to a few people, and they were similar rates to what everyone is now paying under the ACA. As more people buy private plans before they develop a serious condition, rates will remain low and fewer people will be buying in the subsidized high-risk pools.” - Obamacare’s pre-existing condition rules sound nice but don’t work, 04/10/2017, 
thehill.com


Link to the entire article appears below:

http://origin-nyi.thehill.com/blogs/pundits-blog/healthcare/328174-obamacare-misled-americans-about-pre-existing-conditions-now

Obamacare: To Buy or Not To Buy…..use to be the question.

The chart above is Thomas Lambert’s buy/don’t buy matrix regarding Obamacare. The formula finds its basis in: family income, maximum percent of income to be spent on insurance, dollars to be spent on insurance, insurance cost as the percent of penalty, resulting in a “buy”/”don’t buy” likely decision matrix. **

 **The complete essay, How the Supreme Court Doomed the ACA to Failure, The Roberts “tax” ruling undermines the new health care law by Thomas Lambert, law professor, University of Missouri. that yields the buy/don’t buy matrix, appears in the link below:

 www.cato.org/…s/files/regulation/2013/1/v35n4-5.pdf

　

Putting the formula into its action phase, assume a family income of $75,000. You supposedly spend $7,125 on health insurance. You pay the fine and have plenty of money remaining to manage everyday medical expenses. If the year goes by and you remain healthy, which the vast majority of people do, then you are ahead of the game.


However, if disaster strikes, you merely “buy” coverage as no pre-existing condition clause can stop coverage from going into force. Once the disaster passes, you return to the “don’t buy” position.


The matrix surely has nuances and doesn’t work in every last case e.g. chronic condition. However, in the past a rough estimate put forward by pundits and talking heads was that “some people” will not buy Obamacare coverage and merely pay the fine and buy coverage when needed. That proposition may well become “most people” will not buy Obamacare coverage and merely pay the fine and buy coverage when needed. That is to say, the mere fact someone has worked out a “buy” - “don’t buy” Obamacare purchase matrix means it becomes not a “some people” rational decision not to buy, given particular parameters, it becomes a “most people” rational decision not to buy, given particular parameters.