It’s a big deal because millions of people with pre-existing conditions are likely to lose their insurance if Congress passes an aggressive rollback of Obamacare. But it is just as significant because, if Alexander holds to this promise, then he will have a very difficult time making major changes to one of the most important segments of President Obama’s health reform bill.
Under the Affordable Care Act, insurers are no longer permitted to refuse to cover an individual because that individual has a pre-existing condition. This provision, however, cannot stand alone. If individuals are allowed to wait until they are sick to buy health insurance, and then insurers are required to cover them anyway, then sick people will drain all the money out of insurance pools that they did not pay into, leaving nothing left for other patients.
Obamacare solves this problem by adding on two provisions: an individual mandate that taxes people who do not carry insurance at a higher rate, and tax credits that help people who cannot otherwise afford insurance to do so. Together, these provisions bring healthy people into insurance plans before they get sick, thereby ensuring that there is enough money in the insurance pool to go around.
If Alexander is serious about protecting people with pre-existing conditions, the only way that private insurers will be able to operate under such a legal regime is if a structure similar to Obamacare remains in place. Minor tweaks could be made — the individual mandate, for example, could be replaced with a different mechanism to encourage healthy people to buy insurance and to penalize those who don’t. But it is not possible to simply repeal the mandate and the tax credits but leave the provision Alexander likes in place.
It should be noted that some Republicans have, in the past, talked up “high-risk pools” as a way around this problem. Congress could create a new government-run plan that only insures the sickest individuals, letting private insurers cover the rest.
Such a system would be a bonanza for insurance companies, as high-risk pools allow them to keep profitable customers while shifting the cost of insuring the most expensive patients onto taxpayers. But high-risk pools could, in theory, provide care to people with preexisting conditions.
In practice, however, several states attempted to create high-risk pools, but found they provided only a fraction of the funding necessary to provide for everyone who needed coverage. As a report noted when Sen. John McCain (R-AZ) proposed high risk pools in 2008, these pools “have not been a viable alternative for the medically uninsured because of high premiums…and inadequate funding to subsidize the full cost of providing insurance to a high-cost population.”
So, unless Alexander wants to impose a massive new expense on the federal government, the only way he can keep his promise to people with pre-existing conditions is to leave much of Obamacare intact.
Author: Ian Millhiser