The CBO line that will alarm the GOP

Health-bill markup says red states’ mar­kets would grow ‘un­sta­ble’ by 2020

The Washington Post Sunday - - BUSINESS - BY MAX EHRENFREUND

The Con­gres­sional Bud­get Of­fice released its as­sess­ment of the lat­est ver­sion of House Re­pub­li­cans’ health-care bill on Wed­nes­day, and if Re­pub­li­cans were hop­ing for big changes this time around, they didn’t get them. The new score looks a lot like the old one: 23 mil­lion peo­ple would lose their in­surance un­der this ver­sion, the CBO says, as com­pared with 24 mil­lion un­der the last one.

What they got in­stead is a new sen­tence in the re­port that could be par­tic­u­larly alarm­ing for GOP pol­i­cy­mak­ers.

Un­der the GOP plan, the re­port states, “about one-sixth of the pop­u­la­tion re­sides in ar­eas in which the non­group mar­ket would start to be­come un­sta­ble be­gin­ning in 2020.”

To break that down: The “ar­eas” the re­port refers to are mostly red states, and the “non­group mar­ket” refers to peo­ple who do not have health in­surance through an em­ployer or through the gov­ern­ment. And “un­sta­ble” means that peo­ple in those two cat­e­gories who have pre­ex­ist­ing med­i­cal prob­lems might no longer be able to buy in­surance.

Even­tu­ally, ac­cord­ing to the re­port released Wed­nes­day, mar­kets in those states would re­sem­ble mar­kets be­fore the Af­ford­able Care Act was im­ple­mented. Lesshealthy con­sumers would not be able to af­ford cov­er­age be­cause in­sur­ers would be able to ex­am­ine their med­i­cal his­to­ries and charge them more if they were likely to need ex­pen­sive treatment in the fu­ture.

Re­pub­li­cans have claimed that their bill would main­tain the Af­ford­able Care Act’s pro­tec­tions for those peo­ple, but ac­cord­ing to the CBO re­port, about one-sixth of the to­tal U.S. pop­u­la­tion could be at risk if they have pre­ex­ist­ing prob­lems. Those pa­tients would gen­er­ally live in red states.

Pro­tect­ing pa­tients with pre­ex­ist­ing med­i­cal con­di­tions was one of the most pop­u­lar el­e­ments of Oba­macare. Be­fore the health law, pa­tients could be de­nied cov­er­age not only if they had com­mon chronic con­di­tions such as di­a­betes and heart fail­ure but also if they had prob­lems with ad­dic­tion or men­tal ill­ness. Wom-

en con­sid­er­ing preg­nancy or peo­ple with dan­ger­ous jobs, such as min­ers and fire­fight­ers, could also be ex­cluded.

Re­pub­li­cans have said that their bill will pre­serve those pro­tec­tions. They have also ar­gued that the in­surance ex­changes es­tab­lished un­der the Af­ford­able Care Act are en­ter­ing a “death spi­ral” — a term used by health­care ex­perts to de­scribe col­laps­ing mar­kets.

The CBO re­port, how­ever, warns that mar­kets in red states could be­come “un­sta­ble” for those with pre­ex­ist­ing con­di­tions un­der the GOP plan, although the re­port does not use the phrase “death spi­ral.”

“For this one-sixth of the pop­u­la­tion that they talk about, they’re get­ting pretty damn close to say­ing that,” said John Ho­la­han, an econ­o­mist at the non­par­ti­san Ur­ban In­sti­tute. Death spi­ral or not, law­mak­ers with dif­fi­cult elec­tions ahead might be ner­vous about see­ing the CBO’s pre­dic­tions borne out in their dis­tricts.

The CBO’s pre­dic­tion re­sults from a quirk in the bill, which is the prod­uct of elab­o­rate com­pro­mises among Re­pub­li­cans with vastly dif­fer­ent views on how best to pro­vide in­surance for Amer­i­cans who are not cov­ered by the gov­ern­ment or by their em­ploy­ers.

In par­tic­u­lar, many Re­pub­li­cans ob­jected to a rule deal­ing with how in­sur­ers treat new cus­tomers. The Af­ford­able Care Act pre­vents in­surance com­pa­nies from us­ing a pa­tient’s med­i­cal his­tory to de­ter­mine the pre­mium they will pay. Be­fore the pas­sage of the health law, in­sur­ers used that in­for­ma­tion to ex­clude pa­tients who could prove costly for them later.

The GOP bill would keep this rule in place in most states. Yet be­cause of ob­jec­tions from law­mak­ers on the right hop­ing for a more com­plete re­peal of Oba­macare, Rep. Tom MacArthur (R-N.J.) amended the text to al­low states with con­ser­va­tive of­fi­cials to get out of the rule.

State of­fi­cials could seek a waiver from the fed­eral gov­ern­ment to al­low in­sur­ers in their states to use in­for­ma­tion about pa­tients to set pre­mi­ums — un­der cer­tain con­di­tions. In­surance com­pa­nies could sub­ject cus­tomers to that kind of scru­tiny only if the cus­tomers had al­lowed their health cov­er­age to lapse for at least two months.

That pro­vi­sion is de­signed to dis­cour­age res­i­dents of those states from gam­ing the sys­tem. With­out it, they might de­cide to pay for health in­surance only when they are plan­ning on see­ing a doc­tor.

There is a catch, how­ever, ac­cord­ing to the CBO.

Us­ing in­for­ma­tion about a paRepub­li­can his­tory — a prac­tice known as med­i­cal un­der­writ­ing — is in­tended as pun­ish­ment in the GOP bill. For some, though, med­i­cal un­der­writ­ing could be an ad­van­tage. Younger, health­ier peo­ple could pay cheaper pre­mi­ums if their in­sur­ers know that they are in good shape over­all than if they were sim­ply pay­ing the same rate that ev­ery­one else paid.

As a re­sult, the CBO projects, health­ier peo­ple in states where the rule against med­i­cal un­der­writ­ing is waived might al­low their cov­er­age to lapse on pur­pose to take ad­van­tage of those re­duced rates. Those pay­ing the stan­dard pre­mium would be sicker, on av­er­age — and the in­surance com­pany would have to pay more to cover the costs of their med­i­cal care.

Those costs, in turn, would force in­sur­ers to in­crease their stan­dard pre­mi­ums, which would in turn en­cour­age even more health­ier peo­ple to take ad­van­tage of med­i­cal un­der­writ­ing.

Ul­ti­mately, the stan­dard pre­mium could be­come so ex­pen­sive that no one would pay it, and peo­ple with pre­ex­ist­ing med­i­cal prob­lems would sim­ply not buy in­surance.

The CBO’s es­ti­mate that 1 in 6 Amer­i­cans could live in states that would seek these waivers is lit­tle bet­ter than a guess. The ac­tual fig­ure would de­pend on how elected of­fi­cials in each state would view the new law, which is dif­fi­cult to pre­dict. While of­fi­cials in red states are more likely to ask for a waiver from the Af­ford­able Care Act rule than of­fi­cials in blue states, red states tend to be less pop­u­lous, and many might be dis­suaded by the CBO’s pre­dic­tions about the con­se­quences.

In this case, rel­a­tively health­ier con­sumers would be bet­ter off, while the mar­ket would im­plode for sicker pa­tients. “It could be a death spi­ral for less-healthy peo­tient’s ple,” Ho­la­han said.

All the same, a re­turn to the mar­ket as it ex­isted be­fore the Af­ford­able Care Act is ex­actly what many con­ser­va­tive pol­i­cy­mak­ers want, Ho­la­han said. The CBO, he said, is “not giv­ing them a whole lot of credit for these mar­ket dis­rup­tions caus­ing pre­mi­ums to fall for healthy peo­ple, which is what, I think, their goal was.”

The re­port from the CBO, which serves as Congress’s in­de­pen­dent, non­par­ti­san ref­eree, is the of­fi­cial pro­jec­tion of how the House’s bill would af­fect cov­er­age, pre­mi­ums and the fed­eral gov­ern­ment’s bot­tom line.

The bill would ful­fill a long­stand­ing Repub­li­can pledge to undo Oba­macare. First, though, GOP se­na­tors are ex­pected to weigh in, and they can be ex­pected to scru­ti­nize the CBO’s anal­y­sis as they work on a plan of their own.

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