The simplest way to understand the American Health Care Act is as a proposed law that would cut taxes (mostly on rich people) and reduce the deficit by a relatively small amount ($119 billion over ten years) in exchange for massively increasing the number of people who lack health insurance. The nonpartisan Congressional Budget Office said in a report issued Wednesday that the new version of the AHCA would result in 23 million fewer people having insurance in 2026 compared to current law. Most of these would lose out thanks to new restrictions on Medicaid funding; some sick people would be priced out of the market as comprehensive plans got more expensive. And some, the CBO report said, "would use the tax credits authorized by the act to purchase policies that would not cover major medical risks and that are not counted as insurance in this cost estimate."
So, insurance polices that aren't really insurance? What's going on there?
This is a strange side effect of the new AHCA, which House Republicans passed earlier this month without waiting for the CBO assessment. To understand it, a quick rundown of how the insurance system works right now is helpful:
If you don't get health insurance through your job or the government (I.e. Medicaid and Medicaid), you can buy private insurance on an "exchange" set up by Barack Obama's signature Affordable Care Act (ACA). Plans sold on these markets are required by the ACA to cover certain "essential health benefits" (EHBs), like prescription drugs and maternity care. Without that requirement, insurers could offer cheaper plans that provide less coverage, which mainly younger healthy people would buy. But in exchange, insurers could (and would) charge older and sicker people more, making it tougher for people who actually need medical care to get insurance.
Basically, the ACA forces people who don't require as much care to pay more so that sicker people can afford policies they need.
This is one of the things that conservatives hate about what they call "Obamacare." Why should men have to pay extra for a plan that provides prenatal care? (This is an argument that was actually made by Republican politicians.) So in the new version of the AHCA, which was changed to accommodate the right wing of the Republican Party, states are allowed to waive the EHB requirements. That means insurers could offer cheap plans that don't provide much coverage, as they did in the old days. Healthy people would be free to buy these plans, saving them money, but millions of sick people living in these states would find themselves unable to buy insurance that fit their needs.
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Additionally, the AHCA would also incentivize insurers to sell really inexpensive policies that didn't actually provide coverage. "Waiving EHBs causes such uncertainty because you'd get a race to the bottom" as insurers competed to provide cheap plans, said Karen Pollitz, a healthcare expert at the Kaiser Family Foundation. "And the bottom could be really low."
That's how you get "insurance" that's nothing like what most of us think of when we talk about insurance. You'd still technically have a policy, but if you got seriously ill or needed expensive treatment, your insurer wouldn't provide much help. "It would be like having an airbag made out of tissue," said Pollitz.
What do these plans actually look like? Pollitz cited Tonik, a plan Anthem used to offer to "young invincibles," or people who had few healthcare needs. It was cheap (as low as $80 a month), but skimpy—it only covered up to four doctor visits a year, for instance. Anthem no longer sells Tonik policies, but they could come back in states that waive ACA requirements.
Another type of insurance that might return is "mini med" plans, which only provide a few thousand dollars of medical care a year. If you go over that cap—which you almost certainly will if you end up in the hospital for any reason—you'd have to pay out of pocket. (Mini med plans were often provided by fast-food employers, before the ACA banned them.)
In states where EHBs are waived, people would still get tax credits under the AHCA to buy insurance, creating a situation where insurers could sell crappy plans to people who don't want to pay more anything extra out of pocket. As Jordan Weissmann wrote in Slate in March:
If there are no rules about what insurers have to cover, companies will design extremely pared-down health plans that cost exactly as much (or maybe just below) what the tax credit is worth. Sure, they won't really provide much in the way of actual help if someone gets sick, but to insurance buyers they'll be free.
Pollitz told me that the CBO was relying on guesses about how many states would apply for the waivers that might cause these problems. And the CBO doesn't even put a number on how many people would use the tax credits to buy lousy policies, saying only that it would be a "few million." But in an environment where insurers are competing on cost and consumers may not know what they're buying, garbage policies could easily proliferate if this thing becomes law.
"Honest to God, I think insurers want to sell real insurance, more than just the junk," said Pollitz. But without regulations and subsidies, "it's hard to do that."
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