One of the most widely repeated myths in health policy is the idea that Obamacare is protecting people with pre-existing conditions.
Many people – maybe even most – who enter the individual market with a serious health problem face worse options today than they did before there was Obamacare.
Under the old system, people could enroll in an individual insurance plan at any time during the year. If they were denied coverage because of their health status, in most states they could obtain coverage through a risk pool – where the insurance was typically a standard Blue Cross plan. The premium was higher, but the deductible was reasonable and they had access to almost any doctor and any hospital.
In the Obamacare exchanges today, by contrast, the premium has doubled, the deductibles are triple what they are in a typical employer plan and narrow networks often exclude the best doctors and the best hospitals. Moreover, an individual is able to obtain insurance only during a six-week open enrollment period and even then, the coverage does not commence until the next January.
What can be done to give real protection to people with pre-existing conditions? Here are some suggestions for the Trump administration and for Congress.
Continuous open enrollment. People who have been continuously insured in the group market should have immediate access to individual insurance when they leave their group plan. They should not have to wait until the next two-month open enrollment period. Also, people who are being mistreated or underserved by their current plan should be able to switch plans at any time.
Limited open enrollment periods were an idea insisted on by the health insurers, who are afraid of individuals gaming the system by waiting to insure after they get sick or by upgrading to better coverage after they get sick. There are better ways to solve these problems, described in this brief analysis and below.
Centers of excellence for chronic disease. In the Obamacare exchanges health plans are required to be all things to all patients. They are not allowed to specialize and become really good at a particular problem, such as diabetes, cancer or heart disease. This needs to change.
Plans in the individual market should be able to do what Medicare Advantage plans have been able to do for over a decade: specialize and become centers of excellence for such specific health conditions as diabetes, cancer, heart disease, lung disease, etc. Cancer Treatment Centers of America, for example, should be able to enter the exchanges and solicit only cancer patients. It should also be able to make offers to other insurers to take all their cancer patients, if the patients are willing to move.
To facilitate specialization, medical records in the individual market should travel with the patient from plan to plan. All plans should be able to ask health questions and conduct health screenings at the point of entry, to make risk adjustment more accurate and to better ensure that the right patient gets to the right plan.
Actuarially fair premiums. Although the Obamacare exchanges have a risk adjustment mechanism, it is highly imperfect. Why else would the most successful health plans try to attract the healthy and avoid the sick? States should be allowed to set up risk adjustment systems to ensure that the plans receive a fair premium for every enrollee.
Medicare Advantage is a model. With proper risk adjustment – and changes whenever new medical information becomes available – centers of excellence, or focused factories, will arise to compete for the enrollment of the sick. This would be an alternative to the current race to the bottom, in which plans offer ever-narrower services and networks.
States can move in the right direction if they allowed to establish risk reinsurance as a vehicle for risk adjustment. This would allow health plans to insure in advance against enrollment by high-cost patients. Ultimately, though, risk adjustment will work better if it is produced in a real market instead of being administered by a government agency.
A premium tax to fund high-cost patients. This is how risk pools used to be funded and it is an idea worth resurrecting. States should be allowed to impose a small premium tax on group insurance for the sole purpose of paying for any extra costs created by the migration of high-cost patients from the group to the individual market.
Employers would be exempt from the tax if they purchase individually owned insurance for their employees or if they provide post-retirement health care.
Health Savings Accounts for the chronically ill. The chronically ill should have access to accounts completely divorced from the requirement of a high deductible. Patients should be able to control the dollars and pay bills where patient decision-making is appropriate and desirable. Third parties should be able to control dollars and pay expenses where patient discretion is not appropriate or desirable.
Better access to direct primary care. Concierge care used to be available only to the very rich. Today, what is called direct primary care (DPC) is increasingly offered by employers and the prices are quite reasonable: $50 a month for a mother and $10 for a child, covering all primary care and 24/7 access to a physician, including nights and weekends by phone, email and video.
Because of a Trump executive order that will become effective later this year, employees will be able to use employer-funded Health Reimbursement Arrangement (HRA) accounts to contract with a DPC doctor of their choosing. The 26 million families who have a Health Savings Accounts instead of HRAs should be given the same option.
No dumping, no gaming. States should be able to prevent health plans from dumping costs on each other. They should also prevent individuals from gaming the system by waiting to insure after they get sick. In both cases, enforcement would involve appropriate financial penalties.
These are just a few of the many reforms that are needed to create a market in which health plans actively compete for the chronically ill and strive to solve their problems.