Watching Out for the Rights of the Uninsured

Special Guest Post by Professor Howell E. Jackson, Harvard Law School

As Republicans strive to unwind the Affordable Care Act (ACA), public commentary is quite naturally focusing on the number of Americans who might lose health insurance coverage. The Congressional Budget Office last month estimated that eleven million individuals could drop off of insurance rolls immediately, with millions and millions more to lose coverage within the next few years.  These numbers are indeed troubling, but the fate of the uninsured deserves similar attention.

For those critical of the ACA, uninsured individuals are sometimes characterized as victims of government overreach: penalized with a tax assessment for not complying with the individual mandate, and denied access to the kinds of lower-cost insurance policies that a less regulated insurance market might provide.  And there is some truth to this critique:  Mandatory coverage terms under the ACA do drive up premiums, and of the estimated 27 million Americans now without health insurance coverage, some eight million are paying ACA penalties, totaling on the order of $8 billion a year.  But under the ACA, the uninsured are getting something for those penalties.  In fact, they are getting quite a lot.

As policy analysts often note, the ACA prohibits insurance companies from denying coverage or charging higher premiums based on pre-existing conditions.  This protection is most often discussed in the context of individuals seeking to obtain insurance coverage in the first instance or after losing employer-provided coverage.  A less heralded, but equally important feature of this aspect of the ACA is that it allows healthy Americans the freedom to forgo insurance in the first instance and then purchase reasonably priced coverage when the need arises.  The policies available to uninsured individuals have the full protections of the ACA, including limits on out-of-pocket expenses, as well as prohibitions on annual or lifetime coverage limits and mandated terms of coverage.  In addition, premiums are constrained and, for many individuals and families, premium assistance and cost sharing support are available.   While many despair that a large and possibly growing share of Americans lack insurance coverage, at least the ACA ensures that the uninsured have the right to buy a good health insurance policy at a reasonable price when the need arises.

For middle-class Americans, that’s an extremely important protection.  If you happen to be uninsured and you or a member of your family develops a chronic disease requiring expensive treatments over multiple years, the ACA is all that stands between you and bankruptcy.  With the ACA, a stricken, uninsured American can sign up for exchange coverage as soon as the end of the current calendar year during the open enrollment period and in some instances even sooner.  At that point, the costs associated with a serious medical condition are converted from a financial catastrophe into a manageable monthly expense.

What are the rights of the uninsured under the Republican replacement plan?  Well, of course, we do not yet know because the details of the Republican plan are not available.  But preliminary indications are troubling.

Under several leading Republican proposals, protections for those with pre-existing conditions will be limited to individuals with “continuous coverage” – that is, those who already have health insurance.  The uninsured, apparently, will have no protections against price discrimination by insurance companies based on projected costs.  So, for an uninsured individual with a medical condition projected to cost $100,000 a year, he or she would have to pay that amount (plus a charge for administrative expenses and profit) for an actuarially “fair” insurance policy.  In other words, private insurance may simply be out of reach for many middle-class Americans.  But even if some sort of private policies are offered to uninsured individuals at a manageable cost, it’s not at all clear that Republican alternatives will retain the ACA’s mandated coverage or prohibitions on annual or lifetime benefit caps, again exposing uninsured applicants to serious financial risks all-too-prevalent before the ACA’s enactment.

What leading Republican replacement alternatives appear to contemplate for uninsured individuals with serious pre-existing conditions is access to state-run high-risk pools, which have been used in the past to cover at least some vulnerable populations with subsidized insurance rates.  But past experience suggests that these arrangements are chronically underfunded, and none of the Republican proposals forwarded to date offers anything close to enough federal funding to sustain these high-risk pools for the number of uninsured individuals likely to need them if the ACA is repealed. For example, Speaker Ryan has suggested allotting $25 billion to support high-risk pools over the next decade, whereas independent experts estimate the annual subsidies required to support such pools would be several times that amount.  That means either that only a small fraction of vulnerable individuals will have access to these subsidized insurance options or that the states will be called upon to pick up fiscal charges that would likely run on the order of tens of billions of dollars a year.  In a post-ACA world, large numbers of uninsured individuals with serious medical problems may well slip through the cracks.

As most would now acknowledge, the ACA has its flaws, with one being the failure of the legislation to push enough healthy individuals onto the exchange markets.   But at least those who failed to obtain health insurance coverage enjoyed access to insurance coverage should serious medical conditions arise.  As the debates over Republican reform plans unfold, the public should pay attention not just to how many folks will retain insurance coverage, but what options will remain for the uninsured.  And plans, such as elements of the Cassidy-Collins proposal, that contemplate mandatory catastrophic coverage for everyone should to be credited for at least attempting to address the needs of the uninsured.

If uninsured individuals with major medical expenses cannot obtain reasonably priced health insurance policies on the private market under the Republican replacement plans, we need to know who will end up paying for their medical treatments.  Will it be already stretched state budgets through massive subsidies for high-risk pools?  Or will it be the health care providers who will get stiffed on their bills when uninsured patients descend into bankruptcy?

While ACA critics routinely lambaste the law as being an affront to liberty, the legislation might better be understood as one of those wise restraints that make us free.  For all its flaws, the ACA required uninsured individuals to pay a fee for not getting insurance, and then in return gave them a valuable option to get coverage in the face of medical catastrophe.  For struggling members of the middle class, that arrangement constitutes a critical safety net, and one that the country should not lightly dismantle.

Professor Howell Jackson is the James S. Reid, Jr., Professor of Law at Harvard Law School and the co-author of Allison K. Hoffman & Howell E. Jackson, Retiree Out-of-Pocket Healthcare Spending: A Study of Expert Views, Consumer Expectations, and Policy Implications, 39 Am. J. Law & Medicine 62 (2013).

The Petrie-Flom Center Staff

The Petrie-Flom Center staff often posts updates, announcements, and guests posts on behalf of others.

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