Get ready for the “mommy tax.”
One of the most powerful arguments against House Republicans’ embattled legislation to repeal the Affordable Care Act has been that it imposes an “age tax” by raising health-insurance premiums and out-of-pocket expenses for older, working adults.
To woo recalcitrant conservatives whose resistance forced the House leadership to delay a vote on the legislation Thursday, Republicans are considering changes to the bill that could not only compound that problem, but also significantly raise the cost and diminish the availability of maternity coverage. That’s a shift critics are bound to portray as a tax on motherhood.
More broadly, many health-insurance experts say, the latest round of revisions—which are still under negotiation—would undermine Republican promises to protect consumers with preexisting health conditions and could leave comprehensive health insurance virtually unavailable at almost any price on the individual market.
The changes sought by the conservative House Freedom Caucus attempt to lower the price of insurance premiums by revoking the ACA’s requirement that insurers cover an array of 10 “essential health benefits”—spanning maternity care, mental health, and drug abuse, to hospitalization and outpatient care.
Critics argue such mandates inflate the cost of insurance by requiring consumers to purchase more insurance than they want: The classic example is an older male forced to purchase coverage that includes maternity care.
The problem is that if coverage of needs such as maternity care or mental health is not included in all policies, the only people likely to buy it a la carte are those who expect to use it. And that will rapidly raise the cost of such coverage—if insurers offer it at all.
“The losers would generally be people who want to buy a comprehensive insurance policy,” said Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University. “Because once you give carriers flexibility to design the benefit package, they will do so to attract healthy people. No chump insurance company is going to be out there offering a comprehensive package, because then they'll be stuck with higher-risk enrollees.”
Drew Altman, president of the nonpartisan Kaiser Family Foundation, agrees. “The people who liked their pre-ACA plans were mostly healthy people who wanted cheap limited plans (and see no obligation for risk-sharing),” he wrote in an email. “Those folks will like this. Everyone else: no.”
Such a sweeping and likely disruptive restructuring of the individual insurance market may ultimately antagonize Republican moderates as much as the opportunity to uproot a core regulatory legacy of Obamacare attracts conservatives. On Thursday afternoon, Republican Senator Susan Collins of Maine, who had already expressed opposition to the House bill, raised more concerns about the latest proposals to eliminate the mandatory benefits. “The problem with that is while I would welcome some changes to improve the flexibility of plans that could be sold, we need to remember that the essential health benefits includes substance abuse and mental-health treatment, which are critical to retain for my state given the opioid crisis,” she told reporters. “Preventative care, vaccinations for children save money in addition to saving lives.”
As Collins’s comments show, it’s unclear whether eliminating the guaranteed benefits could attract enough votes in the Senate, even if the chamber’s parliamentarian allows the proposal to be included in a reconciliation bill that’s exempt from filibuster.
Uncertainty over whether the provision will ultimately be included in any final repeal legislation is making House moderates even more reluctant to vote for it—and heightening the two-front, left-right pattern of defection that forced the House GOP leadership Thursday to pull the bill, at least temporarily.
Eliminating the essential health benefits reinforces the core dynamic of the underlying House repeal-and-replace plan. In its analysis of the original bill, the Congressional Budget Office concluded it would lower premiums for younger and healthier consumers, but substantially raise them for people with greater health needs—particularly older, working-age adults. The CBO also predicted that the bill would increase out-of-pocket expenses for consumers in the individual market, because the insurance available would cover less of their total medical costs than it did under the ACA. Reaching a similar conclusion, Kaiser this week calculated that deductibles under the House Republican bill would increase by about 60 percent compared with under the ACA.
Repealing the essential health benefits would intensify this cost shifting, which already threatens to impose the greatest harm on those older, working-age adults who are a predominantly white, Republican-leaning constituency. Whites over 45 provided a majority of Trump’s votes last November and about 60 percent of House Republicans represent districts older than the national average.
The benefits repeal would allow insurers to court younger and healthier people with plans that are less expensive but much skimpier—which would probably satisfy many of those consumers unless and until they have a major health need. “Winners will be those who are healthy and looking for low-premium plans,” Corlette said. “Of course, those folks will need to have savings on hand in case anything serious does happen to them.”
But as those healthier consumers withdraw from the larger risk pool to switch to more threadbare plans, enrollment in the remaining comprehensive plans would tilt further toward those with greater health needs. That creates the classic conditions for what insurance experts call a “death spiral”: As the risk pool for a plan includes more and more expensive customers, insurance companies must raise the price, which further drives away those who are least likely to use the service, undermining the economics even more.
Maternity care captures the dilemma. Before the ACA, experts note, it was rarely available at all and prohibitively expensive when it was, because insurers expected that anyone who purchased it was intending to have a child and thus planned to access the benefits. Such a concentration of users undermines the essence of insurance, which is to pool those at higher- and lower-risk of employing the coverage.
“Virtually all non-group plans excluded maternity care pre-ACA, and if they did offer it, the extra cost relative to plans that excluded it was significantly higher than the cost of a normal birth,” Linda Blumberg, a senior fellow in health policy at the Urban Institute, noted in an email.
Corlette expects that if the proposals in the House GOP bill became law, the individual insurance market would rapidly revert to that state. “On maternity, my guess is you’d see carriers pretty quickly drop that from the benefit package,” she said.
The same might be true of other expensive services—including mental health and drug treatment—used by only a distinct subset of the insured population. By allowing insurance companies to limit what they cover, many experts note, the House bill would undermine its promise to maintain the ACA requirement that the firms provide coverage to all consumers regardless of preexisting conditions. Even with a statutory ban on discriminating based on preexisting health problems, insurers could effectively segment out those with major needs by offering policies that do not cover the treatments they require.
“Preexisting-condition protections are empty promises without EHB,” wrote Blumberg, referring to the ACA’s essential health benefits. “I can’t get rejected for having cancer, but you don’t have to cover my chemotherapy drugs, my radiation therapy, etc. … It throws more and more of the costs of health care back on people when they need to use services.”
The possible repeal of the essential health benefits could also interact with other elements of the House legislation to further diminish the availability of comprehensive insurance in the individual market. The underlying bill contains a so-called “continuous coverage” requirement, which requires insurers to sell to patients at comparable prices regardless of their preexisting health conditions—so long as the patients do not let their insurance coverage lapse.
As Rand Corp. senior economist Christine Eibner noted, that means patients could purchase skimpy insurance plans and only shift to more comprehensive, and expensive, plans when a health need emerges. Rather than face that risk, she predicted, many insurers will refuse to offer comprehensive coverage at all.
“If you allowed very limited plans and you have a continuous-coverage requirement, there’s a scenario where the healthy people all gravitate to these limited-generosity plans so they can switch to these more generous plans when the time comes,” said Eibner, who studies health care. “That raises the question of whether those more generous plans can exist, because if they only have a sick risk pool, do they death spiral? So you have a significant risk that this insurance market becomes bare-bones."
For similar reasons, Blumberg believes that comprehensive insurance in a post-ACA environment might be even less available on the individual market than it was in the pre-ACA world—when it was already rare. “The narrow plans would actually be more common here than was the case in the pre-ACA markets, because of the guaranteed issue under the AHCA,” she wrote. “If I can’t deny sick people outright, I’m going to only offer very low-value policies, so if the sick people enroll I’m not at risk of big claims as an insurer.”
Corlette noted that even if Congress repeals the essential health benefits, Washington would still need to provide some minimum definition of insurance—if only to identify what would qualify for the legislation’s tax credits. But the drive to repeal the mandatory benefits suggests those standards are likely to be minimal.
That means the most important restraint on a shift toward narrow insurance would be states that continue to require robust minimum-benefit packages for policies sold within their borders. But any such attempts would be quickly undermined if Republicans achieve a key second-stage goal in their health-reform vision: allowing any health-insurance plan authorized in any state to be sold in every state.
Under such interstate sale, any state attempting to mandate robust benefits could find their younger and healthier consumers lured away to less expensive and comprehensive plans regulated in less demanding states. For that reason, experts such as Larry Leavitt, Kaiser’s senior vice president, flatly predict that no state could preserve comprehensive insurance requirements in an environment of interstate sale.
“Truly allowing insurance to be sold across state lines would make it impossible for any one state to preserve the kind of risk-pooling in the ACA if it chose to,” he told me earlier this year. “An insurer operating in a less regulatory state could always undercut an insurer operating in a more highly regulated state.”
In all these ways and more, the House GOP bill’s latest iteration would shift the individual insurance market, perhaps radically, toward a model that many conservatives favor: low-cost, high-deductible plans that largely cover only catastrophic expenses and require consumers to pay more medical costs from their own pocket. What’s not clear is whether consumers whose principal complaint about the ACA is that it already costs them too much would be equally enthusiastic about such a change.