A problem with stripping away minimum benefit rules is that the whole idea of “health insurance” starts to become murky.
@RepLloydDoggett: #PayMoreForLess #TrumpCare means plans could cover aromatherapy but not chemotherapy. Get cancer? Trump don’t care.
Most Republicans in Congress prefer the type of health insurance market in which everyone could “choose the plan that’s right for them.”
Why should a 60-year-old man have to buy a plan that includes maternity benefits he’ll never use? (This is an example that comes up a lot.) In contrast, the Affordable Care Act includes a list of benefits that have to be in every plan, a reality that makes insurance comprehensive, but often costly.
Now, a group of conservative House members is trying to cut a deal to get those benefit requirements eliminated as part of the bill to repeal and replace the Affordable Care Act moving through Congress. (The vote in the House is expected later today.)
At first glance, this may sound like a wonderful policy. Why should that 60-year-old man have to pay for maternity benefits he will never use? If 60-year-old men don’t need to pay for benefits they won’t use, the price of insurance will come down, and more people will be able to afford that coverage, the thinking goes. And people who want fancy coverage with extra benefits can just pay a little more for the plan that’s right for them.
But there are two main problems with stripping away minimum benefit rules. One is that the meaning of “health insurance” can start to become a little murky. The second is that, in a world in which no one has to offer maternity coverage, no insurance company wants to be the only one that offers it.
Here is the list of Essential Health Benefits that are required under the Affordable Care Act:
• Ambulatory patient services (doctor’s visits)
• Emergency services
• Maternity and newborn care
• Mental health and substance abuse disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services, and chronic disease management
• Pediatric services, including oral and vision care
The list reflects some lobbying of the members of Congress who wrote it. You may notice that dental services are required for children, but not adults, for example. But over all, the list was developed to make insurance for people who buy their own coverage look, roughly, like the kind of coverage people get through their employer. A plan without prescription drug coverage would probably be cheaper than one that covers it, but most people wouldn’t think of that plan as very good insurance for people who have health care needs.
Under the Republican plan, the government would give people who buy their own insurance money to help them pay for it. A 20-year-old who doesn’t get coverage from work or the government, for example, would get $2,000. If the essential health benefits go away, insurance companies would be allowed to sell health plans that don’t cover, say, hospital care. Federal money would help buy these plans.
But history illustrates a potential problem.
In the 1990s, Congress created a tax credit that helped low-income people buy insurance for their children. Quickly, it became clear that unscrupulous entrepreneurs were creating cheap products that weren’t very useful, and marketing them to people eligible for the credit. Congress quickly repealed the provision after investigations from the Government Accountability Office and the Ways and Means Committee uncovered fraud.
Mark Pauly, a professor of health care management at the Wharton School of the University of Pennsylvania, who tends to favor market solutions in health care, said that while the Obamacare rules are “paternalistic,” it would be problematic to offer subsidies without standards. “If they’re going to offer a tax credit for people who are buying insurance, well, what is insurance?” he said, noting that you might end up with the government paying for plans that covered aromatherapy but not hospital care. “You have to specify what’s included.”
A proliferation of $1,995 plans that covered mostly aromatherapy could end up costing the federal government a lot more money than the current G.O.P. plan, since far more people would take advantage of tax credits to buy cheap products, even if they weren’t very valuable.
There’s another reason, besides avoiding fraud, that health economists say benefit rules are important. Obamacare requires insurers to offer health insurance to people who have pre-existing illnesses at the same price as they sell them to healthy people, and the Republican bill would keep this rule. But if an insurance company designs a plan that attracts a lot of sick people, it will be very expensive to cover them, and the insurance company will either lose money or end up charging extremely high prices that would drive away any healthy customers.
Sherry Glied, the dean of the Robert F. Wagner Graduate School of Public Service at New York University, who helped work on the essential health benefits in the Obama administration, raised the example of mental health benefits. Parents of adolescents with schizophrenia will be sure to buy insurance that covers only mental health services. Other parents won’t care about that benefit.
The result: Any company offering such benefits will end up with a lot of customers requiring expensive hospitalizations, while its competitors that drop them will get healthier customers who are cheaper to insure. If mental health services are optional, no insurance company will want to offer them, lest all the families with sick children buy their product and put them out of business.
And then healthy people who develop mental illness, or drug addiction, will also learn that their illness isn’t covered. The result could be a sort of market failure: “If you don’t require that these benefits are required, they often just get knocked out of the market altogether,” she said.
Before Obamacare passed, there were few federal standards for health insurance bought by individuals, and it was not uncommon to find plans that didn’t include prescription drug coverage, mental health services or maternity care. But plans tended to cover most of the other benefits. That was in a world where health insurers could discriminate against sick people. In that era, insurers in most states could simply tell the mother of a mentally ill child that she couldn’t buy insurance. That made it less risky for insurers to offer mental health benefits to everyone else.
David Cutler, a professor at Harvard who helped advise the Obama administration on the Affordable Care Act, said he thinks the kind of insurance products that would be offered under the proposed mix of policies could become much more bare-bones than plans before Obamacare. He envisioned an environment in which a typical plan might cover only emergency care and basic preventive services, with everything else as an add-on product, costing almost exactly as much as it would cost to pay for a service out-of-pocket.
“Think of this as the if-you-have-rheumatoid-arthritis-you-should-pay-$30,000 provision,” he said. Such a system would mean that Americans with costly problems — cancer, opioid addiction, H.I.V. — would end up paying a substantially higher share of their medical bills, while healthy people would pay lower prices for insurance that wouldn’t cover as many treatments.
There is most likely a middle way. Republican lawmakers might be comfortable with a system that shifts more of the costs of care onto people who are sick, if it makes the average insurance plan less costly for the healthy. But making those choices would mean engaging in very real trade-offs, less simple than their talking point.