Pre-existing conditions: Political versus financial reality

Health care was the single biggest issue affecting voters this past election cycle, and it will continue to be, at least through the 2020 elections. And at the center of the debate — the crux of the issue — is protection for consumers with pre-existing conditions.

The Affordable Care Aact (ACA) — ObamaCare — mandated equal coverage for pre-existing conditions for all insurance policies, not just those bought through the ACA exchanges. But now that a federal judge has ruled the entire law unconstitutional, is that coverage threatened?

The truth is there are better ways to ensure coverage for Americans with pre-existing conditions than the wholesale hijacking of the U.S. health care system embodied by the ACA, or even worse, a “Medicare for All” scheme. Market-based principles and more freedom of choice can help keep Americans covered and protect the long-term health of our nation’s health care system.{mosads}

First, it’s important to understand the true scope of the problem. According to the Kaiser Family Foundation, an estimated 27 percent of U.S. adults ages 18-64 have some kind of pre-existing condition that could have led to a denial of coverage before the ACA went into effect. But when those already on group plans, individual plans, Medicaid and VA are factored in, the real number is about 7 percent.

Fixing a problem that affects just those Americans doesn’t warrant a complete overhaul of an already flawed system — yet that is what Democrats are proposing. They’re introducing “Medicare for All” legislation that brings healthcare fully under the control of the federal government. According to California Sen. Kamala Harris, a Democratic presidential candidate, “Medicare for All” legislation could completely eliminate all private forms of coverage (though she seems to be backing off this provision in recent comments).

Republicans, on the other hand, want to make it mandatory for insurers to provide coverage regardless of medical history. The GOP is less cohesive on this topic, but most Republican lawmakers recognize that the pre-existing condition provision is a hot button political issue that must be discussed.

What both groups fail to realize is that mandating the coverage of pre-existing conditions is a major factor in contributing to the increase we’ve all seen in our health insurance premiums and deductibles. The purchase of insurance is essentially a transfer of risk, and when you don’t allow the insurance company to make its own determinations on how to conduct underwriting, the insurer will naturally inflate the costs so it can protect itself against catastrophic losses.

There are better approaches. One is to grant individuals and families the tax benefits enjoyed by their employers when they offer health benefits. This would allow individuals to purchase and keep their own insurance plans. This personal and portable coverage goes with them regardless of employment, without fear of denials due to pre-existing conditions. Employers would also benefit under this model by being able to manage and predict their budgets and provide a defined benefit to their employees that would go toward their benefits by way of increased income or funding of a Health Savings Account (HSA).

Employees would not be limited to traditional insurance options that have typically excluded Direct Care providers, Short-Term Health Plans, Association Health Plans, Catastrophic-Only Plans, and Medical Cost Sharing. Giving families more options — not less — is the key to keeping costs down and Americans healthier.

Employers, too, would benefit from this approach. They would have more budgetary predictability (because their contribution to a worker’s plan would be a defined contribution, rather than a defined benefit).

If individuals were to receive a stipend from their employers and also given the freedom to choose the best option for themselves and their families, the insurance industry would do its part and offer a greater variety of plans and benefits. It would be eager to compete for the business.

Americans would be better served by legislature that allows for more health care freedom, as opposed to more regulation and government-mandated solutions.

David Balat is the Director of the Right on Healthcare initiative with the Texas Public Policy Foundation; follow him on Twitter @DavidBalatHC.