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Republicans’ new health amendment lets insurers charge sick people more, cover less

House Republicans are floating a new amendment to their health care bill, one that would likely cause even more Americans to lose coverage than the last version.

The American Health Care Act that House Speaker Paul Ryan introduced into the House last February dismantled parts of Obamacare. It also left popular provisions, like a ban on preexisting conditions and the requirement that insurers cover things like maternity care, intact.

This new amendment, offered by Rep. Tom MacArthur (R-NJ), would allow states to waive out of those key Obamacare regulations too.

In particular, this amendment would allow some states to charge higher premiums to Americans with preexisting conditions. States would also have the choice to opt out of the Affordable Care Act’s essential health benefits requirement, as well as the possibility of charging older Americans significantly higher premiums.

Leaders of the staunchly conservative Freedom Caucus have reportedly endorsed this proposal. That makes sense: This amendment would take apart key Obamacare regulations the group has spent years rallying against.

But this amendment doesn’t do much at all to assuage concerns about the older proposals. While it meets many of the demands of the party’s far-right wing — namely, the deregulation of the individual insurance market — it does nothing to address concerns about massive coverage loss. Instead, it likely makes those problems worse.

What’s more, it comes at a time when the specific Obamacare provisions that Republicans want to dismantle are proving the law’s most popular. A Washington Post/ABC News Poll released Tuesday found that 70 percent of voters support requiring states to protect people with preexisting conditions, and 61 percent want the federal government to require insurers to cover a comprehensive benefits package with maternity care and mental health services.

“It’s pretty frustrating to see they’ve worked so hard to come up with another Rube Goldberg–type solution,” says Craig Garthwaite, a health economist at Northwestern University’s Kellogg School of Business.

Republicans want to let states waive two key Obamacare provisions

The amendment takes aim at two Obamacare policies that have long been on the Freedom Caucus’s hit list: community rating and essential health benefits.

Before the Affordable Care Act, insurance companies would “individually rate” each patient who wanted to buy coverage on the individual market.

They would send out detailed questionnaires about a potential customer’s age, medical history, and current behaviors (whether she currently smokes, for example, or is pregnant) and then set a specific premium for that person. It was meant to reflect the insurers’ best guess of how expensive that individual’s health care would be.

Obamacare banned this so-called individual rating. It required all insurers, instead, to use “community rating”: setting one premium for the entire community of people buying coverage. This had the practical effect of driving down premiums for sick people, who no longer had to bear the full burden of covering their more expensive health needs.

It also drove up the costs for healthy people, who were suddenly asked to pay more to help cover those expensive bills from the sicker people.

The Obama administration made this change because it felt like this was a good trade-off. It prioritized getting sicker people access to health insurance.

This new GOP amendment to let states waive community rating would once again allow insurers to charge people based on their expected health care costs, so long as the state participates in the Patient and State Stability Fund. This is a pool of money in AHCA that states can use to set up high risk pools or shore up insurers that get stuck with really expensive patients.

Insurers could only charge these fees to people who had a break in health insurance coverage, showing up on the individual market wanting to purchase a plan. The language does not appear to allow an insurer to ask questions about the health status of someone who is transitioning directly from an insurance plan at work, for example, into the individual market.

Republicans’ operating theory here is that it’s okay for states to charge sick people higher premiums so long as they have some kind of fallback option for coverage, like a high-risk pool. But health law expert Tim Jost points out that states don’t have to use their stability funds to create high-risk pools, which means these people could find themselves out of luck.

“The idea was people who fall through the cracks would have a high-risk pool,” he says. “What happens though if a state uses their money for reinsurance instead?”

States could also opt out of Obamacare’s essential health benefits requirement. This is the core set of medical services that the Affordable Care Act requires all insurers to cover, including things like doctor trips, hospital stays, maternity care, and mental health services.

These two Obamacare requirements have been at the top of the Freedom Caucus’s hit list for some time. They also tack a third regulation they want to dismantle onto the list in this new amendment, the one that limits what premiums insurers can charge older enrollees.

The GOP amendment would allow states to opt out of these provisions if they show that the change would lead to “reducing average premiums for health insurance coverage in the State.” If the federal government took no action when these applications came in, the waivers would be automatically approved after 60 days.

This does not set an especially high bar for this waiver option. It means that states could, for example, end the essential health benefits requirement because they believe it will lower premium costs. And of course it would! Tell insurers they no longer have to cover expensive mental health services or maternity care, and average prices would almost certainly drop. The same would happen if insurers had the option to charge sick patients prices they couldn’t afford. Those people would drop out of the market, and premiums would decline.

“If it could be shown that states could lower premiums on an identical policy, that would be one thing, but that is not the metric being used here,” Garthwaite said. “If you allow the essential benefits to go away, you will have lower premiums because it’s a skinnier product. The people working on this don’t seem to understand the market ramifications of what they are doing.”

The obstacles to moving this amendment forward are huge

Republicans’ last version of the health care bill would have caused 24 million Americans to lose insurance coverage, way too large a number for many Republican House members to stomach.

Tacking on this new amendment would undoubtedly cause an even greater decline in coverage, as sicker patients would be priced out of the market in states that take up the waiver.

This then invites the question: Who is this new amendment going to win over? Will House Republicans get behind a bill that causes more coverage loss than the one they ditched a month ago? What has changed between now and then?

One thing we’ve learned during the past month of the health care debate is that some top House Republicans like the ban on preexisting conditions and don’t want to loosen it. This is what House Deputy Whip Patrick McHenry (R-NC) told Bloomberg a few weeks ago.

Then there’s the question of the Senate. The more moderate Senate Republicans would be unlikely to rally behind a plan that causes massive coverage loss.

They might not get the chance to. Many of the changes outlined in the amendment would struggle to move through the reconciliation process, which requires all policies to be directly related to the federal budget. It would be tough to make the case that re-regulating the individual market counts as budget policy, and that these changes ought to be allowed to move forward.

Last, Americans tend to be big fans of the exact parts of the bill that this amendment takes aim at. A new Washington Post/ABC Poll finds they are among the most popular parts of the health care law.

These are the exact type of changes that will make the Republican health care bill even less popular than it already is. The most recent polling showed just 17 percent support for the American Health Care Act, and the changes outlined in this memo will make health insurance less generous and the bill less popular — making it hard to see how this becomes a winning approach.

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