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The Freedom Caucus’s new health care demand: let insurers charge sick people more


The House Freedom Caucus laid out two demands on Thursday for a health care bill its members would support: ending Obamacare’s essential health benefits and its “community rating” provisions.

These sound wonky, but make no mistake: Axing these two provisions would decimate Obamacare and its insurance reforms.

Insurers would once again be able to charge sicker people much higher premiums — and pick and choose which health care services they want to cover. Many would likely drop services like maternity care and mental health services, which are required under Obamacare but tend to draw more expensive patients.

Even if House leadership agreed to meet the demands, those provisions almost certainly would die in the Senate. They would be unlikely to survive the rules governing the Senate’s reconciliation process, which requires that all changes have a direct effect on the federal budget, nor could they garner 60 votes to overcome a filibuster.

Still, they are the best articulation of the actual policies the Freedom Caucus wants. Rep. Mark Meadows framed these as relatively small asks, but crucial ones for the goal of reducing health premiums for Americans. "We have come from six requests down to two," he told the Washington Examiner.

Those remaining two requests are, in Obamacare terms, huge. It’s worth understanding how both would work.

Community rating and essential health benefits, explained

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

They would send out detailed questionnaires about a potential customer’s age, medical history, and current behaviors (whether they currently smoke, for example, or are 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 burden alone of covering their more expensive health needs.

It also drove the costs up 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.

The Freedom Caucus’s demand to get rid of community rating would once again allow insurers to charge people based on their expected health care costs. Insurers would not be able to deny coverage to people with preexisting conditions, but they would have full reign to charge them especially high premiums.

The GOP health care bill already includes big cuts to the subsidies for low and middle-income Americans who buy coverage on the individual market. Ending community rating would be yet another blow to poor, sick Americans who purchase their own coverage.

So would the end of essential health benefits. Current law requires insurers to cover 10 categories of medical benefits. This includes:

  • Outpatient care (essentially doctor visits outside the hospital)
  • Emergency services
  • Hospitalization
  • Pregnancy, maternity, and newborn care
  • Mental health and substance use disorder services
  • Prescription drugs
  • Rehabilitative and habilitative services and devices, which help people with injuries and disabilities to recover
  • Laboratory services
  • Preventive care, wellness services, and chronic disease management
  • Pediatric services, including oral and vision care for children

Before this requirement, many insurers would leave out some of the more expensive benefits. Just 12 percent of individual market plans covered maternity benefits pre-Obamacare, for example. Twenty-two states had mandates requiring the coverage of mental health benefits before Obamacare — which meant 28 states didn’t.

Republicans have argued that these essential health benefits drive up premiums, and they are right. Whenever insurers have to pay for more medical care, the cost of the health plan goes up. Obamacare’s defenders say that these are the basic health benefits everyone should have access to, and it is worth spreading their costs across all people buying coverage.

Repealing the essential health benefits would hurt the exact same people who would lose under the repeal of community rating: people who are sicker and poorer. Their premiums would go up because of the return of individual rating and their benefit packages would shrink because of the end of essential health benefits.

The Freedom Caucus’s demands are unlikely to survive Congress

There are two big hurdles to these demands, one political and one procedural.

First, the politics: The caucus’s demands would be in direct conflict with President Trump’s promise that his bill would continue to protect people with preexisting conditions.

But even more than that, adding these two demands to the Republican health care bill would near certainly drive up the number of people who lose health coverage. The American Health Care Act would cause 24 million people to lose insurance, according to the Congressional Budget Office. Moderate Republicans in the House and Senate shied away from a bill causing such disruption. They would be unlikely to get behind one that only exacerbated the problem.

Then there’s the procedural obstacle. Republicans would not be able to garner 60 votes in the Senate necessary to overcome a filibuster. That would leave the reconciliation process as an option, which only requires 50 votes to move a bill through the upper chamber.

But there is a catch: The only policies that can move through reconciliation are those that directly affect the budget. Senate procedure experts I’ve spoken with in the past have been skeptical that Republicans can make the case that insurance regulations like these fit that category, though some Republicans disagree.

These two hurdles make it awfully unlikely that the Freedom Caucus demands ever get written into law. But at least we now have a clearer view of what this group of conservative lawmakers want — and know that it would fundamentally upend the individual insurance market we currently have.

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