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House GOP members are floating a new health plan. Here’s what’s in it.

Insurers could charge sick people more and cover fewer benefits.

House Republicans Postpone Vote On American Health Care Act
Rep. Tom Macarthur (R-NJ) has been working on the latest health care amendment.
Photo by Chip Somodevilla/Getty Images

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.

Leaders of the staunchly conservative Freedom Caucus and the more moderate Tuesday Group have reportedly hashed out a proposal that would let some states ditch key Obamacare policies, such as the requirement to charge sick people the same for coverage as healthy people. States would also have the choice to opt out of the Affordable Care Act’s essential health benefit requirement.

The Huffington Post reported on the development late Wednesday night, and Politico posted a short white paper early Thursday describing the changes. We still don’t know how final this amendment is or which House Republicans support the changes.

What we do know is that this latest proposal 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.

“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 GOP amendment to let states waive 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 free rein to charge them especially high premiums.

They could also opt out of the health care law’s essential health benefits for the same reason. 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.

The GOP amendment would allow states to opt out of these two provisions if they could show they aimed to do one of three things: “reduce premium costs, increase the number of persons with healthcare coverage, or advance the benefit to the public interest of the state.”

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, of Northwestern University, said. “If you allow the essential benefits to go away, you will have lower premiums because it’s a skinner 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, 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.