Posted by Bill Sandweg on 21 September 2020.
For quite a few years now, we have been bombarded with references to “pre-existing conditions.” All politicians seem to promise that they will protect the voters from losing coverage for pre-existing conditions. A review of the record and of the facts of insurance coverage show that many of these politicians are not telling the truth. In order to understand the issue and to determine who is telling the truth and who is not, a brief review of the elements of insurance is in order.
Insurance is a means of spreading the risk. For example, we know that a certain number of people will have an automobile accident next year. We don’t know exactly who but we can identify some people whose driving records suggest that they are at higher risk than others. In return for the privilege of driving on our streets, we require all drivers to have automobile liability insurance. Each driver pays a premium, the amount of which depends on the driver’s relative risk of having an accident and the amount of coverage the driver wishes to purchase. If a driver does not have an accident, the insurance company gets to keep that driver’s premium. If a driver does have an accident which is his or her fault, the insurance company takes their premium and the premiums of others and pays for the damage done. All of the insurance company’s customers share the risk that one or more of them will have an accident.
In order for an automobile insurance company to stay in business, it must correctly figure out how much to charge its policyholders for coverage. If it charges too little, it will not have enough money to pay for the claims against its policyholders. If it charges too much, prospective customers will go elsewhere to buy automobile liability insurance. All insurance companies hire actuaries to evaluate the driving records of drivers applying for insurance and to determine how many are likely to have accidents and how much those accidents will cost. That is how they decide how much to charge by way of premium.
Everything in insurance is based upon these predictions of the future. One thing no insurance company will do is sell you automobile liability insurance after you have had an accident. You have to buy insurance before an accident. These same principles apply to health insurance.
Health insurance operates the same way as car insurance. The health insurer must determine how much money to collect in premiums in order to have enough to pay all of the covered medical bills of its policyholders. As drivers with bad driving records can be expected to have more accidents, customers applying for insurance who have pre-existing conditions can be expected to have higher medical bills in the future to treat those conditions.
In the past, health insurance companies protected themselves from this risk by inserting language in their policies saying they would not pay medical bills related to customers’ pre-existing conditions. Alternatively, the health insurance company would just refuse to sell insurance to people with significant pre-existing conditions. The Affordable Care Act (also known as Obamacare) put an end to that.
The Act required health insurers to sell to anyone who applied for coverage and prohibited the health insurers from refusing to pay bills related to pre-existing conditions. The Act also required that all health insurance policies meet certain minimum standards and that there be no limitation on the total bills over a customer’s lifetime. These were big changes and required that some other changes be made to keep the insurance companies from going broke.
If health insurers could not refuse to sell insurance to anyone and if they had to pay the bills for whatever conditions the customer had, what was to prevent a person from waiting until after they developed cancer, for example, before buying health insurance? No insurance system could survive if people could wait until they were sick to buy insurance. The answer the Affordable Care Act came up with was similar to that of auto insurance: Everyone had to buy insurance. This was understandably unpopular with younger, healthier people but it was necessary for the system to be able to work.
When the Republicans took control of the federal government, they eliminated the requirement that everyone had to buy insurance but they did not eliminate the requirement that insurance companies cover all pre-existing conditions. That was a popular provision with the public. Unfortunately, this enabled people to once again wait until they were sick to buy health insurance.
To keep the system from hemorrhaging money, the Republicans tried a number of band aids. They stripped out the requirement that all policies provide certain minimum coverages. This allowed unscrupulous companies to sell policies with large deductibles or large co-pays or both. The policies looked like health insurance but were actually of little value to the person who got seriously ill; they just didn’t cover much or pay much.
They allowed health insurance companies to sell across state lines. This meant that no longer could your state require an insurance company to be financially strong in order to sell insurance in your state. Now, if any state would let them operate, they could sell insurance in your state. Again, unscrupulous companies could sell policies and then go bankrupt when the time came to actually pay the customer’s medical bills.
Another band aid allowed insurance companies to set up special risk pools for people with serious medical conditions. Insurance companies forced to sell insurance to people with pre-existing conditions can put those customers in these risk pools and charge much higher premiums. The politician can then argue that she or he protected coverage for pre-existing conditions; the only problem is that you can no longer afford that coverage. This is just the illusion of insurance coverage. If you can’t afford it, it isn’t real.
These are just a few examples of the ways in which some politicians say they are protecting pre-existing condition coverage while actually allowing it to be so undermined that it cannot do what the voting public wants it to do. The public wants affordable coverage for pre-existing conditions sold to them by companies which are financially sound. When you think about your vote in the coming election, look and see whether the candidates actually support a health insurance system which is affordable, which covers pre-existing conditions and which requires companies to be financially sound.
There is no free lunch in life and there is no free lunch when it comes to pre-existing conditions in health insurance. If you want coverage for pre-existing conditions, you cannot let people wait until they are sick to buy insurance. Healthy people need to participate in the system for it to work.