Under the surface, however, those same rules have pushed Obamacare plans to drop coverage for the only local providers who offer the treatment she needs, which they have done repeatedly for five years.
How does a ban on discrimination against the sick instead encourage such discrimination? To illustrate, let’s say the Briggs family costs $100,000 per year to insure. Obamacare requires insurers to charge the family far less — let’s say $20,000.
From an insurance company’s perspective, the Briggs family represents an $80,000 liability. Each year, the Briggs family will reliably choose whichever plan offers the best coverage for Colette’s illness.
The combined effects of these factors are to threaten insurers with an $80,000 loss if they make the mistake of offering the best coverage for Colette and to force insurers who want to stay in business to compete to make their plans worse for expensive patients, in the hope of encouraging those patients to select a different insurer.
Health plans can do so by dropping from their networks hospitals or doctors that expensive patients prefer (as in Colette’s case), requiring high or variable cost-sharing for drugs that expensive patients use, or requiring strict utilization controls (e.g., prior authorization, step therapy) for drugs that expensive patients use. Obamacare’s preexisting conditions provisions reward insurers who implement any design feature that differentially discourages unprofitable patients from selecting one of its plans.
Economic research provides evidence that these “protections” are forcing insurers to engage in such discrimination against patients with multiple sclerosis, infertility, substance abuse disorders, hemophilia, severe acne, nerve pain, and other conditions. Patient advocacy groups have alleged such discrimination against patients with cancer, cystic fibrosis, hepatitis, HIV, and other illnesses. Across all Obamacare plans, choice of doctors and hospitals has grown narrower, and drug coverage has gotten skimpier.
These findings aren’t particularly surprising or even controversial. Obamacare’s architects knew this sort of race to the bottom was a likely, if unintended, consequence of the law’s preexisting conditions provisions. They even included in the law a special insurer bailout program in the hope of preventing a race to the bottom. It isn’t working.
One cannot claim this race to the bottom is simply how health insurance works. “Short term” plans offer broader provider networks precisely because Congress exempts them from Obamacare’s preexisting conditions provisions. More importantly, prior to Obamacare, competition created incentives for insurers to offer better coverage for the sick by building up reserves according to how much consumers were willing to pay. Insurers have always faced incentives to renege on their commitments to the sick, but Obamacare’s “protections” made those incentives worse.
Indeed, this form of discrimination against preexisting conditions is arguably worse than the kind it (mostly) displaced. Unlike discrimination in pricing and enrollment, discrimination in plan design harms all consumers. It not only “undoes intended protections for preexisting conditions” but creates a marketplace where even “currently healthy consumers cannot be adequately insured.” Patient-advocacy groups insist discrimination in plan design “completely undermines the goal of the ACA.”
In 2017, Obamacare also discriminated against 61-year-old Arizona resident Jeanne Balvin, first because she is a woman and again because she had a preexisting condition.
Contrary to the conventional wisdom that Obamacare ended discrimination against women in health insurance, the law dramatically increased Balvin’s premiums because she’s a woman. Economic research shows Obamacare increased premiums for near-elderly women more than any other group because its preexisting conditions provisions lump those women together with sicker men of the same age.
Fortunately, Balvin found protection from Obamacare’s protections. In April 2017, she purchased a short-term plan from UnitedHealthcare, the largest insurer in the country. Since Congress exempts short-term plans from that hidden tax, her plan cost one-third as much as the cheapest Obamacare plan. When she required emergency surgery for diverticulitis, her short-term plan paid her hospital claims on time and in full.
The Obama administration didn’t like that short-term plans gave people like Balvin an alternative to Obamacare, though. So it invented a requirement that insurers must cancel all short-term plans after just three months. That rule stripped Balvin of her coverage right before she returned to the hospital two more times in July 2017, leaving her sick and uninsured.
Obamacare’s preexisting conditions provisions then discriminated against her again by barring her from enrolling in an Obamacare plan. With narrow exceptions, those provisions prohibit consumers from enrolling in coverage or switching plans outside a narrow window from Nov. 1 to Dec. 15. (A dozen states allow enrollment as late as Jan. 31).
The one-two punch of stripping Balvin of her coverage and then denying her Obamacare coverage left her with $97,000 in unpaid medical bills. The ban on mid-year enrollments may not appear to discriminate against patients with preexisting conditions. After all, it applies to everyone. But it exists to block people with preexisting conditions who would tank Obamacare’s risk pools, not by healthy people who would improve them.
When the Briggs’s insurer dropped coverage for Colette’s treatment (again) in March 2020, Obamacare blocked her family from switching to a plan that would have covered it. If a consumer misses this year’s open enrollment window and then contracts COVID-19 on Jan. 1, Obamacare will offer her coverage with an annual limit of zero.
Obamacare supporters criticize this type of discrimination when free markets do it, even though Obamacare does it for the same reason: Insurance pools are not sustainable otherwise. What is the difference between private insurance companies and Obamacare supporters? Insurers don’t pretend they aren’t discriminating against preexisting conditions.
Had Obamacare simply left the Briggs family alone, it would have had better access to care. When Colette was born in 2013, her family had a health plan that prohibited its insurer from dropping it or charging higher premiums. That is, discriminating against the family if, say, its newborn daughter developed leukemia.
Obamacare threw the family out of that plan, dramatically increased its premiums, and encouraged insurers to discriminate against Colette. In its struggle to get Obamacare to cover her treatment, the Briggs family has written op-eds, lobbied members of Congress, and even used its public relations skills to get NPR and the Washington Post to tell Colette’s story. It still had to create a GoFundMe page.
Had Obamacare left Balvin alone, she could have purchased a plan that covered her treatment for diverticulitis and beyond. Come Dec. 15, Obamacare will again deploy the sort of discrimination against patients with preexisting conditions that blocked her from enrolling in coverage.
It is time for policymakers to admit that Obamacare both discriminates against preexisting conditions and denies coverage and care to sick patients who otherwise would have had it. Remember that the next time someone stokes fear about what would happen if Congress or the Supreme Court were to overturn it.
