With House Republicans on the verge of passing a long-awaited health care overhaul, the future of US insurance coverage hinges on three words: essential health benefits.
The GOP’s proposal to let states define on their own which benefits all insurance plans must cover — prescription drugs? hospitalizations? childhood vaccinations? mental health? — would fundamentally reshape insurance for millions of Americans. It would likely drive down premiums, as plans with skimpier coverage would spring up in states which granted more flexibility. But it could drive up costs for individuals, by leaving them responsible for far more out-of-pocket expenses.
And this shift wouldn’t just affect people buying insurance on the individual market. It could also affect the more than 156 million people who rely on insurance plans sponsored by their employers.
“The essential health benefits and the provisions that wrap around them are what defined the guarantee of coverage that’s central to the Affordable Care Act,” said Alan Weil, editor-in-chief of the policy journal Health Affairs. That guarantee, he said, “replaced a world where, due to health status or working for a small business or other reasons, people couldn’t get the coverage they needed.”
How employers could go shopping for cheap plans
The health debate has focused heavily on the most vulnerable populations: The Republican bill makes huge cuts to Medicaid, which serves the poor and disabled. It also lets states opt out of Obamacare’s pricing controls, freeing insurers to once again charge vastly higher premiums to certain patients with preexisting conditions. (If they do that, they have to create a program, such as a “high risk pool,” to help serve those patients.)
Far less attention has been paid to the effect on people with employer-sponsored insurance.
If even a few states let insurers offer inexpensive plans that cover only bare-bones benefits, large nationwide employers could set up their coverage along those lines. Such plans would come with lower premiums, but could leave people with huge gaps in their coverage, according to Matthew Fiedler, a health policy analyst at the Brookings Institution who wrote a recent article about the change.
What’s more, other Affordable Care Act protections — notably, the cap on how much patients spend out of pocket each year — are tied to essential benefits. The ban on insurers imposing lifetime limits on coverage is also tied to essential benefits.
If states let insurers pare those benefits way back, those protections are essentially toothless. People on a plan that doesn’t cover hospitalization, for instance, will have no cap at all on their out-of-pocket costs for hospital bills.
Fiedler said that could leave many Americans vulnerable to catastrophic bills in a health crisis.
“At a bare minimum, I think you’re going to see a whole bunch of coverage categories get carved out,” Fiedler said. “You really only need one state with no essential benefit standards for large employers nationwide” to begin deploying much skimpier plans.
Republicans argue that removing the mandates will give consumers more choices and more freedom; why force everyone to pay for maternity care and pediatric care if they’re not going to use those services, they ask. And they say the high-risk pools, which have had mixed results in states so far, will take care of people with preexisting conditions who are priced out of traditional insurance.
“The bottom line is that while the Affordable Care Act (ACA) has helped millions of people, it hurt many millions more,” New Jersey Representative Tom MacArthur, the author of the GOP provision on essential health benefits, wrote in a March editorial. “Health care choices dwindled, premiums skyrocketed, and deductibles increased astronomically.”
Lower premiums, but at a cost
The GOP plan is certain to decrease insurance premiums over the long term. The Congressional Budget Office, in scoring the party’s original proposal, concluded that premiums in the individual market would drop 10 percent by 2026.
The proposed elimination of essential health benefits would likely result in more substantial reductions for individuals and employer-sponsored plans. On Twitter last week, President Trump wrote: “If our healthcare plan is approved, you will see real healthcare and premiums will start tumbling down.”
But that doesn’t mean consumers would see reductions in their overall costs. Less generous coverage would force many to pay more for a wide range of services.
Obamacare, for instance, currently requires coverage of maternity and newborn care, mental health and substance abuse treatment, prescription drugs, preventive and wellness services, and pediatric care, including dental and vision services for kids. States could let insurers drop one or all of those categories of “essential benefits.” Patients would have to pay for them on their own.
Weil, the editor of Health Affairs, compared the ACA’s mandatory coverage of essential health benefits to creating a building code for health care. The point: to guarantee people in the system that their financial roof won’t collapse with one serious medical emergency.
In real estate, as in health care, many people argue that such standards force consumers to pay higher costs. “But without them you end up with a lot of people living in substandard housing,” Weil said. “That’s basically where we were before the ACA — a lot of people had coverage that didn’t really meet their needs.”