Rules on what benefits health insurance plans must cover have become a major negotiating point as Republicans wrangle votes to repeal Obamacare, even though removing the regulations is likely to upset U.S. insurance markets.
The requirements, called Essential Health Benefits, were written into Obamacare to mandate 10 broad categories of services, including pregnancy, maternity and newborn care; hospital care; prescription drugs; mental health and substance abuse treatment; and pediatric dental and vision services.
Conservative Republicans in a group called the House Freedom Caucus have called for eliminating them in return for getting their vote for the GOP health bill. Yet health insurance experts say that doing so would undermine fundamental parts of how insurance is sold and used in the U.S., undermining some of the Affordable Care Act’s protections, raising premiums for some and resulting in uncovered care for many.
“It’s like trying to play a baseball game, but no one agrees on the rules,” said Rebekah Bayram, an actuary at Milliman Inc., a consulting firm. “Things turn to chaos pretty quickly.”
In a well-functioning insurance market, people pool their money together in the form of premiums to share risk when one of them gets sick and needs a service that’s more expensive than they could afford on their own. For example, premiums from healthy men cover maternity care for women. Premiums from healthy women cover prostate surgery for men.
“The point is that everyone shares the cost with everyone else,” said Bayram. “It becomes a true insurance product, where everyone, if they’re children, if they’re older adults, if they’re pregnant, if they have some kind of disease, that those costs are really spread throughout everyone in the marketplace.”
If healthy people can buy cheap, skimpy insurance plans, they don’t subsidize those who are sick — meaning that people who aren’t healthy have to pay more, or may not be able to get insurance. Cutting the rules could push insurers to offer only limited plans, resulting in less choice for consumers, particularly those who are sick or want more comprehensive coverage.
“The people that need the care the most, need the help the most, would be hurt the most,” said Ben Miller, director of the Farley Health Policy Center at the University of Colorado. “They are going to find that they’re going to be financially paying for this one way or another.”
Republicans have yet to finalize the legislation and are still negotiating key provisions to make sure it has enough votes to pass the House. It faces large obstacles in the Senate, as well.
House Ways and Means Chairman Kevin Brady, a Texas Republican, said Thursday that he supported eliminating the benefit rules and handing the matter to states.
“That’s in discussion — clearly the major request from the Freedom Caucus,” Brady told reporters in Washington. “I agree with that philosophy.”
The insurance industry declined to comment specifically on the potential changes. “Every American deserves affordable coverage and access to quality care. This remains our north star as the bill continues to evolve,” said Kristine Grow, a spokeswoman for America’s Health Insurance Plans, an industry trade group.
What Could Go
The most likely essential health benefits that could end up being made optional are pregnancy, maternity and newborn care; mental health and substance abuse treatment; and pediatric dental and vision care, according to an analysis from Milliman, the consulting firm.
Milliman lays out two scenarios for maternity care, if the benefit became optional. In one case, insurers would no longer offer it, meaning that pregnant women could end up with out-of-pocket costs estimated at $15,000. Or, insurers would offer the coverage, but charge insurance premiums that are 25 percent to 75 percent higher.
If plans are required to cover the benefit, spreading out its costs, it would raise monthly premiums by about $8 to $14, the firm estimates. Dental coverage for children adds about $5 a month to the cost of an insurance plan, according to the firm. If only families with children pay, it rises to $30 a month.
Many states have their own rules about what insurers have to cover, which would take the place of the federal rules — and in some cases already go beyond them. Yet other states could chose to require less. The upside is lower upfront premiums, according to the American Enterprise Institute, or AEI, a conservative think tank.
“If the federally mandated essential benefits package is abolished, and regulatory oversight is returned to the states, less comprehensive, cheaper and more attractive plans will become available for young people to purchase,” Joel Zinberg, a physician and visiting scholar at AEI wrote last month.
Yet Robert Laszewski, an insurance industry consultant, said removing the essential health benefit requirements alone won’t do much to bring down costs. That’s because other parts of the law still require insurers to offer minimum levels of overall coverage.
“If the Freedom Caucus is going to stand up tonight and say they voted for the bill because taking essential health benefits out is going to make health insurance a lot cheaper, they are dead wrong,” Laszewski said. “It’s not going to make much difference at all.”
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