The American Health Care Act, the Republican bill that would repeal and replace Obamacare, is likely to impact one of the most popular provisions of Obamacare: the one that prohibits insurers from charging policyholders more if they have pre-existing conditions. A recent analysis by Kaiser Family Foundation found that under the AHCA (aka Trumpcare), as many as 6.3 million people with pre-existing conditions could face higher insurance premiums -- and some might not be able to buy insurance at all.

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Pre-existing conditions before and after Obamacare

Purchasing insurance as an individual, as opposed to obtaining coverage through an employer, was a complicated prospect before the passage of Obamacare. Americans shopping for policies were forced to complete a lengthy medical history so insurers could use a process called "medical underwriting" to price consumers' policies based on the risk that the company would have to pay out a large claim. In other words, if you were sick and likely to need services, you'd pay more for insurance. 

Applicants with serious conditions like cancer might be denied insurance coverage altogether, while others with medical conditions ranging from asthma to diabetes could be charged higher premiums, could have coverage for their condition excluded, or both. Any condition a person had been diagnosed with prior to applying for coverage was considered pre-existing and could trigger high premium costs or coverage exclusions. 

Obamcare forbid insurers from denying policies to individuals with pre-existing conditions, and it mandated that insurers use adjusted community ratings to price policies, rather than medical underwriting. This means Obamacare required insurers to charge the same premiums to everyone in the same age group and geographic area -- regardless of an applicant's health status. 

Trumpcare, as passed by the House of Representatives, would allow states to apply for waivers from the community ratings mandate. Under Trumpcare, insurers in waiver states would be allowed to charge a higher premium for a full plan year if an enrollee had a gap in insurance coverage of 63 days or more in the past year. In other words, anyone with a pre-existing condition who was uninsured for 63 days could be charged higher premiums when obtaining coverage. 

Millions could face higher insurance premiums

Kaiser Family Foundation used data from the most recent National Health Interview Survey (NHIS) to estimate how many people could be affected by the Trumpcare rules allowing people with coverage lapses to be charged more for pre-existing conditions. The data revealed that 27.4 million adults under age 65 experienced a multi-month coverage gap in 2015. This gap in coverage could put all of those 27.4 million adults at risk of facing higher insurance premiums based on medical history, provided their states received a waiver from community ratings. 

The Foundation determined that approximately 23% of the people with coverage gaps had a pre-existing condition that would have resulted in an insurer denying coverage prior to Obamacare. While Trumpcare precludes insurers from denying coverage to these individuals, this 23% of the 27.4 million adults with coverage gaps -- 6.3 million people total -- would likely experience a substantial premium surcharge if Trumpcare passes and states request waivers from Obamacare's community ratings mandate.

This number is based solely on the number of people with both pre-existing conditions and coverage gaps. The total number of people with pre-existing conditions is substantially higher: Around 27% of all non-elderly adults have a pre-existing condition that could have resulted in a coverage denial prior to Obamacare. Others with coverage gaps might have conditions that, while not likely to have resulted in coverage denials, could still result in higher costs if policies are priced based on health status. 

Previous research has revealed that the premium increases experienced by individuals with coverage gaps and pre-existing conditions are likely to price many policyholders out of the insurance market. The left-leaning Center for American Progress estimated that diabetics would be charged a $5,600 annual surcharge; pregnant women would face a $17,230 annual surcharge; rheumatoid arthritics would face a $26,580 annual surcharge; and patients with metastatic cancer would face a $142,650 annual surcharge. 

Avoiding a premium surcharge

Because premium surcharges for pre-existing conditions would be allowed only for those who experienced a gap in coverage, maintaining continuous coverage will be vital if Trumpcare passes as written. While maintaining coverage could be challenging if Trumpcare makes tax credits less generous -- credits provided to subsidize insurance costs would be 36% lower on average under Trumpcare compared with Obamacare, according to Kaiser Family Foundation -- the risks of a coverage lapse would be substantial.

While Trumpcare is likely to be revised in the Senate, the provision allowing states to apply for waivers from Obamacare's community ratings mandate was instrumental to the law's passage in the U.S. House of Representatives, and influential outside groups have referred to community ratings as one of Obamacare's "most harmful" provisions. Some change to Obamacare's protections for pre-existing conditions is likely, and policyholders will need to be aware of the risks and make sure they do whatever they can to maintain coverage in order to avoid skyrocketing premiums.

 

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