The Sensible Solution for Pre-Existing Condition Exclusions
Alyene Senger /
The problem of individuals being denied health insurance because of a pre-existing medical condition is frequently cited by defenders of Obamacare as justification for the law, particularly its new insurance regulations and individual mandate.
In truth, however, the problem is actually much smaller than portrayed, and a sensible solution does not require anything like the massive new spending, taxing, and insurance market takeover included in Obamacare.
In the group market, where over 90 percent of Americans with private health insurance are enrolled, there are reasonable rules limiting the application and duration of pre-existing condition exclusions. For employment-based coverage, a pre-existing condition exclusion can only be imposed if an individual has less than 12 months of prior coverage. Furthermore any coverage exclusion can be for no more than 12 months—or 18 months if the individual didn’t enroll in the employer plan when first eligible.
As Heritage’s Ed Haislmaier explains, “Those existing rules represent a fair approach: Individuals who do the right thing (getting and keeping coverage) are rewarded; individuals who do the wrong thing (waiting until they are sick to buy coverage) are penalized.”
The one problem remaining is in the individual market—which represents less than 10 percent of the total private insurance market—is that the same rules that protect consumers from unreasonable pre-existing condition exclusions in the group market do not currently apply to the individual market. An individual can keep continuous insurance coverage in the individual market for years and still face unjust exclusions when switching plans.
“The obvious, modest, and sensible reform is to simply apply to the individual health insurance market a set of rules similar to those that already govern the employer group market,” writes Haislmaier. This small reform would ensure protection against unjust pre-existing condition exclusions. Those who maintain continuous insurance coverage would be protected.
Moreover, Heritage has a plan to help those with pre-existing conditions that have not had continuous health coverage. Haislmaier writes, “The rules should also provide a pathway for those who have not always maintained coverage in the past to earn the same right to obtain coverage on more favorable terms in the future.”
But instead of implementing these basic reforms for the relatively few individuals that need them, Obamacare creates and enforces sweeping new insurance rules that prohibit applying pre-existing conditions exclusions under any circumstance. Furthermore, if individuals wait to sign up for coverage until they’re sick, Obamacare bars insurance companies from charging them higher premiums.
It sends the wrong message, particularly to the young and healthy. Under these Obamacare rules, there is no incentive to obtain coverage until they were sick. But with insurers covering only the sick, insurance premiums will soar. To offset this effect, Obamacare included the ever-controversial individual mandate—to force healthy individuals to buy coverage. But this attempt to stop the unraveling will likely fail as well, as the young and healthy choose the penalty over high-priced coverage.
This is yet another example of the mess that is Obamacare.