Revised House Republican Plan Would Give Some Powers to States

The compromise plan between 2 groups of House Republicans to replace the Affordable Care Act (ACA) would shift power over health benefit design back toward the states, giving governors and state legislatures the last word on features that affect the poorest, sickest consumers.

The effort by Republicans to bridge the gap between the conservative Freedom Caucus and the moderate Tuesday Group comes nearly a month after House Republicans could not muster the votes to pass the American Health Care Act (AHCA) during a scheduled floor vote. Some Freedom Caucus members said at the time that the bill did not go far enough to repeal “Obamacare,” while moderates balked at late changes designed to attract conservative votes, notably the elimination of Essential Health Benefits.

An amendment offered by US Representative Tom MacArthur (R-New Jersey) would let states seek limited waivers for several items that ACA opponents say drive up premiums. According to a summary of the amendment obtained by Politico, those items include:

· Essential Health Benefits, an ACA tenet that requires health plans to feature 10 items that include maternity care and mental health services;

· Community rating rules, except for limits based on age, gender, and health status, unless a state creates or takes part in a high-risk pool for these consumers.

The compromise sets federal standards for health coverage: plans cannot exclude people based on preexisting conditions, and the rule for guaranteed issue remains. But whether consumers with expensive health conditions could afford coverage would depend on actions by individual states. Changes would grant states waivers if they can show the action will control premiums, get more people covered, or “advance another benefit to the public interest in the states.”

Change to Age Ratio Remains

The bar on seeking community rating waivers based on age, however, does not alter the GOP shift toward charging older consumers more than younger ones: the 5-to-1 ratio in the original replacement bill, the AHCA, would remain. AARP has labeled this change an “age tax,” as it would fall hardest on those aged 50 or older.

Right now, the ACA bars insurers from charging older Americans more than 3 times what young people pay, but critics say this makes health coverage too pricey for young adults, and many stay uninsured. Poor enrollment of young, healthy consumers has left the risk pool without enough premium dollars to offset costs of the sickest Americans.

The latest compromise keeps a popular ACA provision that lets young adults stay on parents’ plans through age 26.

Community Rating and Risk Pools

For more than a century, states took the lead in setting rules for what health plans must cover and how rates were set. Community rating policies, for example, varied widely by state—some states took pains to protect small business owners from the harsh effects of an employee with a major health problem, but there were fewer protections in the individual market.

The Republican compromise would restore power to states to design community rating policies, especially if they set up risk pools for the sickest residents. Risk pools allow insurers to exclude certain consumers with high-cost medical conditions, which makes premiums lower for everyone else. However, risk pools have had a mixed history, and many consumers with expensive medical conditions found them unaffordable. Without a state subsidy, some consumers with expensive, chronic conditions who have purchased coverage under the ACA might once again be unable to afford it.

Effect on Premiums

While some Republicans expressed concern that the original AHCA did not do enough to lower premiums and out-of-pocket costs, some experts wonder whether the MacArthur amendment will have this effect. A report in Kaiser Health News quotes several actuaries and insurance experts who say that Essential Health Benefits only account for a small share of premium, relative to items like hospitalization and prescription drug costs.

The problem with costs, the experts said, was not the new benefits, but the new consumers—people who had not been able to buy coverage in the individual market for years, if ever. Too little was known about them, and insurers from large national plans to the Blue Cross Blue Shield Association said they proved to have more health problems than expected.

Crossing the Political Impasse

The compromise offers the promise of letting moderate GOP lawmakers support an ACA repeal but not be blamed for actions outside their districts if more conservative states seek waivers or set up risk pools for consumers who use the most healthcare. For example, MacArthur’s district is centered in Ocean County, New Jersey, which has been hit hard by the opioid crisis. Yet, he comes from a state where Democrats control the legislature, one unlikely to remove mental health care from Essential Health Benefits. Moderates who hail from states where the legislature is unlikely to remove protections for the sickest residents will not face the consequences that would have been seen under the original AHCA. At the same time, Freedom Caucus members, who are more likely to come from states that have not expanded Medicaid, will have given their governors and legislatures the ability to remove more pieces of the ACA than permitted under the original House Republican bill.