Could replacing the ACA's individual mandate with a continuous coverage requirement offer the same results?

A closer look at a key provision proposed by the GOP

The debate to repeal and replace the ACA (Obamacare) continues. As an alternative to the individual mandate, several GOP proposals keep the ACA’s protections for people with pre-existing conditions, but only for policyholders who maintain “continuous coverage”. Many people aren’t really sure what this means. About 48% of Americans are covered by an employer-based health plan. If you are one of them, you probably have never had to worry about guarantee issue or pre-existing conditions. Here’s what this means and why you should care.

Simply put, there would be no mandate to have insurance coverage. But , if you allow your health insurance coverage to lapse for more than 63 days, you will not be guaranteed approval when you apply for coverage again.

There are at least six leading GOP proposals to replace the ACA. If Sen. Price’s model (Empowering Patients First Act) moves forward as proposed, this is how it might work:

1.) When you apply for health insurance coverage the insurance company will require proof that you have been covered without a lapse in coverage of more than 63 days. If you have not had a lapse in coverage, you can be guaranteed approval, no matter your current health status or pre-existing conditions.

2.) If you have lapsed, insurance companies are allowed to charge higher premiums or decline an application for coverage. If approved, the policy might not cover a pre-existing condition for up to 18 months.

3.) If you cannot qualify for a private plan, you can apply for coverage in a state-run High-Risk Pool. (which charges more and covers less than a typical policy) 

So why does this matter? Nearly half of all Americans have a pre-existing condition. As the above map shows, about 1 in 4 have a condition that would be uninsurable in the private market. Many Americans experience a temporary lapse in coverage at some point, usually due to job loss, unaffordability or simply forgetting to pay their insurance bill (or due to insurance company record-keeping errors). Think about the household bills you have set up for auto-payment on your credit card and how easy it could be to forget to update payment when you cancel a card or change banks. Under this proposal, allowing coverage to lapse could be very expensive and life-changing. Studies show consumers who lack literacy in the basic concepts of personal finance and health insurance are more likely to remain uninsured. The continuous coverage requirement could fail to serve its purpose if healthier risk does not enroll so alternative proposals could require an auto-enrollment process instead. 'Don't want insurance? Just opt out.'

What about the high-risk pool? For those who lapse or choose to roll the dice without coverage for more than 63 days, there would be a federal or state-run high-risk pool. Based on past history, these risk pools are overburdened, underfunded and very expensive. Before the Affordable Care Act, 35 states had high-risk pools. Several states had a 12-month waiting list for enrollment in a plan that covered much less than normal policies with limits to annual benefits (and still did not cover any pre-existing conditions for 6 to 12 months). The premiums were 1.5 to 2 times more expensive than typical plans. For example, California’s high-risk program had strict limitations like a $75,000 annual maximum on health claims and a $750,000-lifetime maximum. Most people could not afford this premium or the share of costs for what the plan does not pay or cover. Still, Congressional Republicans hope to try it again and fund these pools with up to $25 billion in federal money. House Speaker Paul Ryan proposes that premiums in state programs are capped and wait-lists be prohibited. Watch this part closely as the economics of capping premiums while also allowing unlimited risk are contradicting goals and seems impossible. This Kaiser Health News video explains:

A healthy risk pool. The fundamental principles of insurance require that enough good risk (healthy people) buy and keep health insurance to help offset the losses incurred by less healthy risk (sick people). As we get older, we incur more healthcare expenses and younger people have to bear the burden of these costs. To help drive more healthy risk into the pool, the ACA mandated everyone get covered and imposed a fee/tax penalty if you did not comply. The U.S. uninsured rate fell to a historic low; reduced from 16% in 2010 to 8.6% in 2016 but premiums still increased and outpaced inflation. Some younger and healthier Americans simply chose to pay the penalty and go without coverage and it is feared even more would lapse without a mandate and penalty.

Experts are concerned if the mandate is repealed, many healthy and younger people will be compelled to opt-out and instead will “roll the dice” and pay cash when or if they need health care or prescription drugs. Also, we will not allow our uninsured citizens to die in the streets so we have a safety-net and community health care system for indigent care. County clinics and hospitals are heavily burdened with uninsured patients today, even with the ACA, so repealing the ACA and ending Medicaid expansion would further challenge them to sustain their operations as a growing number of uninsured seek "last resort care".

Conclusion. As proposed, this provision does little to achieve the intended goal to help stabilize or lower health insurance premiums. Without the mandate or better method of driving more healthy risk, the broader risk pool will likely continue to attract less healthy risk and premiums will increase. Based on the limited proposed funding and past experience, the high-risk pools would not accommodate the masses of people who will likely lapse coverage and the premiums will not be affordable for most. An underfunded and already overburdened safety net health system will continue to serve the uninsured and provide more unreimbursed care, then shift more costs to the people who have private insurance. It’s an endless cycle that may culminate with a demand for yet another radical reform of our health care and insurance system. Several polls show a growing frustration with the current healthcare system and low expectations that it will improve in the short term. If this experiment fails, experts believe this will reignite a demand for single-payer in 2020 or 2024. I'll save that topic for another post.

Reforming our healthcare system is complex and there are no quick fixes. The administration and policymakers have heard from experts to better understand the issues (and risk selection) and cautioned to move carefully to avoid unintended consequences - or face serious political backlash for getting it wrong. In a pre-Super Bowl interview on Fox News, President Trump extends a new timeline for implementing a new replacement policy by the end of 2017 or "the following year". (video at 7:10)