Affordable Care Act Options for People with Preexisting Conditions

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The House Energy and Commerce Committee recently released a memo addressing findings from an inquiry into coverage denials in the individual health insurance market. The figures were striking. From 2007 to 2009, the four largest insurers in the individual market denied coverage to more than 651,000 people on the basis of a preexisting medical condition—about one of every seven applicants. Moreover, the number of denials per year increased by 49 percent during that same time period. One company estimated that a full one-third of applicants and possible applicants—people who did not complete an application after being told they would likely be denied—did not obtain coverage because of a preexisting condition. Given this widespread practice, it's not surprising that a recent Bloomberg poll found that three-quarters of Americans favor the health reform law’s ban on the insurance company practice of denying coverage because of preexisting conditions. While this ban does not go into effect until 2014, other provisions of the Affordable Care Act already implemented serve to bridge the coverage gap for people with preexisting conditions.

Starting this year, children up to age 19 cannot be denied coverage in the individual market on the basis of a preexisting condition (except for those covered under grandfathered plans, which are plans that existed when the law went into effect in March 2010). In addition, young adults up to age 26 with preexisting conditions may be able to obtain health insurance through their parent’s group coverage. If someone already has coverage in the individual market, insurers are now prohibited from rescinding that coverage if the individual acquires an illness or condition.

Perhaps the most important immediate relief for individuals with preexisting conditions under the law is the new Pre-Existing Condition Insurance Plan (PCIP) available in every state and the District of Columbia. Funded with a $5 billion federal allocation through December 31, 2013, PCIP programs are open to people who have a preexisting condition and have been uninsured for at least six months. Applicants cannot be denied coverage or charged higher premiums on the basis of their medical histories. PCIPs offer premiums at or below standard market rates for individual coverage and do not impose any waiting periods for coverage of treatment for the preexisting condition(s). Eligibility is transferable to other states if a person moves after enrolling. Although premiums are not subsidized based on income, as they will be for plans that participate in the state insurance exchanges starting in 2014, annual out-of-pocket costs for PCIP enrollees are capped at $5,950 and some states’ programs have lower caps. Though not required under the legislation, many of the PCIP programs also provide coverage for preventive services with no or low cost-sharing.

In 2014, no insurer other than grandfathered plans will be able to deny coverage to individuals based on medical history, or charge higher premiums on the basis of health status. As noted by a spokesperson for America’s Health Insurance Plans, this prohibition is made possible in part through the requirement in 2014 that all individuals have health insurance. The individual mandate serves the very important role of spreading individual risks across a large population, thereby keeping average costs lower and premiums affordable. Starting in 2014, insurers will be allowed to vary premium levels only by defined ratios on the basis of age, family composition, tobacco use and geography. After that date, an individual with a history of cancer or a woman of child-bearing age will pay the same premium for the same coverage as anyone else their age.

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