Business Ethos Blog

Affordable Care Act: Repeal & Replace

Dr. David Mielke, Retired Dean of the College of Business at Eastern Michigan University
President Trump’s campaign promise and the Republican’s promise to repeal and replace Obamacare is moving closer to reality.  President Trump signed an executive order that directs the secretary of health and human services, as well as other agencies, to interpret regulations as loosely as allowed to minimize the financial burden on individuals, insurers, health care providers and others.  It stressed that agencies can “waive, defer, grant exemptions from or delay implementation of any provision or requirement” of Obamacare that imposes a burden “to the maximum extent permitted by law.”  We have already seen a number of anecdotal press articles warning of the detrimental effect on individuals who have Obamacare should it be repealed.  One aspect that has provided a number of anecdotes is the potential impact on individuals who have pre-existing conditions.  President Obama warned that 133 million Americans with pre-existing conditions will be in jeopardy if Obamacare is repealed.  Is this number close to reality?  Will the repeal of Obamacare seriously affect those with pre-existing conditions?  Is this issue significant enough to stop the repeal of Obamacare?  What is the “Right Thing to do?”  Let’s look at some issues:

  1. A recent study claims that the real number of people affected by the repeal of Obamacare with pre-existing conditions is about 500,000.
  2. Half of Americans get their insurance through an employer, according to the Kaiser Family Foundation.  Another 34% are on Medicaid or Medicare.  For all those people pre-existing conditions are no barrier to coverage.
  3. In 2010, Henry Waxman, the Democrat heading the House Energy and Commerce Committee issued a report that stated that the 4 largest health insurance companies declined to issue policies to about 250,000 people a year because of their medical histories.  A 2011 report from the Government Accountability Office found a similar number.
  4. The Waxman report also explains that insurers sometimes issued policies with riders to exclude certain coverage.  The 4 largest insurance companies refused to pay only 70,000 claims a year due to pre-existing conditions.
  5. Many people with pre-existing conditions were able to get health coverage through high risk pools run by 35 states.  Michigan was one of them.  Those pools covered 225,000 people in 2011, according to the Kaiser Family Foundation.
  6. In 2010, president Obama opened a temporary nationwide high risk pool to serve those who were not covered by their state.  Enrollment peaked at 115,000 in 2013, according to Kaiser.
  7. Adding the 3 numbers, 250,000 refused by the big 4 insurance companies, 225,000 in the state run high risk pools and the 115,000 in the national high risk pool, the number potentially in jeopardy due to pre-existing conditions is 540,000, not 133 million as claimed by President Obama.
  8. Republican plans to repeal and replace Obamacare include re-establishing federally funded high risk pools, with a guarantee of no waiting lists to join.  That’s likely to cost $16 to $20 billion a year, or about $32,000 a person.
  9. $16 billion is far more than Republicans are budgeting, but far less than the $56 billion that will be spent on Obamacare subsidies this year, according to the Congressional Budget Office.
  10. Patients with serious illnesses would probably be better off with coverage through a high risk pool than under the status quo.  Obamacare plans offer narrow networks that that exclude many top drawer hospitals, specialists like oncologists and include very high deductibles at increasing costs.
  11. High risk pools would also subdue premium increases for healthy buyers by removing the largest costs from the insurance pool.  The sickest 5% of Americans account for 50% of healthcare costs, according to Kaiser.
  12. Alaska staved off a 40% increase in Obamacare premiums by establishing a high risk pool with a $55 million budget.  The result was a single digit increase in health insurance premiums for individuals.

Is the number of people with pre-existing conditions a real impediment to repealing Obamacare?  Should the healthy pay the same price for insurance as the sick?  Is there a lower cost solution to insure the people with pre-existing conditions?  Does the phony number of 133 million people likely to lose their insurance stand up to analysis? How many more anecdotes will we read or hear from the media about people with pre-existing or serious medical conditions that will lose their insurance?  Should Obamacare be repealed and replaced?  What is the “Right Thing to do?”  There are certainly more questions that have to be answered and issues to be addressed with a repeal of Obamacare.  However, from the standpoint pf pre-existing conditions, the answer is yes.  There is a lower cost solution with far fewer people affected than what is being reported.  High risk pools are the answer.  35 states operated them before Obamacare.  Congressional reports and the Kaiser Foundations estimate about 500,000 people are affected, not 133 million.  Is the 133 million number an example of fake news?