When Ronald Reagan used the axiom “Trust but verify,” he meant conservatives should closely monitor organizations and individuals to ensure that their deeds comport with their words. This axiom should apply to a health-care plan that a group the Heritage Foundation leads will unveil this week. While the group’s website claims its plan would “restore a properly functioning market in the health care sector to lower costs,” Heritage’s own policy analysis suggests otherwise.
Specifically, the Heritage plan would in no way alter what Heritage research describes as the biggest drivers of Obamacare’s “seismic effects on insurance markets.” Nor does the Graham-Cassidy health care bill, the legislative basis for the new effort. In fact, a recent version of the bill further undermines the purported “flexibility” that Graham-Cassidy promises to states, making it even less consistent with the federal principles Heritage invokes in lauding the measure.
Pre-Existing Condition Rules Drive Premium Increases
In March, Heritage released an analysis of a series of actuarial studies assessing the factors that led individual market health insurance premiums to more than double from 2013 to 2017. In assessing the law’s “seismic effects,” the Heritage paper continually returns to one series of changes as the prime driver:
The largest effect on premiums consists of a cluster of [Obamacare] insurance access requirements—specifically the guaranteed issue requirement and the prohibitions on medical underwriting and applying coverage exclusions for pre-existing medical conditions under any circumstances. This cluster of regulations collectively accounts for the largest share of premium increases.
The paper discusses at length how these provisions “appear to have had the greatest effect on premiums,” raising rates for the young and healthy to subsidize the sick. While Obamacare supporters hoped the individual mandate would compel enough healthy individuals to offset those costs, high numbers of people chose to pay the mandate tax or received exemptions from the tax.
“The net result was a constellation of rules that repelled relatively healthy people and attracted those who could reasonably expect their medical bills to exceed their premiums—which Obamacare’s individual mandate simply failed to counteract,” Heritage’s report says.
Rhetoric versus Reality on Graham-Cassidy
After analyzing how the pre-existing conditions provisions proved the prime driver of premium increases, the March Heritage paper claims Graham-Cassidy provides the solution, calling it “a conceptual framework for empowering states to repair or ameliorate much of the market dislocation resulting from Obamacare.”
However, in claiming that Graham-Cassidy empowers states to repair their insurance markets, the paper neglects to mention how much flexibility that bill would give states to address what Heritage itself called the biggest driver of premium increases: In a word, nothing. Zip. Zero. Zilch. Nada. Bupkis. Squadoosh.
Leaving all those regulatory requirements in place might sound good, but—just as the March Heritage paper noted—it causes major policy problems:
Insurance companies are required to sell ‘just-in-time’ policies even if people wait until they are sick to buy coverage. That’s just like the Obama plan. There is growing evidence that many are gaming the system by purchasing health insurance when they need surgery or other expensive medical care, then dropping it a few months later.
Those words were written in 2010 to describe the effects of Massachusetts’ health care law, but they apply just as equally to the Heritage plan, and the Graham-Cassidy bill, in 2018. Surprisingly, then, they came from another member of the group that is releasing the plan this week.
Despite these organizations’ own prior statements opposing these costly insurance requirements, the plan released by Heritage and others would leave them in place at the federal level, hamstringing states’ ability to manage their own insurance markets—and belying the supposed goal of devolving power away from Washington.
The Bill Is Getting Worse
Moreover, a recently obtained version of the Graham-Cassidy bill would give states even less flexibility. In its March analysis, Heritage stated that the bill’s “most important” reform “would release states from the single-risk-pool requirement” without having to pursue a waiver; “states that receive a [block] grant under Graham-Cassidy are not subject to this [waiver] requirement.” By creating multiple risk pools, states could theoretically create one (subsidized) pool for sicker individuals, lowering premiums for the healthier individuals who remain in the primary insurance pool.
Unfortunately, however, the revised draft takes major steps that would undermine states’ ability to create multiple risk pools. Language on page 31 would reduce the block grant allotment for states maintaining multiple risk pools, by a percentage not yet specified. Other new provisions on pages 44 and 45 of the revised draft would allow states to create multiple risk pools only if they follow a series of bureaucratic parameters—parameters that a future Democratic administration would likely use to quash any state’s attempt to establish or maintain multiple risk pools.
Not Flexible, Not Federalism
Even as the Graham-Cassidy bill moves further to the left, Heritage seems insistent on chasing it ever leftward. The bill never addressed what Heritage itself called the prime drivers of premium increases. Now a more recent version further erodes the little flexibility that earlier drafts gave to states.
As I wrote more than one year ago, Republicans can choose to leave the status quo intact on Obamacare’s major regulations, or they can choose to keep their promise to voters to repeal the law. But they cannot do both. It comes down to a binary choice that simple. And Heritage has chosen a path that would effectively break the promise of repeal.
Whatever reasons Heritage may have for publishing the health outline it intends to release this week and supporting Graham-Cassidy, they have very little to do with providing flexibility to states, or advancing reforms to insurance markets. To quote LeVar Burton, you don’t have to take my word for it. You just have to read Heritage’s own research.