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Wednesday, February 18, 2015

The Affordable Care Act Is a ‘Three-Legged Stool’

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One of the most significant and popular features of the Affordable Care Act (ACA) is the new protection that puts an end to insurance company discrimination against people with pre-existing health conditions. This important ACA protection depends on two other provisions that keep coverage affordable: premium subsidies and the coverage mandate. (Our new illustrated ACA video shows just how precarious this balancing act can be if one of the key provisions of the law is taken away.)

Together, these three elements of the ACA formed the statute’s “three-legged stool” to ensure that insurance pools are not imbalanced with a disproportionate number of older, sicker people who would cause premiums to skyrocket. In the pending Supreme Court case, King v. Burwell, it is possible that one of the three legs (the premium subsidies) could be destroyed in three dozen states, thereby toppling the figurative stool.

In the 1990s, seven states tried to put an end to insurer discrimination against people with pre-existing health conditions. These states adopted stand-alone anti-discrimination provisions (without the other two legs of the three-legged stool). In the words of Justice Ruth Bader Ginsburg, the “results were disastrous.” Healthy people felt they could delay purchasing insurance until they got sick. As a result, insurance pools were disproportionately filled by older, sicker people, and premiums rose substantially. In turn, the premium increases caused even more healthy people to avoid buying coverage, and an insurance “death spiral” occurred.  

The non-discriminatory rules to help people who need health coverage depend on the provision of premium subsidies to make insurance affordable. Without premium subsidies, many millions of people would find health insurance unaffordable. This is especially true for young adults who are typically either in entry-level, lower-paying jobs or do not yet have a job. As the health coverage to which they have access remains unaffordable, they will no doubt refrain from buying coverage – and the death spiral that occurred previously in various states would occur across the country.

The outcome of the King case, therefore, is critical to the continued protection of people with pre-existing conditions. If premium subsidies are withdrawn from moderate-income people in approximately three dozen states, the impacts would be severe: Many millions of people would re-join the ranks of the uninsured; premiums would increase enormously; and the non-discriminatory protections for people with pre-existing health conditions would be jeopardized and would probably become ineffective. These are results that must be avoided.  

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