Is Obamacare Living Up to Its Preexisting-Conditions Promise?

The requirement that insurers cover individuals regardless of health status is looking better in theory than in practice.

WASHINGTON, DC - JUNE 28: Obamacare supporters react to the U.S. Supreme Court decision to uphold President Obama's health care law, on June 28, 2012 in Washington, DC. Today the high court upheld the whole healthcare law of the Obama Administration. (Photo by Mark Wilson/Getty Images)
National Journal
Sophie Novack
June 23, 2014, 5:30 p.m.

In­sur­ance com­pan­ies may have found a way to skirt one of Obama­care’s most pop­u­lar prom­ises: equal ac­cess to in­sur­ance cov­er­age for pa­tients with preex­ist­ing con­di­tions.

The health care law re­quires in­surers to cov­er every­one, re­gard­less of their health. It also bans subtler forms of dis­crim­in­a­tion, such as char­ging high­er premi­ums, that would have the prac­tic­al ef­fect of mak­ing health in­sur­ance un­avail­able to sick people.

They’re some of the Af­ford­able Care Act’s most pop­u­lar pro­vi­sions — and have been key to Demo­crats’ de­fense of the law.

But pa­tient ad­voc­ates say the real­ity on the ground isn’t match­ing the ACA’s in­tent. They say in­sur­ance com­pan­ies are ex­pli­citly break­ing the law, as well as un­der­min­ing its in­tent, with policies that put life-sav­ing treat­ments out of reach for many of the pa­tients who need them most.

And, they say, cur­rent reg­u­la­tions are let­ting them get away with it.

In Flor­ida, ad­voc­ates say four in­sur­ance com­pan­ies are push­ing away HIV/AIDS pa­tients by char­ging out-of-pock­et costs that are up to 50 times high­er than com­pet­ing plans. The plans place all HIV/AIDS med­ic­a­tions, in­clud­ing gen­er­ics, on the highest cost-shar­ing tier. Ac­cord­ing to the com­plaint, three of the in­surers — Cov­entry­One, Cigna, and Pre­ferred Med­ic­al — re­quire their con­sumers to pay for 40 per­cent of the med­ic­a­tion costs out of pock­et. The fourth, Hu­mana, re­quires con­sumers to pay 50 per­cent out of pock­et.

This could mean a bill of more than $1,000 each month de­pend­ing on the drug cost, in ad­di­tion to premi­ums pa­tients are already pay­ing for their cov­er­age. Out-of-pock­et costs are pro­hib­ited from go­ing above $6,350 per year, but pa­tients could be re­spons­ible for that sum in just a short time.

Mean­while, BlueCross — the in­surer with the largest share of mid-level plans in the Flor­ida mar­ket — places most HIV drugs on the first or second tier, with a co-pay of $10 to $25 for Tier 1 med­ic­a­tion, and between $40 and $70 for Tier 2, ac­cord­ing to the com­plaint. Oth­er in­surers re­portedly charge co-pays ran­ging from $10 to $75.

The lo­gic be­hind the price dis­crep­ancy, the ad­voc­ates say, is to push sick pa­tients away from the high out-of-pock­et cost plans and to­ward the cheap­er ones — a de facto deni­al of the law’s pro­tec­tions.

“If a plan is $50 versus $1,500, which would you pick?” said John Peller, in­ter­im pres­id­ent and CEO of the AIDS Found­a­tion of Chica­go.

The law lets in­surers set their own cost-shar­ing levels; it’s a stand­ard part of plan design. But it also pro­hib­its com­pan­ies from im­ple­ment­ing plans in a way that tar­gets spe­cif­ic pop­u­la­tions, or has the ef­fect of dis­cour­aging en­roll­ment by those with sig­ni­fic­ant health needs. Crit­ics ar­gue that in­surers are design­ing plans to drive away po­ten­tial cus­tom­ers who have HIV or AIDS, leav­ing them with only health­i­er cus­tom­ers — the kind of cherry-pick­ing the health law was try­ing to cur­tail by re­quir­ing in­surers to cov­er every­one.

“It’s clear that this is blatant dis­crim­in­a­tion,” said Carl Schmid, deputy ex­ec­ut­ive dir­ect­or at the AIDS In­sti­tute, who worked on a com­plaint against the four Flor­ida in­surers, filed with the Health and Hu­man Ser­vices De­part­ment’s Of­fice of Civil Rights at the end of last month.

Tier­ing, in gen­er­al, is a stand­ard cost-con­trol meth­od for in­surers — one that al­lows them to cov­er high­er-cost drugs in a still-prof­it­able way. To be sure, in­surers want to be cer­tain their most ex­pens­ive drugs are paid for, par­tic­u­larly now that they are re­quired to take on these high-cost in­di­vidu­als for the first time. And is­suers ar­gue that their plans meet the law’s re­quire­ments.

“The Cov­entry for­mu­lar­ies meet ACA re­quire­ments and provide ac­cess to drugs ne­ces­sary for treat­ment un­der the cur­rent clin­ic­al guidelines,” a spokes­per­son for the in­sur­ance com­pany wrote in an emailed state­ment. The oth­er three in­surers gave sim­il­ar re­sponses.

But ad­voc­ates say their com­plaint is strengthened by the fact that oth­er in­surers, such as BlueCross, are not en­ga­ging in this kind of be­ne­fit design, in­dic­at­ing that it’s not a mar­ket­place norm or ne­ces­sity. The com­plain­ants re­viewed 36 mid-level qual­i­fied health plans in Flor­ida and singled out the above four; oth­er plans in­cluded a wider range of drug tier­ing, with more af­ford­able op­tions.

The Flor­ida com­plaint is not the first time ad­voc­ates have stepped in to tight­en pro­tec­tions re­lated to preex­ist­ing con­di­tions. A few months ago, a hand­ful of in­surers in Louisi­ana said they would no longer ac­cept third-party pay­ments — in­clud­ing fund­ing from Ry­an White, the largest fed­er­al pro­gram to help HIV/AIDS pa­tients — un­til HHS is­sued a reg­u­la­tion pro­hib­it­ing these prac­tices.

“In­sur­ance com­pan­ies have a long his­tory of un­der­tak­ing prac­tices de­signed to re­strict [high-risk pools] — through preex­ist­ing-pro­tec­tion pre­clu­sions, and high­er premi­ums,” said Robert Gre­en­wald, dir­ect­or of the Cen­ter for Health Law and Policy In­nov­a­tion at Har­vard Law School. “All those op­tions are now off the table clearly and ex­pli­citly. So what we’re see­ing in­stead are oth­er prac­tices — lack of trans­par­ency, fail­ing to cov­er oth­er med­ic­a­tions, re­fus­ing to ac­cept third-party pay­ments, or the tier­ing of medi­cines.”

As is of­ten the case, op­pos­i­tion to the ACA is in­ter­fer­ing with im­ple­ment­a­tion. In Illinois, the state’s in­sur­ance de­part­ment draf­ted a bul­let­in to all mar­ket­place in­surers, in­struct­ing them to in­clude ad­equate cov­er­age, ac­cord­ing to Peller. Oth­er states, in­clud­ing Flor­ida, have de­clined to get in­volved.

“There is a form­al sys­tem in place for over­sight; un­for­tu­nately, it’s of­ten un­der-re­sourced, and in states adam­antly op­posed to the ACA, prob­ably not very ag­gress­ive in terms of re­view,” said Timothy Jost, a pro­fess­or at Wash­ing­ton and Lee Uni­versity School of Law and an ex­pert on the health law. “The way it’s po­liced is at this point to look for out­liers — cost-shar­ing or be­ne­fits out­liers — take a quick look over plans, and if something seems weird, re­quire jus­ti­fic­a­tions.”

The high-cost tier­ing of spe­cialty drugs ex­tends bey­ond treat­ment for HIV/AIDS. A re­cent Avalere Health study sponsored by the phar­ma­ceut­ic­al in­dustry looked at 123 mid-level ex­change plans and found that more than 60 per­cent place all med­ic­a­tion for mul­tiple scler­osis and can­cer on the highest cost-shar­ing tier.

The Flor­ida com­plaint has the po­ten­tial to strengthen reg­u­la­tions across dif­fer­ent ill­nesses, but ad­voc­ates worry that guid­ance will not be set be­fore the next open-en­roll­ment peri­od. The con­cern is that if in­surers are able to con­tin­ue these plan designs for any pro­longed peri­od, com­pan­ies with more-af­ford­able op­tions could change course and fol­low suit. If oth­er in­surers can get away with high­er pri­cing, why charge less and get stuck with all the high-cost pa­tients?

Gre­en­wald says he is “very con­fid­ent” that HHS will rule in fa­vor of the com­plain­ants, but not that the de­cision will come quickly. HHS de­clined to com­ment.

“I don’t ex­pect this com­plaint to be the sil­ver bul­let,” Peller said. “It will take watch­dog­ging and care­fully mon­it­or­ing of what’s go­ing on around the coun­try.”

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