Discussions about repealing and replacing the Affordable Care Act point to its shortcomings and how a new program will be better. However, the current process is repeating a fundamental error in crafting the ACA—it was implemented backwards.
The ACA, signed into law by President Barack Obama on March 23, 2010, contained many provisions for changing the limits on health insurance—for example, lifetime limits on expenditures for care and exclusion for pre-existing conditions were eliminated. Further, the law went into great detail about how much money would be raised for the program and from where it would come. The one glaring omission, however, was an explanation of what benefits the law would cover. Typically, an insurance plan provides a benefit package and then the costs and methods of payment are worked out.
It wasn't until Dec. 16, 2011, when we had the first inkling of what the ACA would cover. On that date, HHS posted the pre-rule on its website titled: Essential Health Benefits Bulletin. But that bulletin created even more uncertainty. Rather than one standard set of benefits prescribed at the federal level, HHS said it was allowing a state to determine its own essential health benefits by choosing a “benchmark plan” based on a typical, locally operating health plan. Although details were to be determined by each state, HHS was to furnish further guidance about what these benefits should look like.
The final rule that set the categories of essential benefits was, at last, published in the Federal Register on Feb. 25, 2013, explaining that a federal definition “would not allow for state flexibility and issuer innovation in benefit design, would require a burdensome overhaul for issuers, and would disrupt the market.” This final pronouncement gave insurers only a few months to prepare policies before they started marketing in anticipation of the ACA rollout on Jan. 1, 2014.
As a result of underfunding (to which lack of healthy enrollees contributed), the federal government was not able to keep its promise to fully reimburse losses incurred by exchange health plans. For example, as reported in Modern Healthcare this past December, the federal government “owes insurers roughly $8.3 billion from the ACA's risk-corridor program to offset losses on the exchanges from 2014 and 2015.” It is well-known that financial losses have contributed to significant insurance company withdrawals from the exchanges. Inadequate cost estimates caused by setting financial targets before benefit definition is also one of the reasons out-of-pocket expenses for many individuals are unexpectedly high.
The American Health Care Act, which the Republicans offered earlier this month, repeats the same mistake. It is true that this proposal addresses only financial issues because it must be passed as a reconciliation bill. However, by dealing only with funding and not addressing underlying problems of benefit design, the AHCA makes the problem even worse: It takes the current “product design” and cuts the funding. Republicans claim this problem can be solved with two further steps after the AHCA is passed: executive orders and a major overhaul of the ACA design (which would require significant Democratic participation). Since the latter measure is highly improbable, we will be left not with Version 2.0 but, as economist Paul Krugman wrote, Obamacare 0.5.
If the ACA is significantly changed, we need to first address what services and products we are willing to cover. Will they be the same for all states? Will they include state-specific mandates? Will they continue to include existing categories of essential health benefits (for example, children's dentistry is under consideration for elimination in further reform plans)? This discussion may be even more contentious than the financial one; for example, it will undoubtedly include women's reproductive rights. However, if we fail to define the product, we can never be sure our plans will cover the cost and that the replacement will improve on the original.
Now is the time, more than ever, for putting aside past animus between the major parties to enact a lasting plan in its place. Let's do it right this time.
