(Bloomberg View) — The Affordable Care Act — Obamacare — has made great strides toward its signature goal: to reduce the number of Americans without health insurance. Unfortunately, another important goal — ensuring that everyone’s insurance policy provides adequate coverage — remains under siege in the courts and Congress.
Before Obamacare, private health insurers were free to exclude coverage for all sorts of care. In 2011, 62 percent of people who bought their own policies had to pay for maternity care out of pocket; 34 percent had no coverage for substance abuse services; and 18 percent weren’t insured for mental health care. One in 10 had no help buying prescription drugs.
Moreover, if anyone’s medical expenses grew too high, insurers could cut them off. In 2009, one-third of family health plans bought on the individual market had lifetime limits on coverage. Even for job-based insurance, which is usually more generous, 12 percent of people with single coverage faced annual limits. A serious or complicated illness or injury could leave people essentially uninsured.
Obamacare changed things by establishing 10 categories of benefits, or essential health benefits, that most insurance plans must cover — including hospitalization, prescription drugs, laboratory services and mental health care — and prohibiting annual or lifetime limits on those benefits. For most consumers, the leanest major medical plans — “bronze plans” — now must cover at least about 60 percent of the actuarial value of those 10 benefits. (Some consumers can buy “catastrophic” plans that cover 100 percent of the bills over a $6,850 deductible.) Any individual policies not meeting these requirements don’t constitute the “insurance” Americans must have to avoid paying a tax penalty.
This month, however, a federal appeals court ruled that people can buy plans with far more limited coverage.
Yet those who buy such plans risk being surprised twice — first when they’re saddled with the tax penalty for not carrying adequate insurance, and then when they need care and find their coverage doesn’t go as far as they thought.
Republicans in Congress have likewise targeted Obamacare’s minimum coverage requirements, arguing that consumers, not the government, should determine what services they want insurers to provide. If the next president is a Republican, he may have the congressional support to rescind the law’s insurer regulations. Such a change might be less unpopular than axing people’s coverage on the exchanges, but it would be a great setback for health-insurance reform.
Beyond improving Americans’ general well-being, coverage requirements broadly keep down costs: If young and healthy people can buy cheap low-coverage plans, they not only leave themselves financially exposed to medical catastrophe, but they also push up the price of adequate insurance plans by removing themselves from the risk pool.
Minimum requirements also ensure that people in the health-insurance marketplace understand what they’re buying. Consumers can then respond to value, allowing competition to drive down the cost of reasonably good insurance.
Health care reform remains unfinished in many ways. But good minimum requirements for insurance have already been set. It’s essential that they not be taken away.
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