When certain organizations or media outlets lead with headlines talking about how tens or even hundreds of millions of people have “declinable” medical conditions, it is necessary once again for responsible citizenry to dig a little deeper to understand the full story.
As we learned in “How to Really Fix Health Care,” the term “pre-existing condition” refers to a relatively rare phenomenon in which an insurance company will deny someone insurance coverage due to one’s medical condition. In 2001, the Department of Health and Human Services released a survey finding that only about 1 percent of people had ever been denied coverage because of a pre-existing condition. Other independent studies since then have confirmed that number.
So why are there always such big numbers thrown around, and what exactly is a “declinable” condition? To begin with, declinable is a made-up term. It doesn’t mean a person has been declined insurance coverage or even will be declined. It basically means a person has been sick or injured before. Millions of people with these so-called “declinable” conditions have insurance and get insurance every day.
The real problem with pre-existing conditions is caused by how our health insurance system is set up. As discussed in “How to Really Fix Healthcare,” we have a two-tiered system where people who get insurance through their employer are offered a 30 percent tax benefit over those who do not. This has had serious negative consequences for the health care system, not the least of which is that it has caused about 90 percent of people with insurance to seek employer-provided insurance plans. This means that when someone changes jobs – an ever-increasing likelihood in our modern economy – they lose their insurance. These breaks in coverage can create issues with pre-existing conditions. The solution, of course, is to decouple insurance from employment. When a person changes jobs, they don’t also worry about losing car insurance, or home or renters insurance. Health insurance should be the same. It should be a personal decision and purchase by individuals. Leveling the tax playing field between the employer and individual insurance markets will accomplish that goal, lower premiums, and reduce the risk of pre-existing conditions even further.
While relatively few have been denied insurance because of a pre-existing condition, that doesn’t mean that there is no consequence for not carrying insurance until there’s a medical need. If someone chooses not to have insurance, gets sick, and then tries to add coverage – that’s not how insurance works. (That’s why schemes like Obamacare always couple a ban on excluding pre-existing conditions with a mandate to buy insurance.) We buy insurance in case we get sick, not after we do. Even then, rather than an outright denial of insurance, what can happen in the free market is that someone will have a longer waiting period before insurance coverage begins, or will pay a higher price after there’s been a gap in coverage. Rather than forcing people to buy insurance through a costly (and ultimately ineffective) individual mandate to buy it, the market incentivizes consumers, through the price system, to purchase insurance before they get sick.
Most people will never be faced with a denial of coverage because of a pre-existing condition, but there are some people with conditions that are so costly and chronic that they are unable to get insured. There is certainly a place for some sort of safety net for people who, through no fault of their own, are unable to get insurance coverage. We have an idea of how many people that would be because of a program – which predated Obamacare’s regulations – that provided insurance to people who had been denied coverage because of a pre-existing condition. At its peak, the Pre-Existing Insurance Plan covered about 114,000 people.
Department of Health and Human Services: Pre-Existing Conditions Survey
Health Affairs Study: Consumer Decision Making in the Individual Health Insurance Market
American Enterprise Institute Statement before the House Committee on Ways and Means: Examining the Effectiveness of the Individual Mandate
Kaiser Family Foundation: Pre-Existing Conditions and Medical Underwriting in the Individual Insurance Market
Utah Citizen Network: Obamacare Failed, Here’s Why, & How to Really Fix Health Care
Center for Medicaid & Medicare Services: Pre-Existing Condition Insurance Plan