For most of his life, Carl Goulden had near-perfect health. He and his wife, Wanda, say that changed 10 years ago. Carl remembered feeling “a lot of pain in the back, tired, fatigue, yellow eyes — a lot of jaundice.”
“Gray-like skin,” Wanda added. His liver wasn’t working, she explained. “It wasn’t filtering.”
Carl was diagnosed with hepatitis B. He is now 65 and on Medicare, but back then he had a flower shop in Littlestown, Pa., so he had been buying health insurance for his family on the market for small businesses and the self-employed.
The medications to manage Carl’s hepatitis cost more than $10,000 a year — and if he ever needed a liver transplant, as some people with hepatitis eventually do, the costs could be formidable. Thank goodness they had health insurance, the couple thought.
But then, Carl said, “the insurance renewals went way up.”
After a few years, he could no longer afford to buy the coverage — more than $1,000 a month — and maintain his business. So he dropped the insurance.
“I was devastated,” he said, “because I didn’t know when my liver might fail.”
Teresa Miller, Pennsylvania’s insurance commissioner, said that steep increase in insurance rates was legal. And before the Affordable Care Act became law, a patient like Goulden might have had a hard time buying another policy. He likely would have been turned down by private insurers because he had a “preexisting” medical condition.
A family like the Gouldens would “just have been out of luck,” Miller said.
Pennsylvania: The Wild, Wild West
Before the ACA, states had differing approaches to handling preexisting conditions.
Pennsylvania was typical. Until the ACA mandated that insurers treat sick and healthy people equally, buying insurance seemed as lawless as the Wild West.
Insurers couldn’t overtly kick people off a plan if they got sick, but they could find ways to charge them much more, even those whose chronic condition wasn’t that serious — such as acne. For individuals looking to sign up in the first place, “an insurance company could simply decline to offer you insurance at all because of your preexisting condition,” Miller said.
Insurers who did offer a policy to someone with a preexisting condition might have done so with a catch — the plan could require a waiting period or might exclude treatment for that condition.
“So, let’s say you had diabetes, for example,” Miller said. “You might have been able to get coverage for an unexpected health care need that arose, but you’d still be on your own for any treatment and management of your diabetes.”
From the perspective of an insurance company, these practices were intended to prevent the sick from signing up for a health plan only when they needed costly care.
Pennsylvania tried to partially solve this problem by creating a scaled-back health plan, called adultBasic, for those with incomes too high to qualify for Medicaid who didn’t have any coverage. Household incomes had to be less than 200 percent of the federal poverty level, which at that time would have been $21,660 for an individual. More than 40,000 people were signed up in 2011, and nearly half a million were on the waiting list, but the plans didn’t include coverage for mental health care, prescription drugs or more than two nights in a hospital. Even so, Miller said, the strategy proved too expensive for the state.
“That program was spending $13 million to $14 million a month when it was shut down,” she said.
More than 30 other states dealt with preexisting conditions by setting up what are called high-risk pools, a separate insurance plan for individuals who couldn’t get health coverage in the private market.
These plans could be lifesavers for some people with conditions like cancer — which can cost tens if not hundreds of thousands of dollars to treat.
The experiences with high-risk pools varied, but states faced challenges, said John Bertko, an insurance actuary with the state of California. And the main problem was the high cost.
“The one in California, which I was associated with, limited annual services to no more than $75,000, and they had a waiting list. There was not enough money,” Bertko said. “The 20,000 people who got into it were the lucky ones. At one point in time, there were another 10,000 people on a waiting list.”
The pools also had catches: Premiums were expensive, as were out-of-pocket costs. And plans often excluded the coverage of preexisting conditions for six months to a year after the patient bought the policy.
New Jersey: Preexisting Conditions Covered, With A Catch
Around that same time, across the Delaware River, the state of New Jersey was trying something different.
“Insurers could not take health status into account,” said Joel Cantor, director of Rutgers’ Center for State Health Policy who has been analyzing the New Jersey experience.
Before the ACA, New Jersey was one of just a handful of states that prohibited insurers from denying coverage to people with preexisting conditions. Insurers also weren’t allowed to charge people significantly more for having a health issue, and the plans had to offer robust coverage of services.
There was a one-year waiting period for coverage of a preexisting condition, but a larger issue became cost. The entire individual market in New Jersey became expensive for everyone, regardless of their health status, Cantor said. Because there was no mandate to have health insurance coverage, those who signed up tended to need it, and healthy people did not enroll.
And so, “the prices went up and up,” he said. And the premiums and enrollment “went down and down.”
The state tried to address this in the early 2000s by introducing a “skinny” health plan, Cantor said.
“By that I mean very few benefits,” he explains. “It covered very, very limited services.”
The plan was affordable and really popular, especially among the young and healthy people, and about 100,000 people signed up. But if a person had a health need, many costs shifted to the individual.
“It left people with huge financial exposure,” he said.
That’s, in part, why the ACA included a rule that insurance plans now must offer good benefits and be available to everybody. In exchange, insurers have the mandate and subsidies — so that everybody will buy in.
Cantor said these experiences point to an ongoing quandary: A small portion of people consume a big chunk of health care costs. It’s hard to predict who will cost a lot — or when.