Senate Republicans are doing everything in their power to keep their health care repeal bill secret. However, some details about the legislation have leaked, including a proposal that would allow states to waive federal requirements that insurers provide coverage that includes core health care services, known as essential health benefits (EHBs). Instead, states could allow insurers to exclude certain benefits from their coverage. In states where services such as maternity care or substance use disorder treatment were not required to be covered, individuals needing those benefits would have to pay thousands or even tens of thousands of dollars more.
A backdoor to punishing people with pre-existing conditions
While some Senate Republicans have claimed that their proposal would provide protections for those with pre-existing conditions, EHB waivers would render those protections meaningless for millions of people.
Under the Affordable Care Act (ACA), insurers are required to cover a comprehensive set of benefits, including maternity care, prescriptions drugs, and mental health and substance use disorder services. The House of Representatives’ health care bill, the American Health Care Act (AHCA), included a provision that would let states waive this EHB requirement so that insurers could provide less-comprehensive plans. The nonpartisan Congressional Budget Office (CBO) estimated that under the AHCA, half of the U.S. population would live in states that waived EHBs.
Once a state waived EHBs, insurers would begin a race to the bottom to provide the most bare bones coverage. Those who provided more comprehensive coverage would attract less healthy customers and see their costs rise accordingly. To avoid this issue, insurers would jettison coverage of expensive treatments and try to cherry-pick only healthier customers. The CBO predicted, “Services or benefits likely to be excluded from the EHBs in some states include maternity care, mental health and substance abuse benefits, rehabilitative and habilitative services, and pediatric dental benefits.” The CBO’s prediction matches the reality of the pre-ACA insurance market, in which the vast majority of plans did not cover maternity care and a significant number of people did not have coverage for substance abuse or mental health services. Under the AHCA, people whose needs were not met by standard insurance would be forced either to buy coverage riders, which would expand the coverage provided by their policy for an added cost, or to find a more expensive plan that provided a broader range of benefits.
Looking to the pre-ACA insurance market alone, however, may understate the risk of EHB waivers to people with pre-existing conditions. Prior to passage of the ACA, insurers could control costs by denying coverage and setting premiums based on health status. In that market, offering a wide range of services did not present a financial risk to insurers because potentially costlier enrollees paid more, and individuals with very expensive conditions such as cancer or hemophilia were often denied coverage or offered coverage that excluded their condition. The Senate Republican bill, however, seems likely to keep the requirement that insurers not discriminate based on pre-existing conditions, meaning that insurers offering comprehensive plans would have to accept enrollees with costly conditions. Given those requirements, some experts argue that insurers in states that eliminate EHBs altogether would offer significantly less comprehensive plans than were available in the pre-ACA market so as to exclude the most expensive conditions.
Patients needing excluded benefits would pay thousands of dollars more
Individuals needing excluded benefits would pay thousands of dollars more, either for coverage riders or for a more comprehensive plan, because insurers would price in the costs of the newly provided benefit. Individuals in EHB waivers states needing services not required to be covered by all plans would face the same massive premium charges as if the protection for their pre-existing condition were waived.
The Center for American Progress estimated the cost of coverage riders that people with health conditions would face in 2026 if their treatment were not included in a waiver state’s EHB. As with our previous work on pre-existing condition surcharges, we drew on Centers for Medicare & Medicaid Services (CMS) data on enrollees’ expected costs. A select list of conditions and the incremental cost of buying benefits to treat them is shown in Table 1 below.
Most conditions included in Table 1 require benefits in EHB categories that the CBO identified as most likely to be excluded in a waiver state, including maternity care, mental health conditions, and substance use disorder treatment. In addition, we included a few expensive conditions that might be excluded in a state that waived EHBs altogether.
In a state that did not require maternity benefits, the premium for a maternity care rider would cost a woman an additional $17,320 in 2026. In states that waived requirements for substance use disorder and mental health benefits, coverage for drug dependence treatment would cost an extra $20,450, and coverage for depression would cost an extra $8,490. And if a state were to waive all coverage requirements, insurance companies could exclude even routine care or hospital services from their standard plans and place annual or lifetime limits on coverage. In such worst-case scenarios, coverage riders would cost patients almost $73,000 for lung cancer and $28,660 for breast cancer. Hemophiliacs dependent on clotting factors for survival would need to pay an extra $344,430 to obtain comprehensive care that included full pharmacy benefits.
Conclusion
Allowing states to waive EHBs would subject people who needed those benefits to thousands of dollars in extra costs for coverage. Those unable to afford it could be forced to go without coverage for their conditions, effectively rendering them uninsured for the health care they need most. As with so many aspects of the leaked Senate proposal, the supposed improvements on the House bill are little more than a fig leaf. While the Senate claims that pre-existing conditions protections remain in place, EHB waivers would still expose millions of Americans with health problems to exorbitant prices and inferior coverage.
Sam Berger is the senior policy adviser at the Center for American Progress. Emily Gee is the health economist for the Health Policy team at the Center.
Methodology
Under the ACA, insurers can vary premiums according to standard age rating curves but cannot vary them by health status. To estimate surcharges for excluded conditions, we used relative cost factors from the CMS Risk Adjustment Program, which is calibrated to the costs of the individual market population.
Our starting point for our estimate is the original CBO score of the AHCA, which projected that the premium for an individual of age 40 would be $6,050 per year in 2026. Because that CBO score assumed that the ACA requirements for EHBs and community rating would continue in all states and because 40 is the average age in the exchanges, we believe that $6,050 is a good approximation of what the average premium would cost in that year for the exchange population. We therefore assume that $6,050 would be the premium for someone with average plan liability risk, or a score of 1.0. This person would be of average health status and therefore not perfectly healthy.
We then used the CMS risk adjustment factors to estimate the relative cost of selected health conditions relative to the cost of a healthy individual, then converted these into dollar amounts representing the cost of a coverage rider in 2026. For example, a pregnancy diagnosis adds 2.862 to an individual’s risk score. This implies that the cost of maternity care would be 2.862 times higher than $6,050, or $17,320. Hemophilia adds a factor of 56.931 to an enrollee’s risk score, indicating that a patient with hemophilia uses $275,500 more for care than an average person.
In choosing examples for states in which some, but not all, EHBs are waived, we attempted to choose conditions whose costs would fall entirely, or almost entirely, within EHB categories likely to be excluded. By contrast, a patient with a condition such as asthma would use more prescription drugs (a benefit sometimes excluded in pre-ACA plans) and more hospital and emergency department care (benefits less likely to be excluded) than the average person.
Our method does not account for the adverse selection that would occur if certain benefits were available only as coverage riders. The price of a rider would likely deter some relatively healthier sufferers of each condition to forgo insurance. Actual coverage prices would, therefore, reflect the cost of treating the more severe cases of each condition and be higher than the amounts we estimate.