We already know that health insurance legislation known as the American Health Care Act (AHCA), is a bad deal for older Americans ages 50-64. For people who purchase coverage on their own in the individual (nongroup) market and are not yet eligible for Medicare, the bill would significantly increase premiums for all older adults and spike costs dramatically for lower- and moderate-income older adults.
Now a bad bill just got worse. The House is considering a new amendment introduced by Representative MacArthur that would make the legislation even more harmful for older consumers. The MacArthur amendment establishes state waivers that would allow insurance companies to charge older Americans and people with pre-existing health conditions higher premiums and weakens critical consumer protections.
Even Higher Premiums for Older Adults
AARP strongly opposes the AHCA for weakening the 3:1 limit on age rating in current law, which prohibits insurance companies from charging older adults more than three times the premium a younger person pays for the same coverage. The AHCA would allow insurance companies to charge older adults significantly higher rates — up to five times more than younger adults. The MacArthur amendment goes further by allowing states to set even higher limits – so that older adults can be charged six times, or more, what they charge younger adults.
Because of these changes, lower- and moderate- income older adults, who would receive significantly less tax credit assistance under the bill, would end up paying significantly higher premiums than under current law. Since the MacArthur amendment would allow insurers in waiver states to charge older adults even higher prices for health insurance, their premiums will increase higher than what we previously estimated.
Loss of Protections for People with Pre-existing Conditions
The amendment would also allow insurance companies to return to charging people with pre-existing conditions higher rates based on their health status – something that was previously common practice among insurers but prohibited by the ACA. If a person experiences a break in insurance coverage, insurers in waiver states could be free once again to charge people with pre-existing conditions significantly higher, and potentially cost-prohibitive, rates. This would hit the older adult population hard, since 40 percent of 50- to 64- year olds have a pre-existing condition.
Reduced Coverage and Fewer Choices for Older Adults and People with Pre-existing Conditions
The MacArthur amendment allows states to waive federal standards for minimum coverage (known as Essential Health Benefits) and instead set their own standards. Under current law, insurance companies have to sell plans that include basic comprehensive coverage, requiring benefits such as prescription drugs, rehabilitative services, and mental health care. Under this amendment, states could set standards that allow insurers to sell less comprehensive, potentially even “skimpy” coverage.
Once a state chooses to eliminate the requirement that policies include certain benefits, it is unlikely that those benefits would be offered at all in the individual market in that state. The result would be less choice and reduced access to needed services for people with pre-existing conditions and health needs.
Weaker Protections Against Lifetime and Annual Limits – Even for Those with Employer Sponsored Coverage
The MacArthur amendment’s language allowing states to weaken Essential Health Benefit requirements also weakens another related set of consumer protections – the ACA’s limits on annual out-of-pocket spending and ban against lifetime and annual insurance limits. For example, as a result of the ACA, 105 million Americans, including people with employer based coverage, benefited from the law’s ban on lifetime limits, providing consumers with critical protection from the risk of medical bankruptcy. Under the MacArthur amendment, waived essential health benefits would no longer be included in these protections. This would be particularly harmful for people with pre-existing conditions or people who develop serious health problems if the services they need once again become subject to such limits.
The MacArthur amendment, simply put, makes a bad bill even worse.
Jane Sung is a senior strategic policy adviser with AARP’s Public Policy Institute (PPI), where she focuses on health insurance coverage among adults ages 50 and older, private health insurance market reforms, retiree coverage, Medicare supplement insurance and Medicare Advantage.
Photo courtesy of iStock
The American Health Care Act (AHCA) threatens to do away with the Affordable Care Act’s (ACA) protection for people with preexisting health conditions. This provision prevents insurance companies from denying these individuals coverage.
Eliminating this protection would force millions of Americans to—once again—rely on state high-risk pools. State high-risk pools are supposed to provide access to health insurance for people who cannot get coverage in the individual health insurance market because of preexisting health conditions.
State high-risk pools may sound like a good idea but, in reality, they are fraught with problems. One of the biggest lessons learned from experience with state high-risk pools: steep premiums that put coverage out of reach for millions. In the past, monthly premiums in state high-risk pools could be up to 200 percent higher than in the individual (non-group) market. Consequently, only a small fraction of those with preexisting conditions could afford to buy a plan. Yet, these premiums—high as they were—only covered about half the amount needed to pay enrollee claims. Most states tried to close the financial gap through taxes on providers and government subsidies, but even those efforts proved insufficient. We project that if states return to pre-ACA high risk pools in 2019, premiums for people with pre-existing conditions could be as high as $25,700 annually.¹
Another problem with state high-risk pools was that they typically offered skimpy coverage. For example, people who bought insurance through high-risk pools in nearly all states that offered them had to wait between six and 12 months before their preexisting conditions were covered. In addition, many had annual dollar limits on coverage for prescription drugs and behavioral health services.
The AHCA would provide $100 billion over nine years to fund—among other things—state high-risk pools. This level of funding is woefully inadequate to meet the need. One study estimates that it would cost at least $178 billion a year to adequately fund high-risk pools today. In the current policy environment, it is unlikely that the federal government will provide the necessary funding to make state high-risk pools work for the millions of people with a preexisting condition.
Bringing back insurers’ ability to consider preexisting conditions would hit older people especially hard—since people tend to have more health problems as they age; but younger people could be hurt by these policies too. Thus, the ban on preexisting conditions is an important protection for people of all ages. It’s time to stop recycling bad policies and come up with solutions that work for everybody.
Lynda Flowers is a senior strategic policy adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.
Claire Noel-Miller is a senior strategic policy adviser for the AARP Public Policy Institute, where she provides expertise in quantitative research methods applied to a variety of health policy issues related to older adults.
 Calculations by AARP Public Policy Institute. Estimate derived as follows: State-specific average premium data in 2010 obtained by dividing total premium revenues over total enrollment in each state high-risk pool. The average premium was inflated to 2019, when the AHCA would allow high-risk pools, using actual and projected per capita growth rates from direct purchased private health insurance from CMS Office of the Actuaries.
Did you know that over 3 million older adults ages 50-64 rely on Affordable Care Act (ACA) tax credits to purchase health coverage? In fact, pre-ACA, almost half of them were uninsured.
These credits help older adults with low- to moderate-incomes offset some or all of the cost of their health insurance premiums. They are a critical form of financial assistance for those without access to health insurance through an employer or public program.
The American Health Care Act (AHCA), as introduced on March 6, 2017, repeals current-law tax credits and replaces them with a new “flat” tax credit adjusted by age. We find that compared to current law, the proposed tax credit amounts would be substantially less for low- to moderate- income older adults, hitting the oldest particularly hard. Such changes could lead to older adults becoming uninsured or underinsured.
Lower- and Moderate-Income Persons Get Less
As figure 1 shows, under the AHCA, tax credits for those making $15,000 a year would be significantly less than what they receive today: between $2,200 and $5,900 less. Our paper also shows that for those earning $25,000 and $45,000 a year, tax credits would be between $850 and $4,500 less.
Older Persons Face Larger Reductions
Protections in current law provide larger tax credits when premiums are higher to ensure insurance remains affordable. Even though tax credits under AHCA increase by age, the increase isn’t sufficient to offset the much higher premiums that older adults pay relative to younger adults in the individual market. As a consequence, older adults face greater reductions in tax credits under AHCA than younger adults. A 64-year-old earning $25,000, for example, would face a reduction 5 times greater than that of a 50-year-old.
Combined Effect of Tax Credit Changes and Increasing Age-Rating
Potentially exacerbating the financial hit even further, the “flat” tax credits proposed under AHCA come alongside other changes that could further reduce health insurance affordability for older adults, including weakening limits on age-rating for health insurance premiums. In combination, the tax credits and age-rating changes could increase premiums for 50- to 64-year-olds by as much as $8,400 a year (figure 2).
Thirty-five percent of all nonelderly adults eligible for tax credits are between the ages of 50 and 64. They simply cannot afford to pay more for their health insurance. The lower tax credits proposed in AHCA will force millions of older Americans to forgo insurance or buy less expensive insurance that covers less, leaving them without the care that they need.
Jane Sung is a senior strategic policy adviser with AARP’s Public Policy Institute (PPI), where she focuseson health insurance coverage among adults age 50 and older, private health insurance market reforms, retiree coverage, Medicare supplemental insurance and Medicare Advantage.
Lina Walker is vice president at the AARP Public Policy Institute, working on health care issues.
Olivia Dean is a policy analyst with the AARP Public Policy Institute. Her work focuses on public health, mental health, health disparities and healthy behavior.
Courtesy of Greg Kahn
An important AARP study shows that an overwhelming majority of people would like to remain in their homes and communities for as long as possible. Personal care services, such as assistance with bathing, eating, and dressing, are critically important to helping older adults and people with disabilities of all ages live independently and avoid costly nursing facility placements.
Medicaid plays a critical role in providing this support. It is the largest payer of long-term services and supports (LTSS), including home and community-based services (HCBS) like personal care. While there has been an increase in funding for HCBS over the years, institutional care still accounts for 59 percent of Medicaid LTSS spending for older adults and people with physical disabilities. Nevertheless, through such programs as Community First Choice (CFC), the trend has continued toward greater availability of HCBS across all populations. And with HCBS being both cost effective and a means of enabling greater independence, it’s a trend that needs to continue.
Yet the recently released American Health Care Act (AHCA), the proposed legislation to replace the Affordable Care Act (ACA), puts the future of CFC in jeopardy. With a provision that repeals the program, if enacted the AHCA could disrupt services for older adults and people with disabilities covered through CFC.
How Does Community First Choice Work?
Community First Choice is a provision of the ACA that offers additional federal funding to states to provide personal care and assist individuals with activities of daily living (ADLs), instrumental activities of daily living (IADLs), and health-related tasks. States may also leverage CFC funds to cover transition services to help people leave nursing facilities and return to their homes and communities.
The CFC option empowers older adults and people with disabilities through its emphasis on self-direction. Unlike some other types of Medicaid programs, individuals enrolled in CFC and their families are guaranteed the right to self-direct their services and oversee the people that provide their personal care.
Community First Choice and the States
As of 2016, eight states offer this option in their respective Medicaid programs. An analysis of just four of the states (California, Oregon, Washington, and Montana) showed that the program has served more than 500,000 people since its inception. States that offer CFC must offer the program to all populations, and the analysis found that 40 percent of CFC enrollees were adults 65+ and 55 percent were people with disabilities under age 65.
While a more recent enrollment count is not available, the current total is likely much higher today due to the increased number of states offering this option.
The Financial Impact of Personal Care and Community First Choice
Numerous studies and analyses reveal that providing people LTSS in their homes and communities is generally less expensive than doing so in a nursing facility. A 2016 analysis from Genworth, for example, shows the median annual cost for a private room in a nursing facility exceeds $92,000, while the cost for 30 hours of personal care is $32,000. AARP research on Medicaid-funded HCBS also found that Medicaid pays nearly three times as much for each person served in institutional settings as it does for each person served in the community. Additional studies found annual cost savings of $11,912 per older adult who transitioned from a nursing facility back to the community through Medicaid’s Money Follows the Person Rebalancing Demonstration. In short, redirecting more resources to provide Medicaid HCBS is cost-effective compared with nursing facilities.
Given the lower expenses associated with personal care and the full spectrum of home and community-based services, increasing the portion of Medicaid LTSS dollars spent on these services could yield significant long-term cost-savings to states and the federal government. We are already moving in that direction. The most recent data on Medicaid LTSS expenditures shows that 53.1% of all Medicaid LTSS dollars go towards HCBS for all populations, up from 51.3% the previous year. Since its inception, Community First Choice has become an important tool to help states continue balancing Medicaid LTSS toward HCBS.
The Future of Community First Choice
The CFC option is an important piece of the puzzle for helping states provide services that enable people to live independently in their homes and communities. It also has the potential to help states and the federal government improve and expand access to LTSS while containing costs.
Including a repeal of Community First Choice through the AHCA, therefore, could hinder the progress made toward balancing long-term services and supports and limit access to home and community-based services for the growing number of states that have embraced the program. Given CFC’s current role in expanding HCBS, and the potential for cost savings to Medicaid through increasing access to HCBS more broadly, it would be wise for policymakers to preserve CFC and allowing state governments to continue offering HCBS through this mechanism.
Brendan Flinn is a policy research senior analyst for the AARP Public Policy Institute. He works on Medicaid, long-term services and supports, and family caregiving issues.