The amended version of Graham-Cassidy is a mess

The revised bill was leaked last night and will apparently be unveiled today. The reporting has suggested that it’s worse than before. Not only is Graham-Cassidy now full of bribes and giveaways to lure hesitant senators, but it also makes it much easier for states to avoid the application of the ACA’s insurance regulations.

That’s because states that want to get out from under the ACA no longer have to submit waivers that the Trump administration has to then approve. They just have to submit applications. Once they do, section 204 of the bill appears to allow the states to establish their own rules for their insurance markets.

Section 204 is really convoluted. Even for lawyers who do this kind of thing for a living, it’s difficult to parse. And on one critical point in particular—whether insurers will be allowed to charge sicker people more for their coverage—it appears to be internally inconsistent.

In general, section 204 says that the states are free to adopt new rules for any insurance plans supported by the Graham-Cassidy block grants. To the extent that the states’ new rules diverge from certain specified ACA rules—the “non-applicable provisions”—the new rules supersede the ACA’s rules.

Which ACA rules can be superseded? It’s a familiar list: the requirement to cover the essential health benefits, the cap on cost-sharing limitations, and the obligation to sell tiered plans (gold, silver, bronze). Insurers can exclude preventive services, including contraception, and states no longer have to treat insurers as part of a single risk pool.

Look carefully at section 204(b)(2), however. It says that the rules that can be superseded include subsections (ii) and (iii) of 42 U.S.C. 300gg(a)(1)(A), which governs community rating. If you chase down that cross-reference, you’ll see that (ii) and (iii) allow health insurers to vary their premiums based on age and rating areas.

But here’s the key: the basic obligation of 300gg(a)(1)(A)—the requirement that premiums can’t vary along anything but the specified conditions—isn’t listed as one of the provisions that states can supersede. No matter what rules the states adopt, then, insurers still can’t discriminate based on health status.

Or can they? If you keep reading, section 204(c) asks states to supply a “description” of the state’s new rules. In that description, the state must specify “[t]he criteria by which, and the degree to which, a health insurance issuer of such coverage may vary premium rates for such coverage, except that in no case may an issuer vary premium rates on the basis of sex or on the basis of genetic information.”

The suggestion is pretty clear: states can allow insurers to vary their premiums, including on the basis of health status, so long as insurers don’t discriminate on the basis of sex or genetics. Plus, it doesn’t make much sense to give the states the freedom to establish separate risk pools if insurers still had to charge the same rate to everyone, healthy or sick.

So what the hell does section 204 mean? Can states discriminate on the basis of health status or not? Who knows?

The craziest thing is that the sloppy drafting may be intentional. It reads to me like a deliberate effort to allow senators to read whatever they want to into the bill. Senator Cassidy and other moderates can claim it preserves the protections for preexisting conditions. Senator Cruz and other conservatives can claim it doesn’t.

Both have a point—but they can’t both be right. One of them is being sold a bill of goods.

My own tentative view is that the statute doesn’t allow insurers to vary their rates based on health status. Nothing in section 204(c) expands the carefully specified list of ACA provisions that can be superseded. There’s internal tension, to be sure, but absent something more, my working assumption is that insurance plans nationwide will remain subject to rules on community rating.

Even if that’s right, however, Graham-Cassidy would still allow insurers to discriminate against the sick. States could liberate insurers to sell plans with huge deductibles and missing benefits, which will discourage sick people from signing up. Since those plans would be in their own risk pools, they could keep their premiums low. Sick people would then be forced into comprehensive plans with sky-high premiums. (Thanks to Tim Jost for walking me through this.)

However you read Graham-Cassidy, then, it allows insurers to screw sick people. It’s just not clear exactly how they can screw them.


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