In the wake of House Republicans’ failed attempt to repeal and replace the Affordable Care Act (ACA), the White House is reportedly working with the House Freedom Caucus on a Plan B. While the details are not known, the plan appears to include an amendment to the American Health Care Act (AHCA, H.R. 1628) that would allow states to remove consumer protections that had been established in Title I of the ACA. Given this new focus on Title I, it is worth considering this part of the law and how delegating to states might affect health coverage in America.

What Title I Provides

Title I of the ACA includes some of the most popular provisions in the law, including a number that Republicansincluding President Trump—had previously vowed to maintain. Some of the numerous provisions in Title I include:

  • Preexisting conditions protections that prohibit insurers in the individual and small group markets from denying coverage or raising premiums for people with pre-existing conditions;
  • Dependent coverage up until age 26 which is required for all types of health insurance plans that offer any dependent coverage;
  • Guaranteed preventive services coverage without cost sharing for proven services such as cancer screening, childhood immunizations, and women’s health services like, domestic violence screening and contraceptive services;
  • Coverage of ten categories of essential health benefits such as hospital care in the individual and small group markets; and
  • Bans on annual and lifetime coverage limits and required annual out-of-pocket cost limits that are especially important to people with chronic and severe health problems that could other bankrupt them.

Title I provisions do not apply just to plans in the Health Insurance Marketplace or the broader individual market—some provisions affect small business health plans, and still others touch every private health insurance plan. This is why, for example, since the ACA was passed, 109 million people have benefited from an end to lifetime limits, and 138 million people have gained guaranteed coverage of prevention without copays.

The Impact of Turning Title I Over to States

The consequences of giving states the ability to pick and choose replacements for the protections currently found in Title I clearly depends on the legislative scope and detail. But there are some risks based on the information known to date.

First, if all Title I insurance reforms were all repealed, and the states were tasked with replacing them, there would be no pathway for states to restore consumer protections for the 91 million Americans in self-insured plans (see Map 1).1 States have primary authority over fully insured health plans, but only the federal government sets rules for plans offered by employers that choose to bear insurance risk (that is, self insure). In New Jersey and Pennsylvania alone, for example, about 7 million people—that is, more than 60 percent of residents who have private employer coverage—are in such self-insured plans. These people could lose young adult coverage, preventive services coverage, annual and lifetime limit bans, and required maximum out-of-pocket limits unless the new amendment leaves these Title I provisions intact. Even if it did so, allowing states to set essential health benefits linked to these plans’ catastrophic protections could weaken if not eviscerate them, as a Brookings analysis recently noted.

Map Source: Authors’ calculations.

Second, allowing states to replace the ACA’s ten essential health benefits with their own menu could return the individual and small group markets to the days when many key services were excluded from many plans. We built on an analysis of the impact in 2015 of eliminating essential health benefits, estimating the potential loss of coverage, if the past is any guide. This suggests that reverting to pre-ACA levels of coverage could strip essential benefits from millions of plan purchasers (see Table 1).

Table 1. Potential Loss of Essential Health Benefits
Benefit Percent of Individual Market Enrollees Without Coverage, 2010 (before ACA)  Estimated Number of Individual Market Enrollees Who Could Be Without Coverage
Maternity Services 62 percent 13 million
Substance Use Disorder Services 34 percent 7 million
Mental Health Services 18 percent 4 million
Perscription Drug Coverage 9 percent 2 million

Source: Authors’ calculations.2

Note: This table assumes current levels of enrollment, although the Congressional Budget Office (CBO) estimated that the AHCA would reduce individual market enrollment by 6 million in 2018.

Individuals most at risk of losing essential health benefits would likely be concentrated in states such as Florida and Texas, which lacked consumer protections before the ACA was enacted. But consumers in all states may also be at great risk for benefit coverage loss, as health insurers seek to use all available tools to avoid enrolling unhealthy individuals.

Lastly, there is speculation that the House Freedom Caucus wants to let states roll back protections for people with pre-existing conditions. Over half (nearly 12 million) of the 22 million enrollees in the individual market have a pre-existing condition (similar to the share in employer-sponsored insurance). Combined with the AHCA’s repeal of the individual responsibility requirement and reduction of the premium tax credit, states would be pressured to allow insurers to charge people with pre-existing conditions more—or deny them coverage altogether—to keep this market afloat.

Conclusion

States have an important role in our health system. The ACA supports them in their traditional role as insurance regulators, has provided billions of dollars to help them set up their own Marketplaces, and allows them to innovate. Hawaii, for example, recently received approval to waive some of the ACA’s small business provisions because of its unique approach to workplace coverage. Indeed, much of Title I itself is based on a successful state experiment: Governor Romney’s health reform initiative in Massachusetts.

However, there is a difference between empowering states to improve their health systems and shifting hard decisions from the nation’s capitol to state capitols. The potential House Freedom Caucus amendment may be deregulation disguised as devolution.

Notes

  1. Authors’ calculation based on MEPS 2015 percent of private-sector enrollees that are enrolled in self-insured plans at establishments that offer health insurance by firm size and state multiplied by the CPS 2015 number of non-elderly people enrolled in group health plans. Note that some fraction of people in self-insured plans are also in grandfathered plans to which the ACA Title I protections do not apply.
  2. Authors’ calculation based on the 2010 percent of enrollees without specified benefits multiplied by the CPS 2015 number of non-elderly people enrolled in nongroup health plans. This is the same approach extended to maternity and drug coverage used by Richard G. Frank and Sherry A. Glied, “Flexibility on ‘essential health benefits’ will increase cost of insurance for pregnancy, addiction, and mental illness,” Stat, March 20, 2107. Note that some fraction of people in nongroup health plans are in grandfathered, transitional, or exempt health plans to which the essential benefit coverage requirement does not apply. These estimates do not include enrollees in small group health plans also subject to this requirement.