How would Republicans handle the $12 million patient breaking Obamacare?

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We’ve spent a lot of time in the debate over the Republican health care bill examining the impact on people with preexisting medical conditions.

Obamacare provided absolute protection — to a point. Iowa has seen the health care law’s limits, as one patient with a genetic disorder was costing their insurance plan an alleged $12 million a year.

That insurer dropped out of the Iowa market, in part because of the cost of covering that person, and others soon followed suit. (Listen to Sarah’s new podcast on Obamacare’s “bald spots.”)

Today we learned that the patient is a teenage boy with a rare blood clotting disorder. It doesn’t seem fair to blame a kid for a market’s failures — and there are some questions about how his costs could be that high — but it remains true that without insurance options, Obamacare’s protections don’t mean much.

But it also made me wonder: What happens to this patient under the Republican plan?

The big question is whether Iowa would seek, as the House’s American Health Care Act allows, waivers from core Obamacare insurance rules: the prohibition on insurers charging sick people more than healthy people and the requirement that plans cover certain essential health benefits.

If Iowa sought the first, a waiver from community rating, the patient’s family could be charged exorbitant premiums based on his health status if they had a lapse in coverage. Experts at the Brookings Institution have argued that even without a lapse, the market would bifurcate and sicker people could end up priced out of insurance.

That’s because healthier people would choose to be charged based on their health status. Those people would be concentrated in a medically underwritten market. Sicker people would likely stay in the community-rated market, but that market’s costs would increase as it became more concentrated with people who have high medical costs.

The Congressional Budget Office agreed this could happen under the House bill and projected that some people in states with waivers would be priced out of coverage.

The other possibility is that if Iowa sought a waiver from the essential health benefits requirement, plans could structure their coverage to make it unpalatable to the patient, perhaps by excluding certain treatments or services.

“People like this patient would be exposed to financial ruin and would likely struggle to get the care they need,” Matt Fiedler at Brookings told me today. “Plans would charge extremely high premiums to these types of individuals, carve out the types of care they are likely to need, or do some combination of the two.”

On the other hand, could the AHCA lure more insurers into the market, addressing this apparent flaw in Obamacare that Iowa has brought to the fore?

The waivers might help, experts said, though that would be in part because plans could more easily avoid costly patients like the Iowa teenager. The bill also provides more than $130 billion in funding over 10 years to lower premiums and other costs as well, which could entice insurers.

“State waivers could bring some insurers back into the market, and there would be pressure from the industry on states to pursue the waivers,” Larry Levitt, senior vice president at the Kaiser Family Foundation, told me.

But any resulting decrease in premiums would likely benefit healthier people, not the people with high medical costs, according to the CBO.

“The agencies expect that premiums would be substantially higher than previously estimated for less healthy people in some states and somewhat lower for the healthier people in those states,” the CBO’s analysts wrote.

There is one other, often overlooked change coming that could make the Iowa patient’s costs more tolerable for insurers.

The Obama administration made a last-minute change to Affordable Care Act regulations that starting in 2018, costs for patients whose bills exceed $1 million will be shared across the nation with all insurers participating in the law.

“This would help insurers in Iowa, if there are any, since the cost of this patient would be spread across all individual market insurers nationally,” Levitt said.

Where our health care costs are increasing. Spending on every kind of health care has increased over the past decade — though the biggest spike has been for prescription drugs. Read more from NIHCM.

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