NCPA - National Center for Policy Analysis

Debating Health Reform: The Pre-Existing Condition Problem

November 9, 2012

The central point in the argument for health care reform revolves around whether individuals can be denied coverage for preexisting conditions. Although the Affordable Care Act (ACA) approach guarantees coverage in the short term, it poses long term risks to the U.S. health care system, says Avik Roy, a senior fellow at the Manhattan Institute.

  • According to the Congressional Budget Office (CBO), only 3.5 percent of the 55 million uninsured were uninsured because they were denied coverage due to preexisting conditions.
  • However, 71 percent of people blamed their lack of insurance on high costs.
  • The CBO estimated that 700,000 people would enroll in the ACA's high-risk pool for people with preexisting conditions.
  • But as of July 31, only 82,000 people had signed up.

There are two root causes to the problem of preexisting conditions. First, the tax code ties employment to health insurance, meaning that people have gaps in coverage when they lose their jobs. If a person loses a job and has a preexisting condition, the individual is forced to endure high premiums.

Second, health insurance is too costly for individuals to purchase. This is primarily because insurance companies cater to large companies and have no incentive to build economically viable risk pools for those that want to purchase health insurance individually.

Rather than tackling the root causes, the ACA exacerbates the problems with health care in America. Instead, it raises premiums and forces people to buy insurance. For those that can't afford it, the government will subsidize insurance which will be paid for with cuts to Medicare and higher taxes.

Source: Avik Roy, "Debating Health Reform: The Preexisting Condition Problem," Manhattan Institute, October 2012.


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