Bills heard in House and Senate committees this week would make preexisting condition discrimination legal once again for certain types of health coverage. Votes taken on these bills may be the first ones taken at the Texas Legislature to reintroduce preexisting condition discrimination since it became illegal in 2014.
This effort is surprising, because it runs directly counter to the overwhelming support across party lines Texans express for strong preexisting condition protections. Nearly 9 in 10 Texans (88%) think health plans should be required to cover people with preexisting conditions. This clear and overwhelming public support isn’t lost on politicians. In recent election cycles, many candidates running for office at the federal and state levels and in both parties expressed a commitment to coverage for people with preexisting conditions.
Since 2014, the Affordable Care Act (ACA) made it illegal for health insurance to discriminate against people with preexisting medical conditions. Insurers can no longer:
- deny coverage to people with a history of illness,
- charge higher rates to people with preexisting conditions, or
- cover the individual, but exclude all health care services related to a preexisting condition either forever or for a defined period of months or years.
This session, legislators have proposed a sneaky way to make preexisting condition discrimination legal again in Texas. A few bills invent a new type of health coverage deliberately designed to evade preexisting condition protections and other consumer protections enshrined in law. How can they do that? Just by saying the new coverage isn’t “insurance” in the law, even though it’ll operate just like health insurance. It may be hard to believe, but defining health coverage as “not insurance” in state law is all it takes to evade all state and federal laws related to health insurance, including preexisting condition protections. Coverage that is “not insurance” will also evade both the state and federal prohibitions against surprise medical billing, network adequacy, and many other well-established consumer protections.
HB 3924 (Oliverson) and SB 1973 (Springer) authorize new “non-insurance” coverage sold through the Farm Bureau, which anyone can join by paying an annual membership fee, regardless of their connection to farming or ranching. Five other states have already taken this unwise step, and it is clear that these plans cherry-pick healthy people and discriminate against others with a history of illness or injury.
Preexisting conditions are common
More than 1 in 4 Texas adults under age 65 have preexisting medical conditions — like diabetes, heart disease, or asthma — that would have resulted in being denied individual health coverage before the Affordable Care Act.
Farmers and ranchers appear far more likely to have preexisting medical conditions. In a 2017 survey by the U.S. Department of Agriculture, 2 in 3 farmers and ranchers (64%) reported having at least one preexisting condition. This means a substantial share of farmers and ranchers who look to buy a Farm Bureau plan will face a denial, higher rates, or a waiting period before coverage fully kicks in. (Note: Farm Bureau plans are not limited to people working in agriculture. Anyone can pay the membership fee to join and then apply for the health plan.)
Farm Bureau plans offer cheaper coverage by screening out less-healthy people
There are essentially only three ways for health coverage to cost 30-50% less than other health coverage, as Farm Bureau health plans in other states advertise:
- Cover only healthier people,
- Offer very skimpy coverage that leaves out expensive categories of coverage, like hospitalization or prescription drugs and/or place dollar caps or other limits on covered benefits, and/or
- Get unheard-of deals to reduce amounts paid to hospitals, doctors, and drug manufacturers that beat what even big, national insurance companies can negotiate.
Farm Bureau plans rely on the first strategy above: covering only healthier people
In each of the five states that have authorized non-insurance Farm Bureau plans, coverage is cheaper because enrollment is limited to healthier people.
- Farm Bureau plans use extensive “medical underwriting.” Applicants must fill out a lengthy health history questionnaire and submit medical records. Plans use this information to deny coverage outright, or charge higher rates to people in less-than-perfect health.
- Most of these plans utilize two other discriminatory, pre-ACA relics: preexisting condition waiting periods and “exclusion riders.” Most Farm Bureau plans make all enrollees pay monthly premiums while waiting 6-12 months for coverage of treatment for any preexisting condition to kick in. On top that that, certain enrollees will only be offered coverage with an exclusion rider, which indefinitely excludes coverage related to a specified preexisting condition.
- The Iowa Farm Bureau plan has a $3 million lifetime limit. Enrollees who get a serious diagnosis or injury face the risk of “running out” of coverage. Traditional health insurers are prohibited from using lifetime limits.
With such extensive use of discriminatory tactics, it is easy to see how cheaper coverage is available to the healthier people who are allowed in.
The debate around these bills and similar ones to create non-insurance health coverage should consider the following:
- Comprehensive coverage got much more affordable for many uninsured Texans just this month through enhanced Marketplace subsidies from the American Rescue Plan Act.
- Farm Bureau plans will not be affordable for Texans who would qualify for Medicaid if it were expanded.
- Farm Bureau plans don’t satisfy some supposed unmet need in the market for coverage. There are plenty of cheaper plans already on the market that can only be purchased by healthier people.
- Farm Bureau plans drive up the cost of comprehensive coverage for people who need it.
Texas has the highest uninsured rate in the nation, and it’s getting worse, posing an additional challenge for Texas’ recovery from the COVID-19 pandemic and the acute financial crisis it has created. The single most meaningful step Texas can take to address its high uninsured rate is to expand Medicaid. Medicaid expansion, along with the enhanced Marketplace subsidies that just took effect from the American Rescue Plan Act, would make comprehensive insurance that covers preexisting conditions affordable to more than a million uninsured Texans who are not offered or cannot afford job-based health insurance.
Authorizing Farm Bureau plans or any other insurance-like plans explicitly designed to evade all state and federal health insurance laws is not a good solution to cover uninsured Texans.