How Trump may cover Americans with pre-existing conditions

Donald Trump speaking at the 1st Presidential Debate at Hofstra University, New York on September 26, 2016.

Donald Trump speaking at the 1st Presidential Debate at Hofstra University, New York on September 26, 2016.

NEW YORK (CNNMoney) — President-elect Donald Trump promises that Americans with pre-existing conditions will have access to health insurance, even after he dismantles Obamacare.

But the system wouldn’t work the way it did under Obamacare, which revolutionized coverage by prohibiting insurers from turning away the sick or charging them higher premiums based on their medical conditions. And that’s left some health care experts questioning whether Trump’s plan will succeed.

Insurers have long been reluctant to cover sick Americans in the individual market since their health care costs can vastly exceed the premiums they pay. Obamacare aimed to address this problem by attracting healthier people to help offset those expenses. To do so, it introduced the individual mandate, which requires everyone to have coverage or pay a penalty. It provided subsidies to 85% of enrollees to make policies more affordable.

Trump has yet to lay out a detailed plan to replace President Obama’s signature health reform law. His transition team did not return a request for comment.

But he, Vice President-elect Mike Pence and House Speaker Paul Ryan have provided some insights into how Republicans would handle the thorny issue of insuring the sick.

They would set up a two-track system: one for those who maintain continuous coverage and one for those who don’t. And they would replace the subsidies with a tax credit or deduction to help people pay their premiums.

Those who are currently covered could not be dropped from their plans or fail to renew them because they are sick, according to a proposal to reform health care outlined in Ryan’s “A Better Way” paper released in June. This would also apply to those switching from work-based plans to the individual market.

Pence echoed this view in a speech earlier this month.

“We will protect Americans with pre-existing conditions so that they are not charged more or denied coverage, just because they have been sick, so long as they have paid their premiums consistently,” he said.

This plan banks on healthier people also signing up because they wouldn’t want to let their coverage lapse and face being excluded if they needed care. And if they did try to get back in, it would be reasonable for them to bear the responsibility of paying higher premiums since insurers will be allowed to assess their health at that time and charge accordingly, said James Capretta, resident fellow at the American Enterprise Institute, a conservative think tank.

However, whether enough healthy people would enroll under this system remains to be seen. Requiring the sick to have continuous coverage is only part of the solution, but it depends on having a functioning market overall, said Ezekiel Emanuel, a health care management professor at the University of Pennsylvania who was one of the architects of Obamacare.

The handful of states that previously required insurers to provide coverage to everyone and banned them from charging the sick more prior to Obamacare saw their individual insurance markets collapse as premiums skyrocketed.

Even Obamacare’s carrots and sticks approach of using subsidies and penalties to attract the healthy was faltering. Premiums are shooting up an average of 22% for the benchmark plan on the exchanges next year in large part because not enough healthy Americans have signed up.

For those with a pre-existing condition who haven’t maintained continuous coverage, the Trump administration would bring back state-based high risk pools, which were largely shut down after the Obamacare exchanges became operational in 2014. The president-elect’s transition website says he will work with Congress and states to re-establish these pools.

Ryan’s plan calls for providing at least $25 billion in federal funding for these programs, as well as placing caps on their premiums and banning wait lists.

Prior to Obamacare, 35 states maintained high risk pools for their sick residents. The programs varied, but generally the state created a non-profit association to contract with an insurer to administer the pool. The plans were similar to individual insurance policies, but often had waiting lists. They also charged premiums of up to 250% of those for healthy individuals, had annual deductibles of as high as $25,000 and limited annual benefits to as low as $75,000, according to Jean Hall, director of the Institute for Health and Disability Policy Studies at the University of Kansas.

They also lost a lot of money: Roughly 50% of their operating costs had to be subsidized by the state, according to the National Association of State Comprehensive Health Insurance Plans, an industry group.

“It was very expensive and not very comprehensive coverage,” Hall said.

Several CNNMoney readers who had been in high risk pools before obtaining Obamacare policies said they are concerned about losing their coverage and being forced back into the pools.

Jeff Leanna, 39, spent two years in Nebraska’s high risk pool. The Scottsbluff resident suffers from epilepsy and asthma, but the premium and deductibles ate up more than 40% of his income so he had to let the policy lapse at times.

Under Obamacare, his premiums went down and his coverage improved even though he doesn’t qualify for subsidies.

“I haven’t had a serious seizure since switching to drugs I can afford,” said Leanna, an office manager at a small law firm.

He’s concerned that Trump’s dismantling of Obamacare could leave him uninsured again, especially if costs continue to rise.

“It doesn’t take much. Once you lose [coverage], trying to get it back could be difficult,” he said.