Legal Issues In the News

A Brief History of Health Care and Coverage for Pre-existing Medical Conditions (Re-broadcast)

Jennifer Pahre

Jennifer Pahre University of Illinois College of Law

Many nations, including the United Kingdom, Canada, France, Germany, and Japan, include health insurance as a public benefit. In the United States, however, employers have played the most significant role in financing health care. 

The link between employment and insurance was forged during World War II. The demand for labor was high, but available workers were limited, and federal legislation prevented employers from raising wages. So, employers used insurance benefits to attract and retain good employees. This legacy from World War II continues into the 21st Century. In 2007, employment-based insurance covered over 60 percent of the non-elderly population; others purchased their own insurance, or were uninsured.

The 2010 Affordable Care Act, known as Obamacare, changed health insurance options, especially for people who purchased their own health insurance.  One change concerned the coverage available for persons with a pre-existing medical condition. Under Obamacare, those consumers could no longer be denied coverage.

But the new federal administration has vowed to repeal Obamacare. The United States House of Representatives’ new American Health Care Act, the AHCA, is the latest effort.

One hot-button issue under the AHCA is the way it treats pre-existing conditions. The AHCA includes the MacArthur Amendment, named after Republican Tom MacArthur. The MacArthur Amendment retains Obamacare's guaranteed access clause, purportedly assuring coverage for those with pre-existing conditions. But there is an escape mechanism that could permit states to decline to provide essential health benefits, including hospitalization and prescription drug coverage. And the McArthur Amendment also permits states to change Obamacare’s community rating provision, and let insurers charge enrollees more based on their medical history. So, insurers could charge much higher premiums to new insureds with pre-existing conditions, potentially rendering coverage unaffordable.

But what if you have a pre-existing condition, but don’t know you have it? Can your insurer refuse coverage?

There are several federal appellate cases that address this issue in the private insurer context. One of them is LoCoco v.Medical Savings Insurance Company. In that case, Joseph LoCoco and his wife applied for health insurance about the same time that he developed a dry cough. The insurance was issued, and would go into effect two weeks later.  During those two weeks, Joseph had a series of doctor’s visits and tests, but he did not receive a formal diagnosis of lung cancer until after the policy started. He died a year later, after generating $124,000 in medical bills.

The insurance company declined to cover his bills, saying that Joseph’s cancer was a pre-existing condition under its policy. His wife sued for breach of contract, arguing that, for the policy’s pre-existing condition exclusion to apply, the illness must have been formally diagnosed before the coverage started. The court noted that there were indications that Joseph’s condition was lung cancer before coverage began, based on his physician’s suspicions, and on his pack-a-day smoking habit. So, the court agreed that the insurance company could properly deny coverage. 

This case highlights a sad reality: if Joseph had not sought treatment before his policy went into effect, his medical bills could have been covered. Of course, his life would likely have been shortened by failing to get timely treatment. Forcing people to choose between qualifying for insurance and getting timely treatment is not humane. It is one reason that Obamacare requires pre-existing condition coverage. Sonia Sotomayor said: “I strive never to forget the real-world consequences of my decisions on individuals, businesses and government.”  When it comes to legislating the parameters of medical insurance, the real-world consequences of policy decisions can be harsh.