A pre-existing health-conditions study says half the country is uninsurable.

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Jan. 18 2011 8:37 PM

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A pre-existing health-conditions study says half the country is uninsurable.

Kathleen Sebelius. Click image to expand.
Secretary of Health and Human Services Kathleen Sebelius

In 1937 President Franklin D. Roosevelt said in his second inaugural address, "I see one-third of a nation ill-housed, ill-clad, ill-nourished."One-third was (Paul Krugman points out in his book The Conscience of a Liberal) a guess rather than a statistic, because the U.S. government had not yet calculated what the poverty line was, much less how many people were situated below it. Nevertheless, the speech helped Roosevelt consolidate support for the New Deal and cement a three-decade realignment of presidential politics.

Now, with House Republicans pushing to repeal the 2010 health reform bill, the Health and Human Services department has done Roosevelt one better by releasing a short paper that states up to half of all Americans have pre-existing conditions that make it either impossible or very expensive for them to obtain health insurance in the private non-group market. That statistic could help President Obama consolidate support for health reform (and maybe his own re-election; this time out a 30-year Democratic realignment of presidential politics probably isn't in the cards). The health-insurance industry says the statistic is an unfair exaggeration, and Rep. Louie Gohmert, R.-Tex., says the claim is not only wrong but "offensive." But the lobbyists and the hard-right GOP hacks are wrong.

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Before we dive into the numbers, here's why they matter. Currently, health insurers are able to refuse coverage to people with pre-existing medical conditions, as defined by the insurer. Or, they're able to grant coverage but charge people with pre-existing coverage much higher premiums. Or, they're able to grant coverage and charge normal premiums with the stipulation that they will not provide coverage to treat the pre-existing condition that the patient has acknowledged. Insurers don't typically pull any of these tricks in the large group market (i.e., health insurance you get at the office), but in the individual market (i.e., health insurance you buy for yourself), they pull these tricks all the time. (To get the flavor, see "How Insurers Reject You.") Under health reform, insurers won't be able to do any of these things starting in 2014.

How many people will be affected? The new HHS paper says that somewhere between 50 million to 129 million Americans below the age of 65 have pre-existing conditions. That represents 19 percent to 50 percent of the U.S. population under 65. If HHS were to include people 65 or older the numbers and the proportions would be higher, because older people are much likelier to have pre-existing conditions than younger people. But HHS excluded this group because it's irrelevant to this discussion; starting at age 65 everybody is eligible for government-funded health insurance under Medicare regardless of any pre-existing conditions.

Fifty million to 129 million is a range big enough to arouse suspicion, but it reflects, if anything, an excess of caution on the part of HHS, which made not one calculation but two. The smaller 50 million figure is based on criteria for admission to the 19 high-risk pools run by the states prior to passage of health reform. These criteria vary, but HHS borrowed its methodology from the Lewin Group, a respected health research firm (one that happens to be owned by UnitedHealth, a major health insurer). This past spring the Lewin Group was commissioned by FamiliesUSA, a liberal nonprofit, to calculate the number of Americans under 65 who had pre-existing conditions. Lewin looked at the 19 state high-risk pools, which were established explicitly to provide health coverage to people who couldn't receive it, or couldn't receive it affordably, because they had pre-existing conditions. (High-risk pools are a terrible solution to the health-care crisis, for reasons I’ve explained elsewhere, but that isn't relevant here.) Lewin figured any pre-existing condition that qualified you automatically for admission to five or more of these state risk-pools had to be pretty serious. (As a rule, states weren't keen to let too many people into these risk pools because they were very expensive to run.) Lewin counted 69 such conditions. Then Lewin calculated how many people nationwide (under the age of 65) had these conditions. That turned out to be 57.2 million. HHS, making the same calculations, identified an apparent error that Lewin made—Lewin said a certain level of obesity qualified you for automatic admission to at least five of the state risk pools, when (according to HHS) it did not. The HHS calculation was therefore a slightly lower 50 million.

The trouble with the 50 million figure is that insurers will refuse coverage, or charge a much higher premium, for a lot more than just the 68 very serious conditions that won you automatic admission to five or more of the state risk pools. (If you don't believe me when I say these are very serious conditions, scroll down in the HHS paper to the subhead, "First Measure: High-Risk Pool Definition of Pre-Existing Conditions." We're talking about AIDS, brain tumor, Hodgkin's disease, etc.) A high level of obesity is a good example. It may not have gotten you automatic admission to a state high-risk pool, but there is a pretty good chance it would screw your chances of getting non-group insurance at a reasonable price.

Here is what HHS did to come up with its higher figure—the one that represents half of all Americans under 65. It checked the underwriting guidelines for non-group plans run by various private health insurers, some of which are available on the Web. In doing so, it found a whole lot more than just 68 pre-existing conditions that jacked up your premiums or denied you health insurance altogether. Let me give you a few examples from the private non-group health plans that HHS looked at. HealthNet's automatic declines—these are the conditions that get you refused any coverage at all, never mind the ones that jack up your premiums—number 120. United Healthcare's comparable deal-killers number nearly 200. HumanaOne's five-page deal-killer list was so long that I lost patience counting. Given such numbers, HHS showed some restraint in adding, for this second calculation, a mere 11 pre-existing conditions to its previous list of 68. These were (in addition to extreme obesity) arthritis, asthma, high cholesterol, hypertension, and a few garden-variety psychological disorders. When these 11 were added in, the 50 million Americans with pre-existing conditions ballooned, plausibly, to 129 million, or 50 percent of the population under 65.

Is HHS saying that half the population currently can't get health insurance, or can't get it for less than a king's ransom? Not precisely. A lot of these people get health insurance through their employers' group plans. That's how most people get their health insurance. But within this large subset anyone who quits his job or get fired had better hope that another large company will hire him, because if he ends up unemployed, or self-employed, or working as a consultant or an individual contractor to one or more businesses on a non-staff basis, then he will either be refused non-group health insurance outright or pay a lot more for it than everybody else. To put it another way: Up to half of all Americans are stuck in their current jobs because if they leave they will likely find it very, very difficult to buy affordable health insurance.

I see one-half of a nation getting screwed one way or another simply because it enjoys less than perfect health. Obamacare will make this group's lives substantially better starting in 2014. Maybe not all these 129 million voted in the 2010 election. Maybe some of them are even Republicans. But if the GOP succeeds in denying them health reform this year, I would guess that they'll probably vote in 2012.

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Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.