Why Insurance Doesn’t Work Like a Salad Bar

By Caila Brander, NWHN Policy Fellow

One of the most controversial debates stemming from Republican efforts to repeal the Affordable Care Act (ACA) has been over maternity coverage and who should pay for it. Under the ACA, coverage for maternity and newborn care—like coverage for mental health care, prescription drugs, and more—is part of the essential health benefits package that insurance companies must include in plans for individuals and small employers.

Republicans argue that government shouldn’t “force” individuals to buy coverage they aren’t going to use and that requiring young men or individuals past reproductive age to pay for plans that include prenatal and maternity coverage makes their premiums unnecessarily expensive. Republicans have been saying this for a while, including Trump appointee Seema Verma who heads the Centers for Medicare and Medicaid Services. This controversy exploded last week during the House Energy and Commerce Committee markups when Rep. John Shimkus (R-IL) questioned why men had to pay for prenatal care. The comment sparked a viral response that raised an important question: Why should anyone have to pay for any coverage they think they’ll never use? Turns out, there’s more than just a moral reason why men should pay for women’s maternity care. It’s actually fundamental to how insurance works.

Since the inception of the ACA, Republicans have been arguing that insurance would be cheaper if individual people were allowed to tailor their coverage to their specific needs. An older couple shouldn’t have to pay for maternity coverage, they argue, and a young 28-year-old single guy shouldn’t have to pay for mammogram screenings. This so-called “a la carte” insurance doesn’t sound too bad at first: wouldn’t it lower an individual’s premiums if they didn’t have to pay for coverage they’ll never need? But in reality, that line of thinking contains grave misunderstandings of how insurance actually works. It all ties into an insurance term called shared risk.

In any given year, most people who have insurance are healthy and don’t need to use much of that insurance. Their premiums subsidize the costs of those who are sick and using the insurance. Who exactly is sick changes from year to year. The idea is everyone pays into the shared pool with the understanding that they won’t always use it, but it will be there when they need it. A 62-year-old man’s premiums help pay for a 32-year-old woman’s maternity care, and in turn, her premiums help pay for his prostate exams and erectile dysfunction medication. They share risk or the likelihood of an insurance company paying more for their care than they paid to insurance. If insurance companies only provide coverage for sick people, or those constantly using a particular provision, they lose money because the risk isn’t distributed. The very idea of insurance crumbles.

Republican plans disrupt shared risk. “A la carte” insurance segments risk pools, meaning those who choose a certain insurance benefit are the only ones who need it and are very likely to use it. If they’re likely to use it, then insurance companies know they will be expensive to cover and will charge significantly more for anyone who wants that benefit. Republicans think that choosing only the insurance you need would be empowering, but how can that be true if makes the care you need so expensive you can no longer afford it?

Another problem with the Republican idea is that insurance companies, not individuals, have control over what plans are offered. If insurance companies know the risk won’t be shared, they are far less incentivized to offer plans. It is likely that many insurance plans would drop more expensive benefits, including maternity care if Republicans got their way. Maternity care, mental health care, prescription drug benefits, and more could be priced out of existence.

This is not just an abstract theory—it’s been proven in the past! Prior to the ACA, only 12% of insurance plans on the individual market included maternity care. For those that didn’t, separate maternity care “riders” could be purchased in order for that individual to have maternity care. These add-on benefits were expensive, had high co-pays and deductibles, and came with severe limitations on how and when they could be used. This is because insurance companies knew those who purchased them would almost certainly use them. The risk simply wasn’t distributed enough to make the riders profitable.

Having healthy individuals is better and less expensive for society overall. Nowhere is this more clear in health care than with maternity and newborn care. Even if you put aside the ethical and moral reasons for why we should cover these benefits, the economics still support it! Sick individuals exact a toll on the economy when they don’t get the care they need. This isn’t an issue of big government telling everyone what to do. This is about ensuring that risk is shared widely and people are able to afford the care they need. Without it, the very foundation of insurance unravels.