SEC. 111. PROHIBITING PRE-EXISTING CONDITION EXCLUSIONS

A qualified health benefits plan may not impose any pre-existing condition exclusion (as defined in section 2701(b)(1)(A) of the Public Health Service Act) or otherwise impose any limit or condition on the coverage under the plan with respect to an individual or dependent based on any health status-related factors (as defined in section 2791(d)(9) of the Public Health Service Act) in relation to the individual or dependent.

America's Affordable Health Choices Act of 2009 (H.R. 3200), §111, 111^th Cong. (2009), available at http://www.govtrack.us/congress/billtext.xpd?bill=h111-3200, p. 19-20.

This provision prevents any health insurer from denying coverage to preexisting conditions. Sounds great. However, it, like much of this bill, creates a fundamental unfairness, and threatens to end private insurance.
Let’s say I’m uninsured. I was uninsured for the better part of last year, so I know how the thought process goes. So I’m uninsured, and I participate in dangerous activities. Let’s say that I really love the Roller Derby. Love it. So much fun. Now, I’m uninsured. And during my bout this week, I have a gnarly fall and tear my ACL. ACL surgery is not cheap. I have no insurance. Under this plan, poof! I get the surgery covered. Nevermind that I didn’t have insurance before, and nevermind that I can drop it (I’ll get to this in a second) immediately after my treatment is done. I get free healthcare! Woo! Now here’s my question: how does this work, money-wise? I just got a whole lot of free healthcare. Did the private insurance company pay for that? Nope. The people who paid for it are all those people who’ve been paying health insurance for several (probably healthy) months or years. In other words, YOU just paid for it.
Now, when I say “drop it,” here’s what I mean. Let’s assume, arguendo, that the government option healthcare doesn’t finance major surgeries, or doesn’t provide as high a standard of care for such surgeries. Under this plan, I can still get a private insurance plan. So that’s what I do. I get my private insurance plan before I go through with ACL surgery because I want to make sure I have access to the best doctors, etcetera, and a higher premium is okay by me for a little while, since ACL surgery is so important. However, after I am done with the surgery, there is nothing requiring me to stay with the private plan I got for the surgery. I’m going to drop that plan and go back to either being a) uninsured; or b) on the public option, if I’m required to do so. This is one of the many ways in which the public option will choke out private health care. If private insurers can’t turn you down for pre-existing conditions, you’ll switch to them for big (read: expensive) health problems and away from them for day to day routine healthcare.
A brief explanation of how insurance works, as a business, may be applicable here. I’m sure most people already get this, but it bears repeating. The way an insurance company works is entirely based on risk. That’s what insurance is—it’s protection, for you, against the risk of high medical bills. So I’m insured. And let’s say my insurance premiums are $50 per month. In year one, I only go to two doctors for routine visits. Each of those visits costs my insurer $200 (we’re ignoring my copay because it’s irrelevant to this discussion). So in year one, my insurer comes out with $200 that I gave it that it didn’t have to spend on my healthcare ($50 x 12 months=$600-($200 x 2 doctor visits)=$600-$400=$200). Let’s say the same goes for the next five years. So at this point, my insurer has $1,000 ($200 x 5 years=$1000) of my premiums in “profits.” (Plus interest, but that’s irrelevant.) Now let’s say in year six that I tear my ACL, to stick with this example. Let’s say that ACL surgery is $1000. The amount I have already paid offsets the amount of this big procedure. Even if the surgery is much more expensive than $1000 (which it is), the insurance company still has some of my money to offset the large bill. However, if I hadn’t been paying the insurance company premiums for all those healthy years and I just jumped in after I knew I was going to have big medical bills, the insurance company would have had almost nothing from which to pay my expensive surgery bills and would have to tackle the whole thing out of their checkbook. Insurance companies are not charities (as the left loves to remind us), and they’re not going to keep doing that indefinitely out of the goodness of their hearts.
Once you look at this on a macro level, it becomes even clearer. My insurance premiums don’t just pay for my procedures. The insurance company pools everyone’s premiums to pay for everyone’s bills.* On average, most people are healthy. Most people have years roughly like my years one through five, where they see the doctor a handful of times for minor complaints. Major procedures are rare, relatively speaking. So because healthy people carry insurance, insurance companies can afford to pay for procedures for their insured who aren’t healthy. However, if healthy people have a free, or substantially cheaper, government-option insurance plan they can use when they’re healthy, any rational decision maker will obviously opt for the cheaper plan. The main concern that will keep people with their private insurer is standard of care. However, if you can get a better insurance plan anytime you suffer a major illness or injury—in other words, if insurance companies are forced to pay for pre-existing conditions—you have no incentive to stay with the private insurance plan. So you won’t. And private insurance plans, at least with the system we have now, are not designed to operate for catastrophic-coverage only. They’re designed to cover patients all of the time. Forcing them to cover pre-existing conditions prevents them from working. And that’s one of the many reasons they’re going to die out under this plan.
*Yes, I know I am way oversimplifying this. But it’s a blog, not a textbook. Deal with it.