Senate Republicans are hoping a “skinny” repeal bill can solve their stalemate over dismantling Obamacare. But this partial Obamacare repeal — which is gaining steam in the Senate — could destabilize already wobbly Obamacare insurance markets, make premiums jump and increase the number of uninsured by millions, health policy experts say.
“I call it the 20-percent-increase-in-premiums-and-at least-15-million-out-of-insurance plan,” Sen. Claire McCaskill (D-Mo.) said. “It’s a terrible idea.”
The slimmed down repeal bill, H.R. 1628 (115), is the Senate GOP’s fallback if they can’t agree on anything more comprehensive. The idea is to get rid of the unpopular individual and employer mandates, as well as a tax on medical devices, but leave everything else intact — and get the 50 votes needed to pass it. Killing the individual mandate would take away the primary mechanism that helped build the Obamacare insurance markets, and the CBO estimated that 15 million fewer people would have coverage in a decade without the individual mandate tax penalty in place.
Chris Jacobs, a conservative health policy analyst, points out a historical irony if the Senate passes legislation that only nibbles at the edges of Obamacare. Two years ago it was conservative hardliners in the Senate who rejected similar House legislation because it didn’t go far enough in undoing the federal health care law.
But that was when then-President Barack Obama was certain to veto any repeal measure. On Wednesday, the Senate rejected a straight repeal bill modeled on the 2015 legislation, with seven Republicans joining Democrats in defeating the measure.
Scrapping the individual mandate, the heart of the skinny bill, is the problematic piece. The tax penalty for failing to obtain coverage is the most unpopular provision of Obamacare. But most health care policy experts believe it’s necessary to have a mandate or some other cudgel to persuade relatively healthy people to get covered. Otherwise, young and healthy people will take their chances, while older and sicker people drive up insurance prices.
Senate Republicans say those fears are overblown. They don’t expect this fallback proposal to be the end of the story. It would merely be a means to get beyond the repeal impasse. It would then go to a conference committee between the Senate and the House, which passed a much more extensive repeal bill in early May.
“If they move to the skinny solution, I don’t think anybody’s looking at it as a solution that would actually be the solution that the House and Senate together would come to,” said Sen. Bob Corker (R-Tenn.) “I don’t think anybody’s thinking the House would just pass that and it’d be the end of it.”
Passing legislation that could raise premiums is problematic for Republicans since they’ve repeatedly cited reducing premiums as their No. 1 goal in pushing forward with repeal efforts.
But many experts say that’s precisely what would happen.
“There’s no doubt it would increase premiums,” said Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation, even if experts don’t agree on quite how much.
An analysis by the liberal Center for American Progress predicts that premiums would increase by an average of 20 percent — or about $1,200 per year — if the individual mandate is scrapped, in addition to the CBO estimate of 15 million fewer insured.
Many conservative health care policy analysts scoff at those numbers. They think CBO overestimates the power of the individual mandate to compel people to get coverage. But even they acknowledge that there would be significant premium increases that would gradually diminish marketplace enrollment.
“It’s going to be something like 25 percent,” said Joe Antos, a health care finance expert at the right-of-center American Enterprise Institute. “The fact that you’re going to have that kind of increase is inevitably going to discourage people from signing up.”
In the past, states such as New York and Washington that have required insurers to accept all customers regardless of medical condition without adopting a coverage requirement have seen their markets implode in a “death spiral.” The markets only attracted customers with expensive medical needs, premiums spiraled upward and insurers eventually headed for the exits.
In Washington state, for example, 19 insurers were selling individual plans before the state eliminated its individual mandate in 1995. Within four years there were no insurers willing to sell that coverage.
But a death spiral is unlikely for the Obamacare markets even if the individual mandate is eliminated, according to health care finance experts. That’s because generous subsidies would remain in place, which more than 80 percent of Obamacare customers receive. That means they’re largely protected from big premium increases and would have little incentive to drop their coverage.
“Neither the New York or Washington experiences are analogous here because those states didn’t’ have significant subsidies,” said Levitt. “The subsidies are really important in preventing a full-on death spiral.”
In fact, Washington state Insurance Commissioner Mike Kreidler, a Democrat, argues that the individual mandate is less important in the current environment than getting certainty around whether Obamacare’s subsidies will remain in place. That includes cost-sharing payments, estimated to be $7 billion this year, that President Donald Trump has repeatedly threatened to eliminate. Those payments, which are made to insurers, are meant to cushion low income people from out of pocket expenses like co-pays and deductibles.
“You’ve got to make sure those subsidies remain in place or you run a very serious risk of collapsing these marketplaces,” Kreidler said.
He points out that one of the state’s major insurers has already significantly scaled back its Obamacare footprint in large part because of uncertainty about the future of the marketplace.
“Insurance companies are conservative by their nature,” Kreidler said. “All of this saber rattling makes the markets that much less stable.”
Adam Cancryn contributed to this report.
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