For the last couple months, the Republican critique of Obamacare has been founded on President Barack Obama’s broken promise: “If you like your health plan, you can keep it.” It was a pledge that the health care reform law wouldn’t disrupt the existing insurance system, that those satisfied with the status quo would be protected from any unwanted intrusion.
It’s been an effective line of attack, given the sinking approval ratings for both Obama and his eponymous insurance expansion. Which makes the new GOP alternative to Obamacare, proposed Monday by three Republican senators, a bit baffling. Because the bill seems to based on another fundamental disruption of the individual insurance market — and on top of that, it could upend the employer insurance universe, through which most Americans receive health coverage, forcing many to either pay more or lose their coverage.
That was the conclusion of several health policy wonks who spoke with TPM about the new proposal, put forward by Sens. Richard Burr (NC), Tom Coburn (OK) and Orrin Hatch (UT). One way or another, millions of people would likely lose the plan they already have.
The GOP’s plan starts with repealing the Affordable Care Act, and it seems explicit that everything must go: “The first step toward achieving sustainable, affordable, patient-centered health care is to repeal the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (HCERA).” The only items untouched would be changes to Medicare, which weren’t related to covering the uninsured anyway, according to a footnote.
That would appear to immediately toss out Obamacare’s coverage expansion, which has already covered several million Americans (three million have signed up for private coverage, and hundreds of thousands if not a couple million have been covered through expanded Medicaid — the exact numbers aren’t available yet).
Obamacare repeal means the federal tax subsidies that people are already receiving to pay for coverage would be stripped away, making that coverage more expensive, perhaps prohibitively so for some, and it’s difficult to see how states could maintain expanded Medicaid if the generous federal funding for it is eliminated by doing away with the law.
The Republican plan has new ways of covering these populations — new tax credits (not as generous as Obamacare’s financial help, covering up to 300 percent of the federal poverty level rather than 400 percent, and calculated in an entirely different way) and a Medicaid block grant that is intended to cover everybody up to 100 percent of the poverty level rather than the current 133 percent under the expansion– but it would likely result in a significant coverage disruption for millions of Americans, the very thing that Republicans have been lambasting the White House for. At the very least, there can be no guarantee that anybody who likes their new ACA coverage can keep it.
“If they repealed the Medicaid expansion, if they repeal the premium tax credits, people who would be covered by those would probably be terminated,” Tim Jost, a health law professor at Washington and Lee University, who supports the ACA, said. “Those people would likely be back uninsured.”
Aides to Coburn and Hatch didn’t quite deny that claim to TPM, though they declined to discuss it in great detail. They stressed the new options that would be available to consumers. The outline released by the senators did not explicitly explain how those already covered by Obamacare would be affected by the new proposal. An official bill is not yet available.
Another disruption could take longer to manifest, but would have the same ultimate result. By repealing Obamacare, the GOP plan would eliminate the new coverage requirements for insurance plans, the provision that led to all those cancellations that Republicans seized on in the first place. But those new rules are baked into the new Obamacare plans that three million people have bought. They made plans more expensive, though the expanded coverage and the fiscal help available under the law helped offset that, because insurance was required to be more generous and cover more services.
Without that requirement in place, insurance companies would likely start eliminating those plans, Austin Frakt, a health economist at Boston University, told TPM. They could pare back coverage and offer less expensive plans in the new market created by the GOP’s plan. Conservatives might see that as a good thing, letting the market dictate the coverage, but it would ironically lead to the bizarro version of the canceled-plan panic that Republicans capitalized on in the fall: A change to insurance rules, this time forwarded by the GOP, could lead to millions of people losing the coverage they already had.
“Just through natural market dynamics, many of the plans that those folks are in would probably go away. They just couldn’t compete,” Frakt said. “It’d be very disruptive, and I’d be surprised that anybody would admit that at this stage. But the fact of the matter is, after it’s all said and done, it’s going to be disruptive. Any change will be — and this is just as large a change, if not larger, than the ACA.”
The great unknown of the GOP’s plan, however, is what it would do to the employer-based insurance market, which is how the vast majority of Americans receive coverage. To pay for its reforms, the GOP proposal would cap the currently unlimited tax exclusion for employer-provided health coverage at 65 percent of the average insurance plan’s cost.
Nobody knows exactly what that would do to the employer-based insurance universe, and the Congressional Budget Office hasn’t yet analyzed the new proposal. But analysts seem to agree that it would force some Americans to pay higher taxes by capping the tax benefits of employer-based insurance. If your plan is average, you’d pay taxes on 35 percent of its cost. Jost said it could lead to “the biggest tax increase on the middle class” in decades.
It could also encourage employers to cut health benefits for millions of their workers, now that the tax upside of providing it is gone. A recent CBO report on a similar proposal estimated that six million fewer people would have employer-based coverage a few years after the policy was implemented. It’s not an apples-to-apples comparison: The exclusion CBO was assessing was capped at the average insurance plan’s cost rather than the 65 percent called for the GOP plan, and it was indexed to a different rate of inflation. But the point still stands: many Americans would lose their insurance.
Again, a lot of those people could likely obtain different coverage through the GOP’s new proposal — but they’d have to switch from their old insurance, just as those who had their policies canceled under Obamacare had to do.
So the upshot of the GOP’s new plan — after these many months of decrying Obama’s broken promise — would be that even if you like your plan now with Obamacare in place, you might not be able to keep it.