At the core of the Republican sales pitch for their Obamacare replacement is the the promise of lower premiums. The problem is they don’t have much in their bill to point to that will, without a doubt, fulfill that promise.
It’s not the cure to the Obamacare ailment that conservatives were looking for.
“It doesn’t change an awful lot,” said Joe Antos, a health care policy expert at the right-leaning American Enterprise Institute.
Until this week, an animating force of conservative health care policy had long been to allow insurers to offer cheaper — albeit skimpier — plans to consumers who prefer them. The more responsive insurers could be to consumer preferences, conservatives argued, the more efficient and effective their coverage.
Despite having seven years to devise their ACA replacement, Republicans have come up with a plan that health policy experts say doesn’t move the dial much on lowering premiums even as their plan reduces the subsidies to pay those premiums.
“There are a lot of moving pieces here, and it’s hard to know exactly which direction premiums will go,” Larry Levitt, vice president at the Kaiser Family Foundation, said in an email to TPM. “My instinct is that premiums will be roughly similar to the ACA.”
Compounding the problem is that while lower premiums are no guarantee, consumers having to pay a larger share is an explicit given of the GOP bill, given how it reworks the tax credits to make them less generous than those in the Affordable Care Act.
“So with reduced tax credits for many who have gained coverage under the ACA, there will be more people uninsured,” Levitt said, of a scenario where premiums stay roughly the same.
The GOP bill does offer some gimmes to insurers to encourage them to lower premiums. Various industry taxes are repealed, a savings that might trickle down to consumers. Insurers will get more flexibility in designing policies from the bill’s repeal of the ACA’s actuarial value requirements, which set the standard of how much coverage plans must offer to be eligible for federal subsidies. And expanding the age bands — the ratio of what insurers could charge older people versus younger — from three-to-one to five-to-one will lower premiums for young people. (On the flip side that will jack up premiums for older consumers.)
The GOP bill also sets aside funding starting in 2018 for states to set up high risk pools or reinsurance programs, which could subsidize insurers for their coverage of costly individuals. That could also bring down premiums for the healthy people.
“That’s not necessarily going to the insurance companies, so it doesn’t completely resolve the nervousness that insurers probably still have,” Antos cautioned.
What will make insurers even more anxious is the provisions that will further destabilize the individual market, which was already in a fragile state. The biggest among them is the repeal of the individual mandate, which is eliminated immediately under the legislation.
In its place, the legislation offers a so-called continuous coverage requirement, which would allow insurers to hike up premiums 30 percent for those who lapse coverage for two months. This is a weaker stick than the individual mandate and one that may be even less effective at compelling the young or healthy people to obtain insurance. They may calculate that they’re better off waiting for the moment they get sick to pay the 30 percent upcharge than they were paying a tax penalty year after year.
Given that the individual mandate would be repealed immediately, America’s Health Insurance Plans, the biggest insurer trade group, asked that funding for state-based risk pools start in 2017 as well in a letter to GOP leaders.
As for the ACA’s carrots, the GOP plan reworks Obamacare’s tax credits so the biggest winners are the middle class and younger people, while low-income people and older consumers would take on a bigger burden to pay their premiums.
According to Elizabeth Carpenter, a senior vice president at Avalere Health, the trade-off here is that the new system that will induce the populations that have been resistant to Obamacare to participate into the individual market.
“What’s unclear is if the tax credits are sufficient to attract middle and higher income people,” Carpenter said.
Meanwhile low-income people — who have benefited the most from ACA — may be no longer able to afford the insurance plans. Carpenter added that it was “unclear” if the potential gains to the risk pool in the middle class and younger populations will be make up for the low-income people who will drop out.
In Republicans’ defense, Antos said, they are severely limited by the process they are using to repeal the law. Reconciliation, a legislative maneuver that avoids a Senate filibuster, can only be used for items related to the budget.
“What else can they do in a reconciliation bill?” he said.
Republicans, to a certain extent, have conceded this reality. They’re promising that the bill is only phase 1 of a three-phase process they say that will ultimately lower costs. The second phase is administrative changes that Health and Human Services Secretary Tom Price can make on the regulatory front, a process he has already started but will still be fairly limited due to the parts of the ACA that will continue to stay on the books.
“It’s really difficult to stay within the legal bounds and make changes that are big enough to get insurers to sit up and listen,” Antos said.
The third phrase is standalone health care reform legislation that will need 60 votes in the Senate and this bipartisan support. There have been no indications from Democrats that they would work with Republicans in this context.
The absence of provisions in the GOP bill that would significantly transform the insurance industry is one of the reasons conservatives groups are opposing to the current House GOP bill. Senate rules be damned, they say, a dismantling of Obamacare’s market reforms like the the 10 Essential Health Benefits should be in the GOP repeal bill. Or, at least, the legislation should do more, generally speaking, on the front of lowering costs.
House Freedom Caucus Chair Mark Meadows (R-NC) said this would be the focus of the negotiations they would like to do on the legislation.
“It’s about making health care more affordable for everybody,” Meadows told TPM.