CBO: GOP’s 2015 ObamaCare repeal bill would mean much higher premiums, 18 million without insurance in first year

posted at 1:31 pm on January 17, 2017 by Allahpundit

Meh. The 2015 bill called for repealing the individual (and employer) mandate immediately and then, within two years, eliminating subsidies for consumers on the exchanges as well as the Medicaid expansion provisions. However, it kept the regulations requiring insurers to cover people with preexisting conditions in place. Put all of that together and you don’t need CBO bean-counters to tell you what the likely effect would be. Once the mandate is gone, healthy young people would stop buying insurance that they don’t really need; once the subsidies are gone, lower- and middle-class people would find that they can’t afford to buy insurance on the exchanges. Combine that with the Medicaid rollback and, yes, suddenly there are going to be a lot more uninsured people. Meanwhile, without revenue flowing in from those healthy young people, insurers would struggle to find a way to pay for coverage for people with preexisting conditions. The obvious solution: Jack up premiums. As premiums rise, more people would find that they can’t afford insurance anymore and would drop their plans. With even less revenue flowing in, insurers would jack up premiums again, and voila — suddenly you’re in the fabled “death spiral,” in which gradually the only people left in the risk pool are the very sick and insurers start imploding because there’s not enough revenue to offset medical costs.

The 2015 repeal bill had no hope of passing, of course. It was destined for an Obama veto, as all repeal bills have been since the GOP reclaimed control of Congress. It was a political document, designed to show the public the things the GOP liked (yay, coverage for preexisting conditions!) and didn’t like (boo, mandates!). The new Trump-era repeal bill will be forced to grapple much more seriously with how to generate revenue for insurers if coverage for preexisting conditions is going to remain in place, which is to say, the next repeal bill will come bundled with either a replacement for ObamaCare on day one — as Trump has said he’d prefer — or the promise of a replacement within two years (“repeal and delay”). The CBO report is useful, though, as a reminder of how the mechanisms of repeal will work. The GOP can repeal the mandates and other tax/budgetary elements of O-Care immediately with 51 votes via reconciliation (remember, the mandate is a tax, per John Roberts), but some of the regulations — like the one requiring coverage for preexisting conditions — are non-budgetary and therefore may be un-repealable until there are 60 votes in the Senate. The result, in theory, could be that the mandates and subsidies are gone as of next month while insurers remain on the hook for preexisting conditions — which is exactly the doomsday scenario imagined in the 2015 repeal bill. Even though that would be a temporary situation while the GOP works on a replacement, there would be some period during which the “death spiral” conditions obtain. That’s why Trump and people like Rand Paul want to pass a replacement immediately rather than follow the repeal-and-delay strategy of waiting two years. If you wait, you risk CBO’s projections coming true, at least for a little while. And “Millions now uninsured” is a bad headline to take with you into the 2018 midterms:

In brief, CBO and JCT estimate that enacting that legislation would affect insurance coverage and premiums primarily in these ways:

The number of people who are uninsured would increase by 18 million in the first new plan year following enactment of the bill. Later, after the elimination of the ACA’s expansion of Medicaid eligibility and of subsidies for insurance purchased through the ACA marketplaces, that number would increase to 27 million, and then to 32 million in 2026.

Premiums in the nongroup market (for individual policies purchased through the marketplaces or directly from insurers) would increase by 20 percent to 25 percent—relative to projections under current law—in the first new plan year following enactment. The increase would reach about 50 percent in the year following the elimination of the Medicaid expansion and the marketplace subsidies, and premiums would about double by 2026.,,

Most … reductions in coverage would stem from repealing the penalties associated with the individual mandate. However, CBO and JCT also expect that insurers in some areas would leave the nongroup market in the first new plan year following enactment. They would be leaving in anticipation of further reductions in enrollment and higher average health care costs among enrollees who remained after the subsidies for insurance purchased through the marketplaces were eliminated. As a consequence, roughly 10 percent of the population would be living in an area that had no insurer participating in the nongroup market.

Once the subsidies disappeared (which was a two-year process in the 2015 bill) and insurers began running in terror from the market, CBO estimates that the number of states where no plans at all were offered on the exchanges would cover about half of the entire U.S. population. Within 10 years, it would be 75 percent. Sounds scary, except that the GOP is promising a new system within two years at the latest and within the next few months at the earliest. Which is why McConnell’s and Ryan’s offices are scoffing at this report:

The 2016 bill that CBO analyzed did not replace Obama’s law with a GOP alternative, which Republicans have insisted will be an integral part of their health care drive this year.

Because of that omission, Donald Stewart, spokesman for Senate Majority Leader Mitch McConnell, R-Ky., said the report “assumes a situation that simply doesn’t exist and that no one in Congress advocates.” AshLee Strong, spokeswoman for House Speaker Paul Ryan, R-Wis., called the estimates “meaningless” because they ignored plans for legislation and regulatory actions by the incoming Trump administration aimed at revamping how people could obtain coverage.

If the GOP manages to replace ObamaCare simultaneously with repeal (which would be a neat trick given that they currently don’t have a consensus bill), then the worst-case scenario imagined by CBO wouldn’t apply. Likewise, if Trump agrees to a “repeal and delay” approach in which repeal passes immediately but its implementation is delayed, say, two years — meaning that the mandate and the subsidies would continue in the meantime — then, again, no worst-case scenario. Only if they were to knock out the mandate effective immediately while taking their time on building a replacement system would you have a disaster in the works. Point being, everything needs to happen at once, be it next month or two years from now. Although, if they follow the “repeal and delay” strategy by leaving O-Care in place for two years while a replacement is built, they run the risk of a Democratic filibuster of their replacement bill in 2018 — and if that happened, with the mandate suddenly set to expire while ObamaCare’s regulations remain intact thanks to the filibuster, then you’d have the CBO scenario after all, with both parties screaming that they other is to blame for the chaos about to unfold in insurance markets. If Democrats did manage to block the GOP’s replacement bill, I assume Republicans would cave and agree to further delay the repeal of ObamaCare and the mandate in order to make sure coverage remained in place.

In lieu of an exit question, a new poll result for you:

That’s almost certainly pure status-quo bias at work. People may not like ObamaCare but they like uncertainty even less, especially when “uncertainty” basically means “a chance my family will lose its health-care coverage.” The sooner Republicans have a replacement system to tout, including and especially if it promises “insurance for everybody,” the more comfortable the public will be with repeal.

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