A proposal designed to “stabilize Obamacare” and reduce health insurance premiums for some Americans seems unlikely to become law anytime soon.
Negotiations to include the proposal as part of the big spending bill moving through Congress have broken down, as Peter Sullivan of The Hill first reported Monday. The primary reason is a dispute over federal funding of abortions: Republican leaders are insisting the proposal include restrictions that most Democrats will not support.
But it is not just differences over reproductive rights that are standing in the way of passage.
Many Republicans still aren’t willing to vote for any proposal that might appear to prop up Obamacare, otherwise known as the Affordable Care Act, which they and many of their supporters would rather just repeal.
Meanwhile, Democrats have begun to wonder, with good reason, whether the specific reforms under discussion could hurt more insurance buyers than they would help.
Circumstances could always change. But for now, it looks like those reservations have left the proposal without the support it needs to get through Congress ― as part of this new spending bill and, perhaps, as part of any other legislation this year.
As a result, some middle- and upper-income Americans are likely to see pretty big premium spikes this fall, above and beyond the usual increases, right before the midterm elections. And they may be looking for somebody to blame.
What The Proposal Would Do
The proposal under discussion now comes from two Republican senators, Lamar Alexander of Tennessee and Susan Collins of Maine. Its focus is insurance for people who buy coverage on their own, either through HealthCare.gov, state exchanges like Covered California, or directly from insurers.
Those people are the ones the Affordable Care Act affected most directly. Today, they can get comprehensive coverage, regardless of pre-existing conditions, and a majority of them are eligible for federal tax credits that generally keep coverage affordable.
Those changes are one reason the number of Americans without health insurance is so much lower than it was before the Affordable Care Act became law.
But a minority of consumers must pay full premiums, because their household incomes are more than four times the poverty line. (That’s about $100,000 for a family of four.) And in some parts of the country, like Iowa and Tennessee, premiums have skyrocketed ― partly because of design flaws in the 2010 health care law, and partly because of Republican efforts to undermine its implementation.
Some struggle to pay premiums, while others decide not to get insurance altogether. Those problems are likely to get even worse next year, because the 2017 Republican tax bill eliminated the penalty for people who don’t get insurance. Without that penalty in place, healthy people are less likely to get insurance, causing premiums to rise.
The proposal from Alexander and Collins seeks to mitigate those kinds of increases, primarily through two new spending initiatives. One would allocate $30.5 billion over three years for “reinsurance” and “invisible high-risk pools,” each of which would reimburse insurers for the beneficiaries with the biggest medical bills ― thereby allowing insurers to reduce premiums.
The Affordable Care Act originally had a reinsurance program that expired after three years. The Alexander-Collins proposal would start it up again, for another three years, reducing premiums by 10 percent on average in 2019 and by 20 percent on average in the two years after that, according to an estimate from the Congressional Budget Office.
The other big initiative in the Alexander-Collins proposal would resume “cost-sharing reduction” subsidies, which are a separate set of federal payments to insurers that President Donald Trump stopped in October.
The benefits of restoring the CSRs, as they’ve come to be known, are more ambiguous than the benefits of funding reinsurance.
The original impetus for guaranteeing CSR payments was to avoid disruption, since insurers had been counting upon those payments and Trump was loudly threatening to stop them (as he eventually did). Last fall, Alexander, who is chairman of the Senate Health, Education, Labor and Pensions Committee, worked closely with his Democratic counterpart, ranking minority member Patty Murray of Washington state, on a bill that would have funded CSRs. It was a rare show of genuine bipartisanship.
But once Trump made his decision and the CSR money stopped flowing, insurers in most states reacted quickly, jacking up premiums exclusively on customers who were eligible for tax credits. By design, those tax credits rise in tandem with premiums, which means those consumers didn’t end up paying more out of their own pockets. They simply got bigger tax credits, which meant greater spending by the federal government.
Many ended up buying more generous plans, while others kept their plans and just pocketed the savings. Restoring CSR funding now would reverse that process ― reducing premiums on the subsidized plans, but reducing tax credits too. The federal government would end up spending less money subsidizing insurance, but lower-income consumers would actually have to pay a lot more to keep the same plans.
Some would end up not getting coverage at all, which is why, according to the CBO, the number of people without insurance would actually rise if the Alexander-Collins proposal became law, although the increase would be small.
Why Talks Broke Down
Whether the upsides of the Alexander-Collins package justify its downsides has been the subject of increasingly intense debate among Democrats and progressive analysts in the last few weeks. Families USA, a liberal organization and prominent advocate for coverage expansions, actually came out in opposition to the bill.
But the whole conversation appears to have become moot because of additional conditions Republican leaders have attached to any Affordable Care Act stabilization proposal. And by far the most important among these is the language around abortion.
Under the Alexander-Collins bill, no insurer that accepts either reinsurance or CSR funds could pay for abortion services. If that were to become law, then it’s almost certain no insurer offering coverage to individuals would include abortion coverage, because no insurer would want to give up those lucrative payments.
That’s not the case today. Today, insurers can cover abortion services in states that allow such benefits, just as long as the insurers don’t use federal dollars of any kind. In other words, insurers can’t use money they’ve received in the form of premium tax credits. Back when CSR money was coming in, they couldn’t use that money either.
To accomplish this, insurers that cover abortion pay for those services with separate spending accounts, filled only with premiums they have received directly from individuals. In theory, the same workaround would (or could be made to) apply to the money insurers get from Alexander-Collins.
But conservative Republicans have never recognized that distinction as meaningful. They say the Affordable Care Act violates the Hyde Amendment, which prohibits federal funding of abortion. The Alexander-Collins proposal would essentially outlaw the existing arrangement, leaving potentially millions of women without a way to get insurance that covers abortion.
Insistence upon these abortion restrictions undoubtedly reflects genuine policy preferences from conservatives. It also reflects a political calculation ― namely, that Republicans can’t afford to alienate supporters who are strongly opposed to abortion, Obamacare, or both.
But a lack of action on health care could have its own political consequences. If the polls are right, voters will hold Republicans, not Democrats, responsible for problems with the Affordable Care Act ― and for problems with health care more generally.
This is actually an argument that Alexander and Collins have sometimes made to their colleagues ― that it’s in the GOP’s self-interest to find bipartisan agreement on policies to reduce health insurance premiums. It looks like that argument is not carrying the day.