There’s a ticking time bomb built right into the Senate Republican health care bill.
The legislation unveiled Thursday, which Republicans dubbed the Better Care Reconciliation Act, aims to preserve the Affordable Care Act’s popular rule forbidding health insurance companies from rejecting people with pre-existing conditions. But the bill also would repeal that law’s unpopular individual mandate that most Americans obtain health coverage or face tax penalties and would significantly scale back financial assistance that helps make health insurance premiums affordable.
The problem is, those things work hand in hand, and are often referred to as the “three-legged stool” that keeps the health insurance system steady. Take out one or two of those legs, and the whole thing probably will fall down.
Keeping protections for pre-existing conditions means sicker people have access to health coverage and medical care, which is good for them but increases costs for everyone else in the insurance pool.
The mandate exists to nudge healthier people to get coverage even if they don’t have an immediate need for medical treatment; they pay into the system so it’s there when they inevitably get sick or injured.
And the Affordable Care Act’s tax credits for low- and middle-income people boost enrollment from a mix of sick and healthy people; a larger risk pool tends to be better than a smaller one.
In their attempt to appease public sentiment by keeping a widely liked thing, getting rid of a widely loathed thing and scaling back a poorly understood thing, Senate Republicans may have set up their own system to fail.
Under the Senate GOP bill, there isn’t much of an incentive for people to buy health insurance unless they know they’re going to use it. And if the bulk of the customers are people with costly medical needs, that’s going to lead to higher premiums for all consumers. Those higher prices will drive out more customers who either don’t believe they need coverage or can’t afford it because the legislation’s tax credits aren’t generous enough and the insurance policies they can buy are so skimpy as to be unappealing.
This is what’s known in the insurance business as a “death spiral”: more and more expensive customers with fewer and fewer healthy ones in any given year to cover the costs. Republicans are fond of falsely saying the Obamacare markets are in this state ― and, however troubled they are, there’s no death spiral ― but their bill is designed to create the exact conditions that cause one.
The Senate reportedly considered provisions that might have helped, such as automatically enrolling everyone who doesn’t already have insurance in a basic, high-deductible insurance plan, but the version of the legislation released Thursday includes nothing of the sort. Like the House bill, the Senate measure does provide funding to states that’s intended to offset the high costs of sick patients. But there’s reason to doubt the money would be adequate to offset the costs of treating them.
The House-passed American Health Care Act would discourage healthy people from going without insurance by letting insurers levy a surcharge of up to 30 percent on anyone who had a gap in coverage longer than two months. But even that could be problematic if a consumer who gets sick decides paying that surcharge will be cheaper than paying out-of-pocket for all their care.
There is a way to avoid a death spiral under the Senate bill, but it’s bad for those sick people who need coverage the most.
The legislation permits states to relax insurance regulations that dictate a minimum set of basic benefits be included in all policies, such as hospitalizations, prescription drugs and maternity care.
States that do so could “fix” the death spiral problem by allowing insurers to design policies that simply don’t cover things sick people need ― think HIV and AIDs medicines or insulin for diabetics. That would make the insurance all but useless to people with costly pre-existing conditions, which will discourage many people from buying it. And those who get coverage anyway would have to pay the full costs out of their own pockets for the treatments they require.
The Obamacare markets have had enough trouble maintaining the right balance under a law that accounts for these issues and attempts to address them. If you think that’s been messy, wait until you see what the Senate GOP bill would do.
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