Mar 13, 2017

Why Republicans think the GOP health plan could make Obamacare's problems worse

(J. Scott Applewhite / AP)

We all knew Democrats would trash the GOP Obamacare repeal and replacement bill in any way possible. What's been surprising is the Republicans who have come out and suggested that the plan could make Obamacare's problems worse.

This includes — of all things — making premiums more expensive. Rising premiums has perhaps been the GOP's biggest source of ammunition against Obamacare.

"What we need to deliver on is the promise that we would make health care more affordable for Americans, we would make it accessible," Sen. Tom Cotton said on CNN last week. "Unfortunately, the House legislation is not going to achieve those results, and the breakneck speed at which it's moving is designed to actually make those results probably worse."

And Rep. Mark Meadows, chairman of the House Freedom Caucus, said this: "Over a ten-year period, I think premiums would go up, just the way this is structured."

Contrast this with what authors of the bill are saying: Competition will bring premiums down. "We're going to be working to unleash the power of the private marketplace to let insurers come in and compete for your business and you'll see rates go down, down, down and you'll see plans go up, up, up," President Trump said Monday morning.

But some experts say the doubters might just be right. That's because the bill does very little to change any of Obamacare's market reforms or consumer protections — like guaranteed coverage of pre-existing conditions, minimum benefits, and limits on out-of-pocket costs — which are what makes insurance plans more expensive. That's what conservatives want to be repealed in the bill.

"While insurers would have more flexibility in designing their cost-sharing, they couldn't offer plans skimpier than what they do now," said the Kaiser Family Foundation's Larry Levitt.

At the same time, the House bill repeals Obamacare's individual mandate, which is supposed to balance out the market by bringing in healthy people.

Of course, the market reforms are excluded from the repeal bill by definition — the bill is being passed through the Senate through budget reconciliation, which means it can pass without Democratic votes but also must be entirely related to spending and revenue measures. But it also means that health plans would likely be under the same design constraints as they are now, with skimpier plans still barred by Obamacare policies.

Why premiums could rise: With the market reforms largely still in place, plans likely won't cost much less, if they cost less at all. The individual mandate is repealed and replaced with a one-year 30 percent premium penalty on the uninsured. Some economists are already saying this actually encourages people to wait to sign up until they get sick. If less healthy people are enrolled in equally-generous plans, premiums will rise.

Avik Roy, a conservative health economist, writes in Forbes that the bill's 30 percent premium penalty on the uninsured "incentivizes those who face much higher costs to sign up, forcing insurers to cover them at a loss. This seems like a recipe for adverse selection death spirals."

Why they could drop: The bill does do a lot to encourage young people to sign up for coverage. It allows insurers to charge older people five times more than younger people, compared to Obamacare's rule that older people can only be charged three times as much. Young people are also likely to benefit from the GOP's tax credit and receive more than they would under Obamacare.

But as the GOP leadership keeps telling us, the bill is meant to be paired with administrative action. Experts caution against ignoring that when looking at premiums.

"I think a lot depends on the administrative action that HHS and the Administration more generally is willing to take. If they can provide some relief on essential health benefits, for example, via administrative action, that will help ameliorate things," said Lanhee Chen, a Stanford law professor and a member of the Axios board of experts.

Go deeper