Is Obamacare Dead?

One claim Republicans, and Donald Trump in particular, keep making about Obamacare, is that it’s in critical condition. In an interview with Fox News’ Martha MacCallum, Trump said, “Obamacare is exploding. Obamacare is dead – essentially, Obamacare is dead.” Trump repeated the claim on Face the Nation, saying, “Obamacare is dead.”

What does Trump mean when he says Obamacare is dead? He seems to think that if insurance companies flee the marketplaces, leaving some places with few, and potentially, no insurers willing to sell there, then the whole law is obsolete.

But Obamacare is more than just the insurance exchanges. It includes insurance regulations, such as the ban on denying coverage to people with pre-existing conditions or charging them more for insurance. It includes subsidies for poorer Americans to help them afford insurance. It includes a Medicaid expansion for people making up to 137% of the poverty line. Even if no insurers would sell in certain markets, those other parts of the law would remain in tact.

That is not to say that the worst case scenario for Obamacare – that certain areas of the country, mostly poor, mostly rural, mostly Republican-leaning, are left with no insurer – is not a horrible outcome. It is. In this scenario, the pool of insured people shrinks, raising premiums, which pushes more healthy people out of the risk pool, raising premiums even more. At the end of this process, what we’d be left with would be a collapsed individual marketplace. But much of the law would remain in tact. Obamacare would be reduced to new regulations on insurance, a Medicaid expansion, and subsidies for poorer Americans to buy insurance, but those pieces would continue to matter.

If they believe that the collapse of the individual market is imminent, the Trump administration and congressional Republicans then have two choices. Either, they could repeal the law and replace it with something else, or they could work to try and prevent the collapse of the individual market. Currently, they are trying option one. They still are trying to pass a version of the American Health Care Act (AHCA) through the House of Representatives.

Knowing Obamacare’s problems, you might think that the Republican plan currently kicking around the House seeks to create a more robust individual marketplace that is immune to the kind of “explosion” threatening Obamacare. The AHCA doesn’t, though. It just takes the old problems, makes those worse, and creates new ones.

A healthy individual marketplace would have enough healthy people to offset the costs of covering people who are, or who become, sick. The Republican bill tries to do that in two ways: First, it incentivizes having coverage with its “continuous coverage” provision, which encourages people to stay insured, or else face price hikes. Second, it gives states the option of waiving Obamacare’s regulations. If a state gets a waiver, insurance companies no longer have to cover the so-called “essential benefits” and they can separate out people with pre-existing conditions into high-risk pools. Because plans don’t have to cover as much, and because they are not being offered to sick people, premiums would go down, inviting more healthy people into the market. Third, it gives people tax credits to buy insurance.

These three prongs, though, will almost certainly amount to a raw deal for many Americans. First, the continuous coverage provision is weaker than Obamacare’s individual mandate, because healthy people can stay out of the market without getting penalized unless they get sick. Second, by gutting the insurance regulations, those who do decide to buy coverage may find that the plans on the offer aren’t worth very much. This is especially rich given that a perennial Republican complaint about Obamacare is that the plans offered on the individual marketplace don’t cover what consumers need and have high deductibles. They are considering a bill that would make it worse! Finally, because the tax credits don’t adjust based on the price of plans on the offer, many people simply won’t be able to afford health insurance under the AHCA.

It’s worth breaking these provisions down. A close look at each shows just how poorly each of these addresses the problems they are supposed to solve.

CONTINUOUS COVERAGE REQUIREMENT

  • Problem this attempts to solve: When health insurance is not compulsory, many people who feel they don’t need health insurance will choose not to buy it, making the risk pool older and sicker, which raises premiums. The continuous coverage provision attempts to incentivize getting coverage without outright requiring it.
  • Obamacare-specific problem this tries to solve: None, as Obamacare’s individual mandate was a stronger version of continuous coverage.
  • Probable net result: Some healthy people choose to stay out of the market until they get sick.
  • Net-result compared to Obamacare: Independent analyses concluded that the continuous coverage requirement will not be as strong as the individual mandate, leading to a loss in coverage, and a more anemic, initially more expensive, risk pool (the CBO concluded that ultimately it would become less expensive, but only after older, sicker Americans are priced out).

Regulation Waivers

  • Problem this attempts to solve: When insurance has to cover more, it becomes more expensive. By seeking waivers, states can opt out of the requirements, and lower premiums.
  • Obamacare-specific problem this attempts to solve: Obamacare requires that insurance plans not be more expensive for people with pre-existing conditions. This raises prices overall, because the pool becomes riskier. By opting out of these requirements, states can have lower premiums.
  • Net result: Premiums will go down, but plans with higher deductibles and higher co-pays will be allowed to enter the market, as well as plans that cover less. People with pre-existing conditions will be moved to high-risk pools that cost significantly more and cover less.
  • Net result compared to Obamacare: Some healthy people will be able to buy health insurance that costs less up front but also covers less. Sick people will pay much more for worse insurance.

Tax Credits

  • Problem this attempts to solve: Insurance is expensive, and some people cannot afford it. Giving people tax credits to buy insurance will make insurance more affordable.
  • Obamacare-specific problem this attempts to solve: Other than the cost to the federal government, none, as Obamacare gave needy people subsidies to buy insurance.
  • Net result: Some people, mostly younger, healthier, middle class people living in cities, will be able to afford insurance that they couldn’t before. Many people, mostly older, sicker, and poorer, will be left with tax credits that don’t cover the cost of insurance.
  • Net result compared to Obamacare: Coverage loss for older, poorer, and sicker Americans.

If Republicans were honest about what they were trying to do here, the bill might be defensible. The goal of the bill, it seems, is to do away with Obamacare’s taxes and take a hatchet to Medicaid. But Republicans keep going out and saying they’re going to make the health system better. But better for who? The measure of success for Obamacare was universal, or near-universal coverage, and it has so far failed. But by what possible standard could the AHCA be judged a success?

Of course, if the AHCA remains stuck in Congress, the Trump administration could try to fix Obamacare’s problems. They could pester insurers and try to cut deals with them in order to get insurers in every county. They could do outreach in order to boost enrollment. They could make it clear that for as long as Obamacare is the law of the land, they will continue to uphold it, reducing uncertainty.

Right now, if the individual market collapses, the fault lies in large part at the feet of the Trump administration, who could have done something to stabilize them, but chose instead to try and de-stabilize them. And that seems to have been the goal all along – to purposely unmoor something meant to help poor people in order to cut taxes.

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