So, here we are. It’s Thursday evening, and House Republicans have had to cancel their vote to repeal and replace Obamacare because their bill still doesn’t have enough support from hard-line conservatives to pass. House Freedom Caucus Chairman Mark Meadows, the face of the holdouts, says leadership needs to turn another “30 to 40” votes to reach the finish line. Trumpcare appears to be on life support.
What do the noes want? Meadows isn’t getting into specifics, except to say that he doesn’t think the current bill would lower premiums enough for his constituents. But the answer seems to be that conservatives are determined to kill off many of the insurance market regulations that make up the very heart of Obamacare. House leaders seem to be hesitant to do so, because many of those rules are quite popular, and nixing them would tee up some easy 30 second ads against Republicans in swing districts.
But, purely from a policy perspective, the hard-liners may be on stronger footing. Sure, the changes they’re seeking might not go over well outside their own ruby-red districts. But their approach might be slightly less disastrous for the insurance market than the misbegotten, unloved compromise bill Paul Ryan and the White House are currently pushing.
Up until last night, the American Health Care Act was animated by a very specific legislative logic. Because Senate Republicans planned to pass their version of the bill using the budget reconciliation process in order to avoid a filibuster, the plan could only deal with spending issues, not regulations. So Congress could slash Obamacare’s subsidies, eliminate its taxes, and cut Medicaid down to size, but it couldn’t eighty-six rules barring insurers from discriminating against patients with pre-existing conditions. That was the theory, anyway. In reality, many parts of the bill looked a whole lot like regulatory tweaks, such as a change that would have allowed insurers to charge older Americans up to five times what young adults pay for coverage. Why was that fair game, but not Obamacare’s hundreds of other pages of regulatory dictates? Nobody would really say. This angered conservatives, who really, really want to tear out Obamacare root and branch, without worrying about obscure Senate parliamentary rules.
On Wednesday, the pretense that the bill couldn’t touch regulations finally fell apart for good when, in order win over skeptical Freedom Caucus members, the White House reportedly offered to repeal Obamacare’s essential health benefit rules, which require insurers to cover a wide array of services such as maternity care and hospitalization. These are regulations, pure and simple. You can argue that they affect the budget, and therefore should be fair game for reconciliation, because they affect the cost of the insurance the government has to subsidize. But that logic applies to pretty much all of the other regulations in Obamacare, as well.
And now, like the mouse that got its Milano, the Freedom Caucus wants to repeal the rest of Obamcare’s regs, too. According to the Washington Post, they’re pushing to scrap pretty much everything important in Title I of the law. That includes rules that stop insurers from charging people more based on their health or sex, from canceling their customers’ plans at the drop of a hat, or from imposing lifetime or annual limits on coverage. The two provisions they’re apparently willing to leave in place are the rules letting children stay on their parents’ insurance until age 26 (nobody opposes that one) and barring insurers from turning down customers because they have pre-existing conditions (of course, that extremely popular rule would be rendered mostly useless, since carriers would be allowed to charge those sick individuals more).
This sounds barbaric. It is barbaric. The Title I rules are generally popular for a reason. They were designed to make the Kafka-esque nightmare of America’s individual health insurance market something predictable and fair. Nobody wants to go back to a world where insurers can rescind coverage because somebody forgot to mention their childhood allergies on some paperwork or where sick people have to pay exorbitantly for insurance or go without.
And yet, at this point, that would be a more coherent approach to health policy than what GOP leaders seem to have settled on. That’s because, by eliminating the essential benefit rules, the GOP plan would already make it possible for insurers to discriminate against the sick and aged. They just have to do it indirectly. Without any minimum benefit requirements to get in the way, carriers will be free to offer bare-bones plans that don’t cover the needs of your typical 50- or 64-year-old. Carriers wouldn’t reject anybody outright—they would just make sure not to sell health plans that might accidentally appeal to an unprofitable customer. I’d expect to see carriers start offering a whole lot of “insurance” that covers one night in the hospital and some antibiotics with maybe a gym discount thrown in to lure millennials.
Those are extremely perverse incentives that would warp the insurance market in some very ugly ways. Not only would sick people not be able to find the health plan they need, but relatively healthy and well-off customers looking for more comprehensive care like you’d typically get from an employer might have nothing to choose from but junk coverage designed to scare off the ill, or very expensive plans designed to compensate for the cost of caring for them. If you’re a successful self-employed contractor with a nice roofing business, neither of those options probably sounds too appealing.
Eliminating most of Obamacare’s regulations, rather than just the essential health benefits, might make this bizarro world of insurance a little more rational. Rather than indirectly discriminating against the sick by only offering cheapo or crazily expensive coverage in a way that also punishes healthy people, companies would be allowed to just charge the ill more. Meanwhile, they could offer somewhat comprehensive coverage to healthier customers at something approaching a reasonable price. What would happen to people with pre-existing conditions? Their situation wouldn’t be great. But Trumpcare does have a $100 billion fund that states could use to set up subsidized high risk insurance pools, which has long been the standard conservative policy approach for dealing with people with pre-existing conditions. That might not be enough to adequately fund them over a decade, but it’s something.
Now, to be clear, the insurance market that Freedom Caucus types are aiming to set up would still be an absolute horror. As I wrote on Wednesday, without essential benefit rules in place, insurance companies will be able to offer trash coverage priced at exactly the value of Trumpcare’s premium subsidies, market the plans as free to consumers, and skim money off the government the way for-profit colleges have gobbled up Pell Grant and student loan money while ripping off undergrads for years. Older, sicker patients would certainly suffer, too, especially if the high risk pools are badly underfunded.
But those things would also be true if House leadership got its way. Obamacare’s regulations, remember, really were designed to work as a cohesive whole. If you pull out a few of its key stones, you’re likely to create as much wreckage, if not more, than if you demolished the whole thing. So maybe Trump and Paul Ryan ought to let the Freedom Caucus have its way. Then they can hopefully let whatever politically radioactive bill comes of it die mercifully in the Senate.