At some point in the next day or so, Senate Republicans are expected to vote on their Plan C for killing Obamacare—“skinny repeal.” Nobody knows exactly what is in the bill yet, because it was still being written Thursday afternoon. But the rough idea is to wrap a handful of ideas the entire GOP can support into a piece of bare-bones legislation that avoids controversial issues like cuts to Medicaid that have split the party’s moderates and conservatives. Above all, it would end the Affordable Care Act’s requirement that all Americans buy insurance lest they pay a tax penalty—aka the individual mandate. It would also “partially” repeal the employer mandate requiring businesses to offer their workers coverage. Beyond that, it would make changes around the ACA’s edges.
In theory, this splinter of a bill is not supposed to reach Donald Trump’s desk. Republicans are being asked to vote for it merely to keep the repeal process alive, allowing the House and Senate to meet in a conference committee to craft a final, more robust piece of legislation. But at this point, it’s not clear that Republicans are actually capable of coming up with anything better. The Senate GOP has been unable to muster 50 votes for any kind of comprehensive plan to replace Obamacare. And even if those votes existed, it’s becoming increasingly clear that procedural hurdles would get in the way. If Republicans are determined to notch a win—loosely defined—on health care, Congress may have to pass skinny repeal and call it a day.
What would that mean for health insurance in this country? Nothing good. The individual mandate, while politically loathed, is still the keystone that makes Obamcare’s extremely popular consumer protections hold together. Republicans would remove it while leaving in place the regulations that bar insurers from rejecting or charging more to customers with pre-existing conditions. The Congressional Budget Office has estimated that such a plan could cause insurance premiums to rise by an additional 20 percent within a year, as young and healthy Americans dropped their coverage, leaving behind a pool of sicker enrollees with higher medical costs. Eventually, the CBO believes 16 million more Americans would be left uninsured—some by choice, and others because they were priced out of the market.
To be clear, that 16 million figure shouldn’t be taken as gospel. According to a chart the CBO provided congressional Democrats, the office thinks that by 2021, 5 million fewer Americans would have individual coverage, 4 million fewer would have insurance through their employer, and 6 million fewer would have it through Medicaid. (Presumably, there are unseen decimal points in there that round up the total to 16 million.) The Medicaid number is probably the most controversial part of that prediction, since it doesn’t make a ton of intuitive sense that killing a mandate to buy insurance would drive people off a government safety net program. But Medicaid has a lot of turnover each year; people sign up for it and drop off when they find work or other insurance options. And it’s entirely possible that without the mandate, some people would never discover they were eligible for Medicaid in the first place, because they would never go looking to find a health plan. Whether it would actually cause the program to shrink by 6 million heads is hard to say.
The bigger question is whether the insurance markets in some parts of the country would collapse entirely. We know that forcing insurers to cover the sick without making everybody buy coverage works poorly because several states tried it prior to Obamacare. Premiums skyrocketed as enrollment in the individual market shrank. But the difference today is that Obamacare provides insurance subsidies that cap premiums as a percentage of a household’s income. As a result, there will almost always be some people ready to buy insurance no matter how high premiums shoot up, since the government will pay most of their tab. It seems very unlikely the insurance market would plunge into a full-fledged, nationwide death spiral, where rising premiums drive out the vast majority of healthy customers, and insurers are forced to abandon the market or charge unaffordable prices.
Even so, killing the individual mandate would be sure to rock the insurance market (which is why insurers are shouting apocalyptically about it). First, Obamacare’s subsidies cut off for families that make more than 400 percent of the poverty line, or about $82,000 for a family of three; the millions of Americans currently paying full price for their insurance would get gouged. Second, even with subsidies around to act as a cushion, insurers might decide to abandon some parts of the country anyway. Remember, there are already some counties that could end up with zero carriers offering health plans on their exchanges next year. If skinny repeal passes, it wouldn’t be surprising if that pain spreads further. We wouldn’t see a coast-to-coast death spiral, but we might witness a few localized ones.
That sort of dysfunction might still be preferable to the House or Senate plans to replace Obamacare, which would have dealt a generational blow to the safety net by slashing hundreds of billions of dollars from Medicaid. But skinny repeal is still bad policy. It’s a slight piece of legislation that could deal some heavy damage.