Moneybox

Congress Probably Won’t Pass a Bill to Stabilize Obamacare—And That’s OK

WASHINGTON, DC - JANUARY 19: Sen. Lamar Alexander (R-TN) speaks with reporters at the U.S. Capitol January 19, 2018 in Washington, DC. A continuing resolution to fund the government has passed the House of Representatives but faces a stiff challenge in the Senate. (Photo by Aaron P. Bernstein/Getty Images)
Sorry Lamar.
Aaron P. Bernstein/Getty Images

Congress may be about to miss its last real chance to pass a bill to stabilize Obamacare’s insurance markets. On Monday, Republicans unveiled a batch of fixes that, in theory, were designed to undo some of Donald Trump’s attempts to sabotage the law. But after running into opposition from Democrats over abortion language, it looks unlikely that the legislation will be included in the $1.3 trillion spending package Congress must pass by Friday to avoid a government shutdown. Since anything left off of that giant barge of a bill will likely be abandoned until after this year’s midterm elections—if not for good—the prospects for an Obamacare deal are officially looking bleak.

It turns out, however, that’s probably for the best. The GOP’s plan would likely have done little to steady the law, and ultimately might have left fewer Americans insured . “My view is that this bill would be a small net negative for the insurance markets,” Matthew Fielder, a health policy fellow at the Brookings Institution told me.

The reason why takes a little bit of explaining, but it boils down to this: One of Donald Trump Trump’s dramatic moves to undermine the Affordable Care Act backfired in some ways, and ultimately made health plans less expensive for many low-income Americans. If Congress undid his work, it would drive the cost of insurance back up for those families, and some would likely drop their coverage.

You might recall that after Republicans gave up on repealing Obamacare last year, Trump tried to bring the law crashing down by cutting off an important set of government subsidies for insurers. These subsidies were known as cost-sharing reduction payments, or CSRs for short. For a while, many health care experts thought that this move would either lead health plans to abandon the Affordable Care Act’s exchanges, or dramatically increase their premiums—which is why industry wonks started referring to it as the president’s “nuclear option.” But most states found a clever way to keep their insurance markets functioning in spite of Trump’s ploy. Instead of letting insurers hike premiums on all of their health policies, regulators told them to just increase the prices on silver plans, which make up Obamacare’s middle tier of coverage, and were the only plans affected by the CSRs.

This led to a weird-but-fortunate side effect: Many Americans suddenly became eligible for free, low-end health insurance, or very cheap high-end insurance. The tax credits Obamacare gives some families to buy coverage are based on the cost of silver plans. So, as the price of silver policies rose, so did the value of the tax credits. In some cases, they rose high enough to cover the entire cost of an inexpensive bronze plan, or most of a generous gold plan.

Long story short, Trump’s attempt to destroy Obamacare instead left some Americans paying $0 premiums. Lest you think this was some sort of carefully aimed bank shot on the president’s part meant to bring down insurance prices, know that Trump spent plenty of time explicitly threatening to wreck Obamacare by killing the CSRs, unless Democrats would negotiate a repeal-and-replace deal with him.

The stabilization bill that Republican Senators Lamar Alexander and Susan Collins unveiled this week would restore the cost-sharing reduction payments. That move would probably save the government some money and make coverage a little cheaper for some upper-middle-class families who don’t receive help paying their premiums from the government, and whose states failed to keep the cost of their plans from rising. But it would likely drive up the cost of silver and gold plans for lower and middle-income households who’ve benefited from Trump’s failed scheme. The Congressional Budget Office predicted this week that, as a result, between 500,000 and 1 million fewer Americans would carry insurance.

Alexander and Collins’ bill does include another, more helpful idea. It would set aside money for states to create reinsurance programs—which would essentially reimburse health plans that get saddled with too many high cost patients. That might undo some of the damage Republicans did by repealing Obamacare’s individual mandate, which was meant to keep the insurance market balanced between healthy and sick customers by forcing Americans to buy coverage or pay a tax penalty. Partly as a result, the CBO thinks Alexander-Collins would lower premiums by 20 percent compared to where they’d otherwise be in 2021.

But the people who benefit from those lower premiums would be Americans who make more than 400 percent of the poverty line, too much to qualify for Obamacare’s premium subsidies. According to the Congressional Budget Office, maybe 500,000 more Americans would buy coverage thanks to the reinsurance program lowering the cost. That’s possibly equal to, and maybe half-a-million less than, the coverage losses associated with bringing back the CSRs. In a best-case scenario, Alexander-Collins looks like a wash when it comes to helping people get insurance.

Which means Democrats really don’t have much reason to support it. As their price for supposedly propping up Obamacare, Republicans want to include language that would prevent ACA plans from covering abortion. They also want to make it easier for governors to opt out of Obamacare’s regulations without the support of their state legislatures. If Republicans were actually ready to fix the exchanges by, say, restoring the individual mandate, those changes might conceivably be palatable. But as is, it’s an offer Democrats should be more than happy to refuse.