The Congressional Budget Office’s bombshell numbers — 24 million fewer insured and big premium hits to President Trump’s base under the GOP’s health-care plan — got the headlines, but two other findings pose big challenges for Speaker of the House Paul Ryan (R-Wis.), who is facing the biggest crisis of his speakership and failure on the GOP’s primary issue for 7 years.
Ryan’s principal argument for the American Health Care Act is that Obamacare is “failing.” Aside from the logical disconnect (the latter does not justify a rotten bill), CBO throws cold water on the idea that the Affordable Care Act is in a death spiral. The CBO explains:
Under current law, most subsidized enrollees purchasing health insurance coverage in the nongroup market are largely insulated from increases in premiums because their out-of-pocket payments for premiums are based on a percentage of their income; the government pays the difference. The subsidies to purchase coverage combined with the penalties paid by uninsured people stemming from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for the market to be stable.
This does not mean some markets face a shortage of insurers or that Obamacare hasn’t helped consolidate the insurance industry (both are true); it does mean the situation may not be as dire as Republicans make it out to be.
However, the AHCA has troubles of its own. For one thing it might disrupt the employer-provided healthcare market. The CBO explains:
[F]ewer employers would offer health insurance because the legislation would change their incentives to do so. First, the mandate penalties would be eliminated. Second, the tax credits under the legislation, for which people would be ineligible if they had any offer of employment-based insurance, would be available to people with a broader range of incomes than the current tax credits are. That change could make nongroup coverage more attractive to a larger share of employees. Consequently, in CBO and [Joint Committee on Taxation’s] estimation, some employers would choose not to offer coverage and instead increase other forms of compensation in the belief that nongroup insurance was a close substitute for employment-based coverage for their employees.
In addition, in the transition phase market stability will be adversely affected. (“The mix of enrollees in 2019 would differ from that in 2018, because the change to age-rating rules would allow older adults to be charged five times as much as younger adults in many states. . . . [Therefore] it might be difficult for insurers to set premiums for 2019 using their prior experience in the market.”)
In short, the “sky is falling” GOP analysis is exaggerated; the AHCA has its own issues.
Republicans face another significant issue. Ryan insists consumers will have more choices and prices will come down. Not so fast. The CBO reminds us:
Many rules governing the nongroup market would remain in effect as under current law. For example, insurers would be required to accept all applicants during specified open-enrollment periods, could not vary people’s premiums on the basis of their health, and could not restrict coverage of enrollees’ preexisting health conditions. Insurers would also still be required to cover specified categories of health care services, and the amount of costs for covered services that enrollees have to pay out of pocket would remain limited to a specified threshold. Prohibitions on annual and lifetime maximum benefits would still apply. Also, the risk adjustment program—which transfers funds from plans that attract a relatively small proportion of high-risk enrollees (people with serious chronic conditions, for example) to plans that attract a relatively large proportion of such people—would remain in place.
In other words, the regulatory factors which keep premiums high and prevent a range of coverage options won’t change. Ryan says that will be fixed in later stages of legislation. That, however, would require 60 votes and therefore is unlikely to ever happen.
Ironically, the one market-type reform the GOP could explore, loosening regulations on the type of coverage offered, does not appear in the ACHA. The GOP has been so intent on complete repeal that it has refused to approach the Democrats with options to help inject market forces into the existing ACA structure. (Those might include loosening up the required services, repealing the 80/20 requirement for insurers, etc.)
The CBO report, for those who care about the policy specifics, deals a blow to the arguments Ryan and other Republicans have been marshaling. This may not be devastating to the chances of passage in the House, but it is additional ammunition for Ryan’s critics who claim his wonkish reputation is unearned.