House Speaker Paul Ryan and the House Republicans unveiled their replacement legislation for the Affordable Care Act on Monday. Known as the American Health Care Act, the legislation includes exactly zero new ideas to make health insurance more affordable or more easily accessible. Instead, the bill contains a poison pill that, if passed and signed into law, will almost certainly destroy the individual marketplace.
According to the House GOP website, the law would repeal certain aspects of Obamacare relating to the budget such as taxes and subsidies. Subsidies would switch to an age-based system rather than an income-based table, which, of course, is regressive -- offering more to higher income Americans (earning up to $75K per year) and less to Americans closer to the poverty line. As predicted, it expands health savings accounts, which will end up being nothing more than tax shelters for people who can afford to sock away extra money every month. The Medicaid expansion is shifted to allotting money to the states via block grants.
Worth noting: four Republican senators have already walked away from the bill, leaving it as a nonstarter unless a few Democrats end up supporting it. Sens. Rob Portman of Ohio, Cory Gardner of Colorado, Lisa Murkowski of Alaska and Shelley Moore Capito of West Virginia have all reported to Mitch McConnell that Ryan's bill won't get their votes.
The bill also claims it'll create lower costs, more choices and more access, but there's no evidence proving any of it. At all. In fact, the rundown of the bill confesses that "we are still discussing details" with regard to the bill's cost as well as its efficacy. Chances are, once the Congressional Budget Office (CBO) scores the bill, it's likely everything will fall apart. One reason being that rules forbid any legislation from adding to the deficit. If it does, the bill is shelved.
But if this replacement bill somehow makes it through the Senate, the repeal of the individual mandate will destroy everything. Penalties for failing to own insurance will be repealed retroactively to 2016, so those who still haven't enrolled in a plan will be shielded by the tax penalties. Insurance companies will despise this. In fact, they'll hate it so much, it's very likely many of the biggest insurers will abandon the individual marketplace, forcing those of us without group or employer policies to go without insurance.
The only alternative is for insurers to remain in the marketplace while accepting the untenable option of allowing enrollments when people get sick or injured, and then canceling their policies when they're better. In other words, insurers will refuse to allow customers to game the system. Without the mandate, that's exactly what'll happen. Insurers will sooner cut and run than deal with the scammers.
However, one oddity could mitigate collapse, at least temporarily. The GOP replacement bill calls for a 30 percent premium surcharge for people without continuous coverage. It's unclear whether this will apply to people who enroll when they're sick, or if this relates to people who lose their coverage from lack of payment or for people who lose their jobs through no fault of their own. On the surface, it looks like a backdoor mandate -- the Republicans are merely repackaging the most unpopular part of the law and calling it something else.
By the way, unlike the mandate, which is a penalty paid to the government, the surcharge would be paid to insurance companies, billable at their own discretion. So, we can definitely expect the cost of the American Healthcare Fuck Yeah! bill to be higher than the deficit-reducing ACA, since the original mandate penalties helped offset the cost. Of course, GOP voters won't notice the penalty could be charged monthly for up to a year. Whoops. So, if you end up losing your job or your insurance and are unable to afford a new policy within a 63 day window, the premiums on your eventual policy could be 30 higher for a full year.
Nevertheless, it's too early to know whether insurers will accept the surcharge as enough of an incentive for customers to retain continuous coverage. Additionally, will the House parliamentarian accept this new penalty given reconciliation rules? And will insurance companies accept any legislation that doesn't mandate coverage, leaving a foggy "surcharge" provision in its place? It's doubtful. The messy legislation this close on the heels of the original ACA passage, combined with the loss of the individual mandate, is likely to drive more insurance companies out of the marketplace. It simply won't be worth it any more.