The Senate Republicans released their second attempt at a bill to repeal and replace Obamacare on Thursday and, predictably, it’s every bit as bad as the first one, perhaps even worse. Ezra Klein, who does as good a job of digging into policy details as anyone, identifies the key problem:
The revised Better Care Reconciliation Act was released today, and here’s the bottom line: It returns individual insurance markets to the bad old days when insurers competed on insuring the healthy and finding ways to avoid covering the sick.
There are a host of changes in the new BCRA, most of which leave the fundamental thrust of the legislation intact. But there’s one addition that genuinely changes everything.
Included in the new bill is a version of Ted Cruz’s amendment allowing insurers to offer plans that don’t comply with Obamacare’s insurance regulations so long as they also offer plans that do comply with Obamacare’s insurance regulations.
So imagine you’re an insurer. As long as you offer some Obamacare compliant plans, you can also offer plans that deny people coverage for preexisting conditions, that don’t cover mental health benefits or pregnancy.
What will happen here is clear: The plans that have to offer decent coverage to anyone who wants it, no matter their health care history, will become a magnet for the old and the sick or the soon-to-be-sick, as they can’t afford, or perhaps can’t even buy, the other plans. That will drive premiums in those plans up, pulling younger, healthier people into the non-compliant plans.
The Senate bill thinks it has a fix: a roughly $200 billion fund to offset the costs of sick enrollees. So, in short, what the GOP bill attempts to do is to rebrand high-risk pools as Obamacare plans and make them subsidized dumping grounds for the sick and the old, while everyone else buys insurance in a basically unregulated market.
He lays out many reasons why this is a bad idea. As he notes, health status is not a simple binary. Lots and lots of people are healthy now but won’t be within a year, or two years, or some other span of time. The only ones who could possibly take advantage of the Obamacare-compliant plans, with their very high cost, are those who are in most need of continual medical care because they have serious conditions. Everyone else will choose cheaper plans without the comprehensive coverage and with higher deductibles and out-of-pocket costs because they feel healthy right now.
But what happens when that changes? They’re now stuck in a plan that doesn’t cover what they need. Or with no plan at all, since the mandate is gone as well. So you have millions and millions of people with extremely expensive plans, millions more who can’t afford them at all, even with subsidies (and Medicaid being cut, so they won’t be eligible for that either), millions of people with inadequate insurance coverage when they do get sick, and millions more who don’t bother getting it at all.
The withdrawal of healthy people from the insurance markets can only have one effect: Higher prices for everyone else. That is the core premise of insurance, the only way an insurance market can work. That’s why the mandate was a necessity in Obamacare. If you’re going to offer subsidized private insurance, which is what Obamacare did, you must have relatively healthy people in the market to balance off the costs of those with higher medical care needs.
The CBO will score this new version next week sometime. I bet there will still be at least 20 million people left without insurance in that scoring. And higher insurance premiums for everyone else. And higher medical care costs (not the same as the cost of premiums, but it drives higher premiums) for everyone because the amount of uncompensated hospital care will skyrocket. It’s still a very bad idea in every possible way.