What happens when Republicans pursue a half-baked repeal of Obamacare and sell it to the public as full repeal of Obamacare? Premiums go up because of the core Obamacare provisions left behind, yet that increase will be blamed on the false pretense that Obamacare was indeed repealed.
Earlier today, the Congressional Budget Office (CBO) released a budgetary and economic score of the presumptive GOP plan to “replace” Obamacare. CBO concluded that not only will premiums fail to decrease, but will increase by 20-25% and 27 million more people would be uninsured. The Left is using this as proof that repeal of Obamacare is a net negative. In fact, this CBO score explicitly states that full repeal of Obamacare would decrease premiums, but only chose to score the GOP’s half-baked repeal, which retains Obamacare itself while repealing only the funding mechanisms.
Now Republicans have a PR nightmare of their own making and feel pressure to “replace” Obamacare in order to plug the hole — a hole that only exists because they are in fact not repealing what is qualitatively 80% of Obamacare.
What is Obamacare?
Obamacare is not the individual mandate or the subsidies. Those are the [insufficient] funding mechanisms to cover the cost of the law. What is the law? A hodgepodge of rules and regulations that result in insurance companies being unable to offer actuarially solvent plans. Between guaranteed issue, community rating, mandated benefits, mandated networks providers, intractably limiting actuarial value requirements, and enrollment and contractual flexibility for individuals to drop coverage until they get sick, insurance has become completely insolvent. These regulations have not just driven up costs, but have destroyed the market by taking the concept of “insurance” out of insurance.
CBO scores GOP’s fake definition of Obamacare
The prospective Obamacare “repeal” law scored by CBO does not repeal any of these elements. Instead, it repeals the requirement to purchase health care and the subsidies along with the ACA’s Medicaid expansion. Thus, the outcome, as we predicted, is quite obvious. Prices remain high, there is no choice or competition in the marketplace, yet the funding mechanism is cut off. This creates a phenomenon of adverse selection and increased premiums. Think about it: if the costly regulations remain in place but you take away the penalty to buy insurance why would someone like me — whose annual health costs have tripled as a result of Obamacare — bother purchasing insurance?
CBO directly addresses this point:
The ACA’s changes to the rules governing the nongroup health insurance market [regulations, such as guaranteed issue and community rating]work in conjunction with the mandates and the subsidies to increase participation in the market and encourage enrollment among people of different ages and health statuses. But eliminating the penalty for not having health insurance would reduce enrollment and raise premiums in the nongroup market. Eliminating subsidies for insurance purchased through the market-places would have the same effects because it would result in a large price increase for many people. Not only would enrollment decline, but the people who would be most likely to remain enrolled would tend to be less healthy (and therefore more willing to pay higher premiums).
Leaving the ACA’s market reforms [euphemism for insurance regs] in place would limit insurers’ ability to use strategies that were common before the ACA was enacted. For example, insurers would not be able to vary premiums to reflect an individual’s health care costs or offer health insurance plans that exclude coverage of preexisting conditions, plans that do not cover certain types of benefits (such as maternity care), or plans with very high deductibles or very low actuarial value (plans paying a very low share of costs for covered services). [clarification and emphasis mine]
Obviously, CBO always overestimates the coverage issue and underestimates the cost of liberal policies. But in a general sense, CBO actually agrees with our analysis that the panoply of regulations is what has made health insurance insolvent. When CBO says repeal of Obamacare will result in higher, not lower, premiums and will exacerbate the complete death spiral of insurance, it is working with the assumption the GOP has presented to them — that they are not repealing the insurance regulations.
Imagine injecting a patient with a painful disease in one arm while injecting them with morphine in the other arm. The only way to stop the morphine (subsidies, individual mandate) is to get rid of the self-immolating injections (debilitating insurance regulations). The answer, first and foremost, is to stop injecting the patient with the disease.
Tearing down the Berlin Wall of regulations would both lower costs and increase number of insured
Repealing the insurance mandates will do more than just lower the cost of coverage. More people would be covered by a positive momentum of lowering costs and fostering choice and competition in the marketplace. CBO recognizes that the “number of people without health insurance would be smaller if, in addition to the changes in H.R. 3762, the insurance market reforms mentioned above were also repealed.” [emphasis added]
Now imagine if in addition to repealing the Obamacare-era regulations, we rolled back other anti-market forces, made insurance a national market (which encourages states to reduce their respective regulations), got rid of the anti-trust exemption, create equal tax treatment for individual insurance purchasers, and expanded HSAs? Prices would diminish, competition would rise, and more individuals would feel incentivized to purchase one of the many tailor-made and cheaper plans they can actually afford.
The dumbest policy and dumbest messaging
Yet instead of committing to full repeal of the insurance regulations in the bill, Republicans responded to the CBO defensively by saying they will have a replacement plan:
CBO misses the point. Obamacare will be replaced with lower costs and more choices.— Rep. Steve Scalise (@SteveScalise) January 17, 2017
Once again, this is akin to saying I’ll take away the morphine but find a suitable replacement. How about taking away the disease itself — the insurance regulations — which were not scored by the CBO, as the report itself said? Then you won’t need a “replacement” plan, other than instituting further free market reforms that we needed long before Obamacare.
Republicans have managed to successfully paint themselves with the liabilities of Obamacare … under the banner of repealing Obamacare.
There is only one viable option to repealing Obamacare: REPEAL OBAMACARE.