Experts warn GOP bill could destabilize insurance markets

Experts warn GOP bill could destabilize insurance markets
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One of the primary arguments from Republicans for repealing ObamaCare is that the healthcare law is “collapsing.” But experts warn that the GOP’s legislation might destabilize insurance markets even more over time.

The Senate’s ObamaCare repeal-and-replace bill, released Thursday, would abolish ObamaCare’s mandate for people to have insurance, but it would still bar insurers from denying people coverage for pre-existing conditions.

Experts warn that arrangement would allow people to wait until they get sick to buy insurance coverage, likely driving up premiums 

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On top of that, the GOP bill cuts back on ObamaCare’s tax credits, providing less financial assistance to help people afford a plan. So in addition to the lack of an enforcement “stick” to get healthy people to enroll, there would also be less of a “carrot,” in the form of financial assistance.

This combination could lead to more insurers pulling out of the market or hiking premiums, experts say, exactly the problems under ObamaCare that Republicans have talked about solving. 

“A combination of repealing the individual mandate and diminishing premium subsidies would tend to destabilize the market,” said Larry Levitt, a healthcare expert at the Kaiser Family Foundation.

Rodney Whitlock, a former Republican congressional staffer who is now a healthcare consultant, wrote on Twitter that the lack of a mandate combined with lower financial assistance “is pretty much the definition of a death spiral.”

However, sources say it is likely that an alternative to the individual mandate will be added to the bill next week before it is passed. That alternative is expected to be a provision requiring people to wait six months before signing up for insurance if they have a gap in coverage.

Sources say the language is encountering problems under Senate rules governing the fast-track process being used, and Senate Republicans are working on ways to make the provision comply.

Even if some mandate alternative were added, the legislation could lead to problems in the market.

The legislation provides billions of dollars in a “stability fund” aimed at bringing down premiums for 2018 and 2019, which experts say is likely to make those years stable.

But after those two years, the funding starts to taper off.

Levitt said 2022 looks to be the first year where the market would face serious problems, due to reduced stability funding.

The reduced financial assistance for people buying insurance is also an issue. With less help in affording a plan, people are likely to gravitate towards skimpier plans with lower premiums, but much higher deductibles.

Consumers already face high deductibles under many ObamaCare plans, something Republicans have criticized. Experts say the GOP bill could make those deductibles worse.

Healthy people might not want to buy a plan with a large deductible, and could just decide to stay out of the market instead.

“Consumers might look at the benefit and say this is not good enough and I don't want to buy it,” said Dan Mendelson, president of Avalere Health, a consulting firm.

In the short term, though, the Senate’s bill would likely make the next two years more stable, given that it provides a large amount of stability funding for those years. 

“In 2018 and 2019, they have done everything possible to establish stability,” Mendelson said.

However, Mendelson said the stability funds might not be enough for 2020. That year is also the first time the reduced tax credit kicks in. Before that, the bill maintains the current level of ObamaCare tax credits.

That change could make 2020, an election year, a problem in terms of rising premiums or insurers dropping out, he said.

Mendelson said he did not understand “why the president would be interested in legislation where the funding dries out in the year he's running for reelection.”