Getting Senate Republicans to agree on the contours of their tax-reform legislation was complicated on its own. Inserting a repeal of the most hated part of Obamacare did not make the task easier.
Senate leaders and the White House appeared to keep that complication to a minimum after winning over the biggest GOP foe of repealing the individual mandate—Sen. Susan Collins of Maine—by backing bipartisan bills that would provide payments to insurance companies in hopes of keeping premiums down and countering the effects of repeal.
“I remain very concerned about offsetting the premium increases that will occur as a result of the repeal of the individual mandate,” Collins told reporters Thursday before the tax bill passed the Senate. “I still believe it was a mistake to include that in this bill.”
Because the mandate repeal made it into the tax package, Collins wants two bills—one negotiated by Sens. Lamar Alexander and Patty Murray providing cost-sharing subsidies, and her own measure, cosponsored with Sen. Bill Nelson, to provide funding for reinsurance programs—approved before the end of the year.
But will these proposals actually help?
Collins proposes to provide $5 billion per year for 2019 and 2020 so states can build reinsurance programs or invisible high-risk pools that would help insurers offset high-cost enrollees and in turn lower premiums. This is substantially more than in the original version of the bill—which provided $2.25 billion a year.
But the funding is for only two years, while the mandate repeal is permanent.
The Congressional Budget Office estimates that premiums would increase by 10 percent due to the repeal of the mandate and 13 million more people would be uninsured by 2027.
“More money is better for the market, [but] there’s not necessarily a perfect number,” said Elizabeth Carpenter, senior vice president at Avalere Health. She noted that the first year of the Affordable Care Act reinsurance program alone cost $10 billion.
Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation, said this amount of money would likely offset the projected 10 percent average premium increase if states are also able to capture the money the federal government saves by spending less in premium tax credits.
“While the Collins-Nelson bill would mitigate the premium increases resulting from repeal of the mandate, it wouldn’t prevent the increase in the number of people uninsured CBO expects,” said Levitt.
More money still may not keep all insurers in the market. “On the one hand, it’s become a more attractive market at the premium levels,” said Caroline Pearson, senior vice president at Avalere Health. But insurers still have to handle the trade-off with the ongoing uncertainty, she added.
As for the Alexander-Murray deal, Murray herself threw cold water on the idea when the legislation began being floated as a way to offset effects of the mandate repeal. “The Alexander-Murray bill does not fix the problem that they are creating with their tax proposal,” she told National Journal last month.
The legislation ensures cost-sharing reduction payments for 2018 and 2019. These payments—which were discontinued by the Trump administration—went to insurers who were covering the out-of-pocket costs of low-income consumers on the exchanges.
And experts questioned whether going through with the proposal—now that premiums are adjusted and set for the 2018 market—would be the best idea.
“Forget about 2018; it’s all baked into the cake. You’re trying to undo the ingredients of the cake. … It’s not worth the effort,” said Edmund Haislmaier, health care policy expert at the Heritage Foundation. “If Congress wants to appropriate money for CSRs, they should start with the next plan year, not the current plan year, because it’s too messy.”
The CBO sent a letter to the Senate Health, Education, Labor, and Pensions Committee saying that if Congress repeals the individual mandate and enacts the Alexander-Murray bill, “the agencies expect that the interactions among the provisions would be small; the effects on premiums and the number of people with health insurance coverage would be similar to” previous CBO estimates.
Beyond policy implications, both proposals would likely hit roadblocks in Congress. Collins received assurances that President Trump was on board with both proposals, but conservatives in the House are concerned about “bailing out” insurers.
“I think that would be tantamount to a bailout for the insurance companies that supported the very policy that’s put them in the position they’re in. I would not support it,” said Freedom Caucus member Trent Franks.
Senate Majority Leader Mitch McConnell told Collins that he supported passage of both bills.
But conservative analyst Christopher Jacobs argues that either set of payments may not be made even if the bills are passed.
“As it stands now, both sets of payments to insurers Collins wants—the cost-sharing reductions and reinsurance—could end up subject to a statutory sequester due to the tax bill,” he wrote last week in The Federalist, meaning these payments could be cut due to federal caps on spending.