Republicans have spent months cobbling together a handful of plans to quell the fallout of a potential Supreme Court ruling that would strike down federal subsidies to millions of Obamacare enrollees living in the 34 states that rely on HealthCare.gov.
However, a new report says by eliminating the very foundation upon which Obamacare was built -- the individual and employer mandates -- two of the GOP contingency plans will wreak havoc on the insurance industry that undergirds all health plans, private and public. Although it's almost certain the president would veto any bill with those provisions, if passed, the bills would likely cause huge problems for the current health structure.
The report, released by the American Academy of Actuaries, reviews two of the GOP’s proposals, including one gaining the most traction in the House, which would keep federal subsidies flowing until 2017 in exchange for repealing the two mandates.
The individual mandate, which requires people to have health coverage or pay a penalty, as well as the employer mandate, which requires medium to large companies to offer their workers’ coverage, both play a large role in encouraging people to sign up for health coverage. They are also a crucial part of financing the law through their respective penalties.
The study found that repealing both mandates would have an extremely negative impact on the insurance markets. The idea is that if people were no longer penalized for not having health insurance, more young and healthy individuals would not buy coverage. Without them, the insurance risk pools would be made up largely of older, sicker individuals who cost more to insure. If that happened, insurers would have to raise the cost of premiums to cover this sicker population.
The GOP plan would be extremely detrimental to the markets this year if the Court rules against the administration in King v. Burwell. Rates are already locked in and wouldn’t change—regardless of how the court’s ruling would affect the risk pool.
Then there’s the whole issue of how to make up for the lost revenue of repealing the mandates. The Congressional Budget Office estimated that the Treasury would bring in about $4 billion from the individual mandate in 2016.
Separately, the CBO calculated that delaying the employer mandate by one year, which the administration did last year, would cost the federal government about $10 billion in lost revenue.
The two Republican plans do not offer a way to make up for that lost revenue.
The study also threw cold water on the Republican plan to extend temporarily the federal subsidies to individuals until the GOP can come up with an Obamacare replacement. The researchers said all this does is “delay the market disruption” they predicted when criticizing the first plan.
The study comes just weeks before the Supreme Court is expected to issue the high-stakes ruling that could potentially dismantle Obamacare.
While Republicans seem to be rallying around a few proposals, many experts think that if the Court does side with the plaintiff, it will likely be left up to state governments to decide what to do.
Some states that currently rely on the federal exchange, are contemplating using workarounds or establishing their own exchanges in the event of such a ruling. Others like Louisiana have signaled that they will do nothing.
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