House Republicans have taken their first step towards repealing Obamacare, and that step opens the door for them to work toward full repeal within months. They say they’ve built a fail-safe in to protect those who may otherwise lose their insurance while they continue dilly-dallying on coming up with an actual replacement — delaying implementation of the repeal so they have time to develop their replacement (because the last six years apparently wasn’t enough time).
Here’s a secret: Those people will probably lose their insurance anyway.
And not just for the reasons we already know. One massive problem that’s not really getting discussed is that Republicans’ “repeal and delay” tactic creates too much market uncertainty for risk-based insurance. Republicans have been sowing the seeds of uncertainty for a long time, and they’re one of the big reasons insurers like United Healthcare began pulling out of the exchanges despite still raking in billions in net profits.
J.B. Silvers, a former health insurance CEO, first explains this while describing the “risk corridor” program, which was supposed to help offset the risks insurers took when enrolling high-risk people in their programs. He then says:
“But when the time came to pay up for risk reduction in the Obamacare exchanges, Congress reneged and paid only 12 percent of what was owed to the insurers. So, on top of the fact that the companies had to bear the risk of unknown costs and utilization in the start-up years, which turned out to be higher than they expected, insurers had to absorb legislative uncertainty of whether the rules would be rewritten.”
He’s talking about the payments that were supposed to go out for 2014, after Republicans regained control of both houses of Congress. Insurers risk corridor claims were much higher than their contributions. For FY2015, Congress stipulated that risk corridor payments under Obamacare could not exceed the amount that insurers owed to the program. Thus, they only got 12 percent of what they believe they were promised.
Or, to put it another way, they were playing by one set of rules, and then Congress abruptly changed those rules.
Now, we can argue till we’re blue in the face whether insurers, Congress, Obamacare, or all of them, are responsible for that problem. It won’t change the cold, hard fact that Republicans have been working hard on creating uncertainty in the market, and their repeal-with-no-replacement plan just makes that uncertainty much worse.
It’s worth noting that that’s a big reason for why premiums are going up this year, too.
So, as Silvers says:
“And now comes the reality of the “repeal and replace” initiatives from the Republicans. If the uncertainty of this market was large before with the ACA, it is almost unknowable under whatever comes next. Thus the initial exit of some latecomers, including United Healthcare, and undercapitalized minor entrants, such as nonprofit co-ops, is almost certain to become a flood of firms leaving the exchanges. They have little choice since the risks are too large and the actuarially appropriate rates are still not obvious given the political turmoil and changing rules…
…If we want them to continue to do the good things required by the ACA, we can’t make it so uncertain. What this means is that the mechanisms designed to reduce risk and a stable set of operating arrangements must be reaffirmed as core principles of all reform and replace efforts. This shouldn’t be hard for market-oriented Republicans, if they can leave behind their political baggage. Blind talk of repeal with no clear way to build confidence among the private insurers, which will be needed in the replace phase, leads to market failure.”
In short, their idea of a fool-proof repeal is going to backfire horrifically on them. While that might seem like something we can laugh at, it isn’t, because millions of Americans will become collateral damage in this mess. Good job, GOP.
Featured image by Win McNamee via Getty Images