Politico reports that “Senate Republicans are coalescing around a plan to extend Obamacare subsidies for up to two years if the Supreme Court strikes them this month.” Yet if the plan described by this Politico piece were actually to become law, it would eventually lead to far more people losing health care than the millions who are expected to lose their insurance if the plaintiffs prevail in a Supreme Court case known as King v. Burwell. While a loss for Obamacare in King would only threaten individuals in approximately three-dozen states, the Senate Republican plan could potentially collapse the individual insurance markets in all fifty states.
On Wednesday, Politico reports, Senate Republicans met behind closed doors and “crafted the outline of a plan” that resembles a proposal by Sen. Ron Johnson (R-WI). That proposal would temporarily restore subsidies to people who currently receive them in the many states where those tax credits would be cut off if the Supreme Court sides with the plaintiffs in King. Johnson’s proposal, however, would also repeal the law’s individual mandate, an unpopular but necessary provision that prevents health insurance markets from collapsing.
This proposal, it should also be noted, is separate from a proposal that is expected to be released by House Republicans, suggesting that the GOP has not managed to coalesce around a single plan.
Under the most likely reading of the Johnson proposal, many insurance plans would still be required to cover individuals with preexisting conditions. Yet, without an individual mandate, healthy individuals would be able to delay buying insurance until they are sick, draining money out of an insurance pool that they have not already paid into. To meet these new costs, insurance companies would need to raise their premiums, which would cause more healthy customers, who pay more money into the pools than they take out, to drop their coverage. That, in turn, would cause premiums to rise even more, which would cause more people to drop coverage, which would cause premiums to rise even more.
The technical term for this phenomenon is a “death spiral,” and it can potentially cause an entire insurance market to collapse. As the American Academy of Actuaries warned in an issue brief discussing proposals similar to the Johnson bill, “[e]liminating the individual mandate could threaten the viability of the health insurance market.”
The Senate Republican “fix,” in other words, would actually make things worse in the long run, potentially causing even more people to lose insurance than would suffer under an unchecked attack on Obamacare from the Supreme Court.