Premiums rose, insurers fled; consumers buying own coverage had fewer choices
Betting that thin is in — and might be the only way forward — Senate Republicans are eyeing a “skinny repeal” that rolls back an unpopular portion of the Affordable Care Act. But analysts warn that the idea has been tried before — and with little success.
Senators are reportedly considering a narrow bill that would eliminate the individual mandate of ‘Obamacare, ‘ which assesses a tax on people who don’t have insurance. The bill also would penalize employers that have 50 or more workers but fail to offer health coverage.
Details aren’t clear. But it appears so far that rest of the 2010 health law would remain, including the rule that says insurers must cover people with existing medical problems when they seek new policies.
In remarks on the Senate floor Wednesday (July 26) , Minority Leader Chuck Schumer of New York said that “we just heard from the nonpartisan Congressional Budget Office that under such a plan … 16 million Americans would lose their health insurance, and millions more would pay a 20 percent increase in their premiums.” A bipartisan group of governors, including Louisiana’s John Bel Edwards, signed a letter echoing these concerns and urging the Senate to reject it.
But earlier in the day, some Republicans saw this concept as a means to advance the debate. “We need an outcome, and if a so-called skinny repeal is the first step, that’s a good first step, ” said Sen. Thom Tillis, R-N. C.
Based on published reports, several Republican senators, including Dean Heller of Nevada and Jeff Flake of Arizona, appear to back this approach. It is, at least for now, being viewed as a step along the way to Republican health reform.
“I think that most people would understand that what you’re really voting on is trying to keep the conversation alive, ” said Sen. Bob Corker, R-Tenn. “It’s not the policy itself; … it’s about trying to create a bigger discussion about repeal between the House and Senate.”
But what if, during these strange legislative times, the skinny repeal were passed by the Senate and then became law? States’ experiences with insurance market reforms and rollbacks highlight the possible trouble spots.
Considering the parallels
By the late 1990s, states such as Kentucky, Massachusetts and Washington felt a backlash from the coverage requirement rules they had put on the individual market. When some of the rules were repealed, “things went badly, ” said Mark Hall, director of the health law and policy program at Wake Forest University in Winston-Salem, N. C..
Premiums rose and insurers fled, leaving consumers who buy their own coverage, because they don’t get it through their jobs, with fewer choices and higher prices. That’s because — like the current Senate plan — the states generally kept popular parts of their laws, including protections for people with existing medical conditions. At the same time, they didn’t mandate that consumers carry coverage.
That goes to a basic concept about any kind insurance: People who don’t file claims in any given year subsidize those who do. Also, those healthy people are less likely to sign up, insurers said, leaving them with only the more costly policyholders.
Bottomline: Insurers end up “less willing to participate in the market, ” Hall said.
It’s not an exact comparison, however. Hall said the current federal health law offers something most states did not: significant subsidies to help some people buy coverage, which could blunt the effect of not having a mandate.
During the debate that led to passage of the Affordable Care Act, insurers flatly said the plan would fail without an individual mandate. On Wednesday, the Blue Cross Blue Shield Association weighed in again, saying that if there is no longer a coverage requirement, there should be “strong incentives for people to obtain health insurance and keep it year-round.”
About 6.5 million Americans reported owing penalties for not having coverage in 2015. Polls consistently show, however, that the individual mandate is unpopular with the public. Indeed, when asked about nine provisions in the Affordable Care Act, registered voters in a recent Politico/Morning Consult poll said they want the Senate to keep eight, rejecting only the individual mandate.
Even though the mandate’s penalty is often criticized as not strong enough, removing it would still affect the individual market. “Insurers would react conservatively and increase rates substantially to cover their risk, ” said Robert Laszewski, an insurance industry consultant.
That’s what happened after Washington state lawmakers rolled back rules in 1995 legislation. Insurers requested significant rate increases, which were then rejected by the state’s insurance commissioner. By 1998, the state’s largest insurer — Premera Blue Cross — said it was losing so much money that it would stop selling new individual policies, “precipitating a sense of crisis, ” according to a study published in 2000 in the Journal of Health Politics, Policy and Law.
“When one pulled out, the others followed, ” said Washington Insurance Commissioner Mike Kreidler, who was then a regional director in the U. S. Department of Health and Human Services. The state’s individual market was volatile and difficult for years after. Insurers did come back, but won a concession: For a time, the insurance commissioner lost the authority to reject rate increases. Kreidler, first elected in 2000, won the authority back.
Predicting the effect of removing the individual mandate is difficult, although Kreidler expects the effect would be modest, at least initially. Subsidies that help people buy insurance coverage, if they remain as they are under current law, could help blunt the effect. But if those subsidies are reduced, or other changes are made to drive more healthy people out of the market, the effect could be greater.
“Few markets can go bad on you as fast as a health insurance market, ” Kreidler said.
As for employers, dropping the requirement that those with 50 or more workers offer health insurance or face a financial penalty could mean some workers would lose coverage, but their jobs might be more secure, said Joe Antos, at the American Enterprise Institute.
