In a recent JAMA Forum I wrote about how the King v Burwell case currently before the Supreme Court “has the potential to unleash a massive game of chicken around the Affordable Care Act (ACA).”
The case challenges the legality of providing subsidies to low- and middle-income people in the 34 states where the federal government set up a health insurance marketplace because the state declined to do so.
The Obama Administration has said that it is not working on a contingency plan in the event of the court siding with the plaintiffs in the case, and that, in fact, no such contingency plan is even possible. US Department of Health and Human Services Secretary Sylvia Burwell said in testimony before Congress that “we don’t have an administrative action that we believe can undo the damage.”
In other words, the Administration is suggesting it won’t swerve if headed towards a head-on collision with Congress over the future of health insurance subsidies for 6.4 million people.
Obamacare opponents in Congress are also signaling their intentions in this potential game of chicken, introducing a variety of bills that would continue financial assistance under the ACA, but also make certain changes to the health law. The leading contender so far is a bill sponsored by Sen Ron Johnson (R, Wisc) called the Preserving Freedom and Choice in Health Care Act, which has attracted 31 cosponsors.
A Subsidy Reprieve, but With Conditions?
Johnson’s Preserving Freedom and Choice in Health Care Act would continue the ACA’s subsidies until September 2017 for those currently receiving assistance in states where the federal government is operating the insurance marketplace, but it would not allow subsidies for any new enrollees in these or other states. At the same time, the bill would make some major changes to the ACA that would apply in all states: repealing the so-called individual mandate that requires people to be insured or pay a penalty, repealing the requirement that larger employers offer affordable coverage to their workers or pay a penalty, and allowing states to determine the minimum benefits insurers must offer. The bill, according to one analysis, might also affect the ACA’s insurance market rules in other ways that may or may not be intended.
The impulse behind this approach is understandable, for reasons of both ideology and politics. The ACA’s requirements on insurers, employers, and individuals involve a much bigger role for government in the health system than Republican opponents of the law are generally comfortable with. As Sen Johnson has said, “This bill is a transitional response that rescues Americans from the coercive nature of Obamacare, which is an unnecessarily complicated scheme that should not be resuscitated.” And, by attaching repeal of those requirements to a temporary continuation of the subsidies, ACA critics are hoping that the President will either blink and sign the bill—a likely win in both policy and political terms for them—or that he will veto it and potentially get blamed for millions of people losing subsidies and health insurance coverage.
But from a more pragmatic perspective, would a plan like the Johnson bill maintain coverage and keep insurance markets stable until September 2017, when a more permanent fix could presumably be put into place?
Effects of Fewer Carrots and No Stick?
Allowing states to set minimum benefits would likely result in skimpier insurance and lower premiums in some places—a trade-off reasonable people could reach different judgments about—though it would not interfere with the basic functioning of insurance markets.
Similarly, eliminating the employer requirement and penalties would increase the federal budget deficit. The Congressional Budget Office (CBO) projects that it will raise $167 billion in revenues over the next decade. But this change would likely have a negligible effect on the number of uninsured individuals.
However, bigger challenges would arise from disallowing subsidies for new enrollees and repealing the individual mandate.
There is enormous churn in individual insurance as people who buy their own insurance get jobs with health benefits and leave the market, while others lose their jobs and benefits and enter the market. Freezing subsidies in place only for those who already have them would mean that over time the insurance pool would disproportionately include sick people—who signed up for coverage as soon as the ACA went into effect in 2014 and eliminated discrimination against people with preexisting conditions—without the possibility of an influx of healthier enrollees. The result would be higher premiums for people buying insurance in the individual market in states not running their own marketplaces.
Subsidies represent the carrot used by the ACA to entice healthy people to buy insurance, and the individual mandate is the stick. Repealing the individual mandate would, according to CBO projections, result in 15% to 20% higher premiums in the individual market and 16 million more people uninsured (it would also decrease the federal budget deficit as fewer people sign up for subsidies.) This would affect insurance buyers in all states affected by the Johnson bill.
A simple extension of the subsidies until 2017 without any additional conditions would likely keep insurance markets stable while states decided whether to set up their own marketplaces and Congress debated a more permanent approach. However, that stability would be disrupted if the individual mandate is repealed and subsidies are unavailable to new enrollees—2 conditions that might be required for ACA opponents to support an extension.
Who would get blamed for the loss of coverage and higher premiums in this scenario? Republicans in Congress who supported the fix? The president, whose name adorns the Obamacare plan? Governors? Insurance companies?
Or conversely, who would get blamed if President Obama vetoed a bill like this and millions of people lost their subsidies and their insurance almost immediately?
It’s a complicated game of chicken, with high stakes.