Obamacare 101: Would a ‘skinny repeal’ trigger a death spiral?

Reporting from Washington —  As Senate Republicans struggle to unite behind legislation they can say repeals the Affordable Care Act, they are considering a more limited bill that would scrap only a few parts of the 2010 law, often called Obamacare.

This “skinny repeal” plan hasn’t been fully studied by the nonpartisan Congressional Budget Office or any other independent analyst.

But Republican officials have sketched the outlines of the plan, which could become the Senate GOP repeal bill as soon as Thursday night.

What would this so-called skinny plan do? And what impact could it have on Americans’ healthcare and their health insurance?

Here are the basics.

What is in the “skinny repeal” plan?

The plan repeals three parts of the current healthcare law.

These include the requirement that Americans have health insurance and the requirement that large employers provide workers with health benefits. These two mandates have always been the most unpopular parts of Obamacare.

The plan also would scrap a tax on medical device makers that was included in Obamacare to fund the expansion of health insurance coverage made possible by the law.

What is left of Obamacare?

Most of it.

Untouched are insurance protections, including the ban on insurers turning away sick people, the prohibition of annual and lifetime limits on coverage and the requirement that insurers cover a basic set of benefits, including prescription drugs, maternity care and mental health services.

Also preserved are the taxes on wealthy individuals that are used to help provide hundreds of billions of dollars in government aid for low- and moderate-income Americans.

Money for Medicaid, which 31 states have expanded to cover poor working-age adults, would remain.

So, too, would subsidies that offset the cost of insurance premiums for some 8 million working Americans who get health coverage on marketplaces created by Obamacare.

Didn’t Republicans say they want to repeal all that?

They did, but the party has had a very hard time agreeing on how much of Obamacare to repeal.

A group of GOP senators from states that have expanded Medicaid and seen big coverage gains through the healthcare law have expressed reservations about repeal plans that take away big chunks of Medicaid funding.

And more conservative Republicans have demanded repeal plans that sweep away as much of the current law as possible.

Senate GOP leaders are billing the skinny plan as a way to pass something, which could then be beefed up when the Senate bill is combined with the more sweeping Obamacare repeal bill that House Republicans passed in May. The House bill rolls back much more of the current law.

Won’t getting rid of the insurance mandates lead to a death spiral?

It might.

Few experts believe that the employer mandate has had much effect, largely because the vast majority of large employers already provide health benefits.

In fact, when the Obama administration delayed implementation of the mandate, there was little evidence that employers started dropping coverage.

Repealing the so-called individual mandate is potentially more problematic.

Independent analyses by the Congressional Budget Office, or CBO, and others suggest that without some kind of penalty, many healthy Americans would not get insurance until they were sick. That would push up health insurance costs, causing what people in the business call a death spiral.

Several states experienced just this kind of market collapse when they tried guaranteeing their residents coverage without any kind of requirement that all people — including the young and healthy — get coverage.

And two years ago, CBO estimated that repealing the mandates would increase the ranks of the uninsured by as many as 15 million, mostly people voluntarily dropping their coverage. It also estimated that premiums would increase by 20%.

The financial aid that Obamacare provides consumers might ameliorate some of this problem, as it makes health coverage more affordable and may provide enough of an incentive that people will buy coverage even if there isn’t a penalty.

But many insurers would nonetheless likely raise premiums to deal with the risk of an unstable market, as the American Academy of Actuaries warned this week.

So would Congress have to replace the mandate with something else?

Probably.

Many health insurance and insurance regulators believe that no matter what happens with the current repeal debate, Congress needs to take several steps to stabilize health insurance markets around the country, which, though not collapsing in most places, have been battered by the current political turmoil.

Lawmakers from both parties have already talked privately about such a package, which could also provide an opportunity to review other tools to get healthy people to enroll in health coverage.

Few experts believe that the approach in the current House bill — charging a 30% surcharge on people who drop their coverage for a while and then try to buy it — will work.

But conservatives have voiced support in the past for proposals that would automatically enroll people in coverage if they don’t sign up on their own.

What are the chances that skinny repeal will be the final outcome?

It’s quite possible.

Senate leaders say they want to set up a conference committee with House lawmakers to reconcile their bill with the House repeal legislation.

If that happens, the conference committee could produce what is essentially a new piece of legislation. Then, the House and Senate would each have to vote on it without any opportunity to amend it.

But as the last several months have shown, crafting a complex healthcare bill that balances competing demands within the Republican ranks isn’t easy.

Alternatively, the House could simply take up the “skinny” plan passed by the Senate and vote on it.

If it gets a majority, the “skinny” bill would become law, and Republicans could call that their Obamacare repeal.

Obamacare 101 is a periodic primer on the debate over repealing and replacing the Affordable Care Act »

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Twitter: @noamlevey

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