The CBO line that will alarm the GOP
Health-bill markup says red states’ markets would grow ‘unstable’ by 2020
The Congressional Budget Office released its assessment of the latest version of House Republicans’ health-care bill on Wednesday, and if Republicans were hoping for big changes this time around, they didn’t get them. The new score looks a lot like the old one: 23 million people would lose their insurance under this version, the CBO says, as compared with 24 million under the last one.
What they got instead is a new sentence in the report that could be particularly alarming for GOP policymakers.
Under the GOP plan, the report states, “about one-sixth of the population resides in areas in which the nongroup market would start to become unstable beginning in 2020.”
To break that down: The “areas” the report refers to are mostly red states, and the “nongroup market” refers to people who do not have health insurance through an employer or through the government. And “unstable” means that people in those two categories who have preexisting medical problems might no longer be able to buy insurance.
Eventually, according to the report released Wednesday, markets in those states would resemble markets before the Affordable Care Act was implemented. Lesshealthy consumers would not be able to afford coverage because insurers would be able to examine their medical histories and charge them more if they were likely to need expensive treatment in the future.
Republicans have claimed that their bill would maintain the Affordable Care Act’s protections for those people, but according to the CBO report, about one-sixth of the total U.S. population could be at risk if they have preexisting problems. Those patients would generally live in red states.
Protecting patients with preexisting medical conditions was one of the most popular elements of Obamacare. Before the health law, patients could be denied coverage not only if they had common chronic conditions such as diabetes and heart failure but also if they had problems with addiction or mental illness. Wom-
en considering pregnancy or people with dangerous jobs, such as miners and firefighters, could also be excluded.
Republicans have said that their bill will preserve those protections. They have also argued that the insurance exchanges established under the Affordable Care Act are entering a “death spiral” — a term used by healthcare experts to describe collapsing markets.
The CBO report, however, warns that markets in red states could become “unstable” for those with preexisting conditions under the GOP plan, although the report does not use the phrase “death spiral.”
“For this one-sixth of the population that they talk about, they’re getting pretty damn close to saying that,” said John Holahan, an economist at the nonpartisan Urban Institute. Death spiral or not, lawmakers with difficult elections ahead might be nervous about seeing the CBO’s predictions borne out in their districts.
The CBO’s prediction results from a quirk in the bill, which is the product of elaborate compromises among Republicans with vastly different views on how best to provide insurance for Americans who are not covered by the government or by their employers.
In particular, many Republicans objected to a rule dealing with how insurers treat new customers. The Affordable Care Act prevents insurance companies from using a patient’s medical history to determine the premium they will pay. Before the passage of the health law, insurers used that information to exclude patients who could prove costly for them later.
The GOP bill would keep this rule in place in most states. Yet because of objections from lawmakers on the right hoping for a more complete repeal of Obamacare, Rep. Tom MacArthur (R-N.J.) amended the text to allow states with conservative officials to get out of the rule.
State officials could seek a waiver from the federal government to allow insurers in their states to use information about patients to set premiums — under certain conditions. Insurance companies could subject customers to that kind of scrutiny only if the customers had allowed their health coverage to lapse for at least two months.
That provision is designed to discourage residents of those states from gaming the system. Without it, they might decide to pay for health insurance only when they are planning on seeing a doctor.
There is a catch, however, according to the CBO.
Using information about a paRepublican history — a practice known as medical underwriting — is intended as punishment in the GOP bill. For some, though, medical underwriting could be an advantage. Younger, healthier people could pay cheaper premiums if their insurers know that they are in good shape overall than if they were simply paying the same rate that everyone else paid.
As a result, the CBO projects, healthier people in states where the rule against medical underwriting is waived might allow their coverage to lapse on purpose to take advantage of those reduced rates. Those paying the standard premium would be sicker, on average — and the insurance company would have to pay more to cover the costs of their medical care.
Those costs, in turn, would force insurers to increase their standard premiums, which would in turn encourage even more healthier people to take advantage of medical underwriting.
Ultimately, the standard premium could become so expensive that no one would pay it, and people with preexisting medical problems would simply not buy insurance.
The CBO’s estimate that 1 in 6 Americans could live in states that would seek these waivers is little better than a guess. The actual figure would depend on how elected officials in each state would view the new law, which is difficult to predict. While officials in red states are more likely to ask for a waiver from the Affordable Care Act rule than officials in blue states, red states tend to be less populous, and many might be dissuaded by the CBO’s predictions about the consequences.
In this case, relatively healthier consumers would be better off, while the market would implode for sicker patients. “It could be a death spiral for less-healthy peotient’s ple,” Holahan said.
All the same, a return to the market as it existed before the Affordable Care Act is exactly what many conservative policymakers want, Holahan said. The CBO, he said, is “not giving them a whole lot of credit for these market disruptions causing premiums to fall for healthy people, which is what, I think, their goal was.”
The report from the CBO, which serves as Congress’s independent, nonpartisan referee, is the official projection of how the House’s bill would affect coverage, premiums and the federal government’s bottom line.
The bill would fulfill a longstanding Republican pledge to undo Obamacare. First, though, GOP senators are expected to weigh in, and they can be expected to scrutinize the CBO’s analysis as they work on a plan of their own.