Republicans might have a new Obamacare problem: what to do if they win at the Supreme Court later this month.
The justices are about to decide the legality of Obamacare's insurance subsidies, which currently help 6.4 million Americans pay for their health coverage. If the justices toss out the financial help, it’ll be a coup for Republicans who’ve tried repeatedly to kill the law in Congress and in the courts.
But it will also leave Republicans holding the bag on how to prevent chaos in the insurance market. If lawmakers do nothing — and with the level of gridlock in Washington, there's a decent chance this happens — many experts say the consequences could be severe. Obamacare premiums would spike on average by 256 percent, leaving many enrollees unable to keep up with the bills. They could decide to pay the much higher prices, or drop their coverage.
But Republicans lawmakers have also come up with five alternatives plans to keep the dollars flowing. The question is whether they’ll do much good. Most of the plans would extend the availability of subsidies, while dismantling other parts of Obamacare. The result would likely be a world that looks much more like America before Obamacare — where fewer people are enrolled in coverage and are paying higher premiums.
Take, for example, Sen. Ron Johnson's Preserving Freedom and Choice in Health Care Act. It would both extend the Obamacare subsidies and kill the health-care law's individual mandate, the unpopular requirement that nearly all Americans carry health coverage.
Without a requirement to purchase insurance coverage, health economists roundly expect that young, healthy people would no longer buy coverage. This, then, would lead to a spike in premiums as only the really sick people, who use their coverage a lot, opt to buy insurance plans.
The transitional period Johnson's bill imagines is one where the individual market is smaller and a more expensive place to shop.
These types of problems turn up again and again in all five Republican plans. When you try to repeal Obamacare and maintain the law's subsidies, it turns out you end up with some very bizarre policy outcomes that are not good for the individual insurance market.
Preserving Freedom and Choice in Health Care Act
Who supports it: Sen. Ron Johnson introduced this bill in April, and it has the most mainstream support among Senate Republicans. Senate Majority Leader Mitch McConnell has signed on as a co-sponsor of the bill, signaling that this could become the dominant position of Senate Republicans in the event of a ruling against the health law.
What it does: Johnson's proposal does two main things: it kills the individual mandate, and it sunsets Obamacare's subsidies in August 2017. In opinion columns, the Wisconsin senator has framed those two policy changes as setting the stage for Congress to pass a full Obamacare replacement bill in 2017.
"This transitional piece of legislation would live up to its name, reverse many of the negative unintended consequences of Obamacare, and pave the way for full replacement in 2017," Johnson wrote in a May 27 USA Today op-ed.
Johnson wants to leave the subsidies in the individual market intact through August 2017 to create a smoother transition. But he has another policy proposal that wouldn't be smooth at all: immediately eliminating the individual mandate and no longer requiring Americans to carry health coverage.
How it changes the individual market: Without a requirement to purchase insurance coverage, health economists roundly expect premiums would spike as healthy, young people opt not to purchase a plan. This could, even in the transitional period, make the Obamacare markets a much more expensive place to shop.
Is there legislation? Yes, Senate Bill 1016.
Winding Down Obamacare Act
Who supports it: Freshman Nebraska Senator Ben Sasse, who introduced the bill in March. He currently has no co-sponsors.
What it does: Sasse, like Johnson, envisions a transition period, although he has a much more complex structure around it. Sasse's plan overhauls the health law's subsidies to cover 65 percent of each enrollee's premium.
This is really different from the current Obamacare subsidy structure, which covers a larger chunk of the premium for lower-income enrollees. Under the Sasse plan, a person who earns $15,000 and one who earns $30,000 would pay the same price for their coverage. The Weekly Standard outlined what, exactly, this would look like for a family of five in Milwaukee:
Take a family of five living in Milwaukee, Wisconsin with an income of $30,000 and parents aged 59 and 54. If they’re enrolled in Obamacare’s second-cheapest "silver" plan, they currently receive a whopping $20,142 in taxpayer-funded Obamacare premium subsidies, plus further lavish subsidies to help cover their out-of-pocket costs. Under Sasse’s proposal, they would have to settle for a tax credit of $13,484 (65 percent of the $20,745 premium).
In their hypothetical example, the Milwaukee family would lose about $7,000 in subsidies. And this amount would decline over time: the Sasse plan would slowly wind down these subsidies, reducing them by 5 percent each month — until, after 18 months of reductions, the subsidies were eliminated.
The Sasse plan doesn't do much else to change Obamacare. It doesn't, like other proposals, kill the individual mandate or repeal big chunks of the law. Some conservatives have praised this strategy as a way to put pressure on Republicans to come up with an Obamacare replacement.
How it changes the individual market: Because of its regressive structure, the Sasse plan would make the individual market a more difficult place for low-income Americans to shop. And more generally, as the subsidies dwindle down month by month, all enrollees' coverage becomes increasingly expensive.
Is there legislation? Yes, Senate Bill 673.
A Bridge Away From Obamacare
Who supports it: Sens. Lamar Alexander (R-LA), Orrin Hatch (R-UT), and John Barrasso (R-WY) co-authored a Washington Post op-ed in March outlining this approach.
What it does: Like the two other Senate proposals, the Alexander-Hatch-Barrasso plan would authorize the Obamacare subsidies to continue temporarily. Unlike the two other proposals, it does not outline a specific timeline — whether this would be for a few months, a few years, or something else entirely.
The Bridge proposal is arguably the vaguest of the proposals that Republicans have put out. The main idea is that state exchanges would continue to operate like they do now. States on the federal marketplace would get "the freedom and flexibility to create better, more competitive health insurance markets offering more options and different choices." What exactly that flexibility looks like, however, is not outlined.
How it would change the individual market: Because this plan is so vague, it's difficult to know what, exactly, the individual market would look like in the Bridge scenario. But the idea of "more options and different choices" suggests a market where insurance plans would not have to cover a core set of insurance benefits, like pregnancy or no co-pay preventive care. This would make coverage both skimpier and less expensive.
Is there legislation? No, but there is a Washington Post op-ed from March 3 outlining the main ideas.
Patient Freedom Act of 2014
Who supports it: A group of 21 of conservative Republican House representatives, including bill sponsor Tom Price (R-GA).
What it does: First, the Patient Freedom Act kills some pretty big parts of Obamacare's insurance expansion. The marketplace to shop for insurance, the individual mandate, the ban on preexisting conditions, the extension of benefits to young adults up to age 26 — those all go out the window.
The plan does, however, keep one key element: subsidies. This House plan would maintain subsidies for people who purchase their own health insurance, presumably in the type of individual market that existed before Obamacare.
How it would change the individual market: A world in which the Patient Freedom Act passes is one in which many fewer Americans have access to health insurance. It would once again allow insurance plans to reject people with preexisting conditions. Those who could get a plan would have access to subsidies to make insurance more affordable and, unlike the Sasse and Johnson plans, these subsidies would not go away at some point. They're here to stay — at least until a point when Republicans could come up with a different health-care plan.
Is there legislation? Yes, H.R. 1234.
An Off-Ramp From Obamacare
Who supports it: Reps. John Kline (R-MN), Fred Upton (R-MI), and Paul Ryan (R-WI) co-authored a Wall Street Journal op-ed outlining what their preferred reaction to King v. Burwell would look like. All three hold leadership positions in the House, meaning this is the type of plan that would likely advance through the legislative chamber in the case of a ruling against the administration.
What it does: The Kline-Upton-Ryan plan essentially gives each state a choice: stick with Obamacare or opt out of it pretty completely. Hence, they describe their solution as an "off-ramp" from the health-care law.
"Off-ramp" states would have the flexibility to ditch most major parts of Obamacare. The individual mandate would disappear, as would the requirements that health insurance plans cover a certain set of benefits. (Obamacare makes all health plans cover things like pregnancy and preventive benefits, which some plans used to skip.) At the same time, these states would still keep some of the most popular parts of Obamacare, like the ban on preexisting conditions and the extension of dependent benefits to young adults under 26.
All states would continue to have insurance subsidies, regardless of whether they take the "off-ramp" option. In states that decline the new approach — likely states with Democratic governors — Obamacare continues to operate just like it does right now.
How it would change the individual insurance market: In those that do get on the off-ramp, the insurance market would look pretty different. The Kline-Upton-Ryan approach sets up a market where insurers are required to take all shoppers — but shoppers aren't required to purchase a plan. Only the really sick people would likely buy coverage, sending premiums skyrocketing. In this scenario, where most of the consumers are sick people with high medical bills, you could see insurers deciding to exit the market.
Is there legislation? No, but there is a Wall Street Journal op-ed from March 3 outlining these ideas.