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How the Senate’s revised bill punishes you for not having insurance, explained with a cartoon

Senate Republicans released their health bill last week, but there was a gaping hole in the text: There was no provision that incentivized people to stay insured. That’s why some analysts thought this would send the individual market into a death spiral, meaning premiums would skyrocket as healthier people dropped coverage.

But the revised bill, released Monday, tries to fix this with what is called a “waiting period.”

If you don’t have health coverage for more than 63 days, then when you show up to buy health insurance during the enrollment period, you’ll be told you have to wait another six months before you can buy insurance on the exchange.

The hope is that this penalty will incentivize enough healthy people to stay insured.

To understand what’s happening here, let’s delve into how Obamacare deals with this, and how Republicans are trying to change it.

How Obamacare works

Imagine a group of people, ranging from healthy to sick:

Obamacare forces insurance companies to accept all these people, regardless of any preexisting conditions. So this raises costs for everyone — including healthy people.

Here’s how Obamacare deals with that. Keep track of those gauges on the top right of each panel that say how sick the pool is and how much insurance costs:

In short, it incentivizes healthy people to stay in the pool by a) giving subsidies based on income, and b) fining people for not having insurance.

If you force insurance companies to accept everyone, you need something that incentivizes healthy people to stay

The reason Obamacare’s individual mandate is crucial is because without it, the individual market could collapse in what is called a “death spiral.”

Here’s what could happen:

Here’s how Senate Republicans want to address this

But the individual mandate is the least popular part of Obamacare and, outside of low-income people who can’t afford the penalty, it creates no case in which an individual can opt to stay uninsured without paying a penalty.

So Senate Republicans are looking to replace the mandate with something else:

As my colleagues, Sarah Kliff and Dylan Scott, write:

Senate Republicans have settled a six-month waiting period as their replacement policy. This means that those who show up during open enrollment to purchase coverage, but have had a break in coverage longer than 63 days, will have to wait six months from the date of their application for their coverage to kick in. They would not have to pay premiums during that time period.

We don’t know whether this incentive is enough to keep healthy people in the market. But the trade-off here is that, instead of punishing people monetarily for not having insurance, it will punish people who want coverage by withholding it from them for six months — and hope that this possibility incentivizes people to stay covered.