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Why Senate Republicans’ skinny repeal could cause a death spiral

Explained with this cartoon.

Senate Republican have come up with a last-second idea to repeal the Affordable Care Act, which some have dubbed “skinny repeal.”

The proposal would get rid of the most unpopular part of Obamacare — the individual mandate — while doing little else. Vox’s Dylan Scott and Jeff Stein have more on the skinny repeal idea.

But there’s a reason why repealing only the individual mandate is a bad idea: It would likely destroy the individual market, in a process health care experts call the “death spiral.”

To explain why this would happen, let’s explore with this cartoon.

Let’s start with 10 people, some sick and some healthy.

Before Obamacare, insurance companies could refuse to give insurance to people who were too sick. That's because covering them would cost too much money — and they didn't want to raise prices on relatively healthy people.

This is how Obamacare solved that problem

Obamacare forced insurance companies to cover sick people — but it did two other things in concert, which hold the system together.

These things work together. Economists like to describe them as a three-legged stool — and you need all three pillars to make the stool sit steady.

But some parts of this system are unpopular, like the individual mandate. Other parts are popular, like forcing insurance companies to cover sick people at an affordable cost. Yet you can't have one without the other. If you get rid of any leg of the stool, it all falls apart.

The “skinny repeal” would keep the popular parts while repealing the individual mandate

This is what that would look like:

One way Senate Republicans could keep healthy people in the pool is by providing even more subsidies to further incentivize healthy people to keep paying for insurance. But that would mean spending even more on health care.

So if the only substantive thing Senate Republicans do is repeal the individual mandate, then it's likely insurance costs will skyrocket — or that it will even result in a "death spiral."

We know this probably won't work because we've tried this before

In the 1990s, New York, along with other states, also forced insurers to cover everyone, no matter how sick. But it didn't do anything to incentivize healthy people to keep their insurance, like mandating coverage or providing subsidies. So as the New York Times's Margot Sanger-Katz reports, this is what happened:

When Obamacare kicked in, it added in the two missing portions: the individual mandate and the subsidy. And then costs plummeted.

Here’s where Senate Republicans are at right now

The skinny repeal is one of three possible bills the Senate Republicans will try to pass in the coming days.

The other options include the Obamacare Repeal Reconciliation Act, which repeals most of Obamacare without a replacement. The other is the Better Care Reconciliation Act, which cuts massive portions of Obamacare. Because Republicans didn’t wait for a Congressional Budget Office score of the current version of the BCRA, leadership admits they will need 60 votes to pass it, which they do not have.

But as a lobbyist told my colleagues, the skinny repeal may be the “lowest common denominator product” and stand the best chance to pass.

Here’s a flowchart to explain how the skinny repeal fits into this process: