Written by Timothy D. McBride, PhD, MS, co-director for the Center for Health Economics and Policy
The effort to “repeal and replace” Obamacare (the Affordable Care Act, ACA) has been a major goal of the Republicans since the ACA was passed. Achieving this goal has been elusive – first President Obama blocked all such efforts, then the GOP has found it difficult to find a majority in favor of any specific plan to “replace” Obamacare. The situation Missouri faces in this environment was part of what was discussed at a recent event, co-hosted by the Center for Health Economics and Policy and the Clark-Fox Policy Institute.
In the wake of three attempts so far this year, Congress faces the choice of not repealing Obamacare or turning to a bipartisan alternative bill, that may be called a “repair” bill; leaving in place the major elements of Obamacare, while adjusting others.
One such effort that has gained some momentum is a bipartisan bill co-sponsored by Senators Alexander (R-TN) and Murray (D-WA). Sen. Alexander’s Senate Health, Education and Pensions (HELP) Committee held a handful of hearings on this bill in September and October. Though much momentum was gained towards a bipartisan alternative, the effort halted as the Senate tried again to “repeal and replace” Obamacare. Failure of that effort has turned attention back on the Alexander-Murray approach.
In general, the Alexander-Murray approach to repairing Obamacare focuses on fixing the aspect of Obamacare that has been most troubled – the “marketplaces” where individuals shop for plans sold by private insurers. This market functioned well for the first 2-3 years after Obamacare was phased in (2014-16), but starting in 2017 the marketplaces have been rocked by high increases in premiums, insurers dropping out of the marketplaces, and plans with very high out-of-pocket costs.
Potential Marketplace Changes
The Alexander-Murray approach would apply a small number of tweaks to the marketplaces meant to reduce volatility. First, the proposal would make permanent the payments to the plans for “cost-sharing reductions” paid on behalf of low-income persons (under 250% of the federal poverty line) to compensate for higher deductibles and copayments. In the ACA, discretion to pay these CSRs was left in the hands of the administration, and this month President Trump announced he would not continue the CSRs.
Second, the legislation would permanently codify sources of payment for consumer outreach, education and assistance. This would improve the ability of individuals to identify and access marketplace plans.
Third, the proposed legislation would add an additional type of plan – called “Copper” – to the range of choices of plans offered by the insurers. This would be a catastrophic plan, which is currently available only to those under age 30.
A fourth proposal would reinstitute “reinsurance” for insurers who face high costs from outliers in their insurance pools. This provision from the original legislation was removed by Congress after two years.
Finally, the proposal would allow states more flexibility in implementing the ACA. The previous GOP plans that did not pass contained such provisions, which have also been rejected by Democrats and moderates, but the Alexander-Murray bill would implement a more limited scope of state flexibility changes.
Put together, all serious analysts concur that these provisions, while modest, could help stabilize premiums in the marketplaces. The size and magnitude of the effects is limited – the Congressional Budget Office (CBO) recently concluded that the provisions would not substantially change the number of people enrolled in the marketplaces, but would reduce the federal budget deficit by $3.8 billion from the 2018-27 period.
On the other hand, these provisions avoid the dramatic changes to Medicaid coverage in particular that were major parts of the previous proposals, and the repeal of insurance mandates, with the combined provisions leading to projections of increases of 20-30 million in the number of uninsured.
Will It Really Pass?
What are the prospects for the Alexander-Murray proposal? On the one hand, a bipartisan approach has the potential to obtain 50 or more votes in the Senate, since at least two dozen Democrats have already endorsed the legislation. Combined with moderate Republicans, this could pass the Senate if a vote were held on the legislation, though prospects for passage in the House is uncertain. On the other hand, President Trump recently signaled that he opposes the current draft of the Alexander-Murray approach, unless changes are made, though he endorses a bipartisan approach.
All serious analysts who have studied Obamacare agree that the marketplaces need attention and are not working as well as they could. In addition, it has historically been common when a major piece of legislation (especially health legislation) passes, then the Congress usually enacts minor changes to the program, maybe several times, after passage. This has happened for years with Medicare. So one of the problems Obamacare has faced is that partisanship has precluded any small changes to the ACA structure.
What Needs to Happen
The marketplaces face some serious underlying issues that are not addressed by this legislation. In particular, most of the places in the U.S. where the marketplaces are not functioning that well are in rural areas, with low population density. Insurers offering coverage in such areas have a smaller insurance “pool” across which to spread the risks of high costs. This fundamental problem needs to be addressed. The Alexander-Murray bill has some approaches that would help fix the marketplaces, but more changes are needed.