The Corner

Health Care

GOP Refusal to Fund Insurer ‘Bailouts’ Backfires

(Bryan Sikora/Dreamstime)

Under Obamacare, insurers are supposed to reduce “cost-sharing” — deductibles, etc. — for lower-income enrollees, and the federal government is supposed to reimburse them. Republican Congresses have refused to fund these payments, though, and Trump ended them last year.

This was entirely correct as a legal matter. But it was unwise as a policy matter, and not just because these are expenses the law requires insurance companies to incur. As I pointed out here not once but twice — drawing on the analysis of the Congressional Budget Office — the move promised to increase both federal spending and the number of people insured through Obamacare.

That would happen because of the way the law is set up. Insurers would respond to the loss of their payments by hiking premiums, and when premiums went up, subsidies to enrollees would automatically increase as well. In fact, owing to some complications of the law, many people would see higher subsidies even if their own premiums weren’t affected.

If anything, the transition to the new system went surprisingly well. Some moderate Republicans are proposing to restore the payments, and some insurers are opposed. Philip Klein writes, summarizing a report from the Robert Wood Johnson Foundation:

Though the report notes that insurers did find Trump’s move extremely disruptive at the time, particularly as it was announced weeks before the start of open enrollment, they also talked about how they were able to work with state commissioners to respond to the problem.

What happened was that state regulators allowed insurers to concentrate their premium hikes among mid-level “silver” plans, which are used to calculate Obamacare’s core subsides for individuals to purchase insurance. That enabled qualifying individuals to receive much higher federal subsidies, creating situations in which they were effectively able to purchase “gold” plans for the price of silver plans, or to obtain “bronze” plans at no cost to them.

According to the report, some insurers now say “many consumers are now ‘getting a good deal,’ thanks to higher premium tax credits, and that restoring CSRs would cause considerable confusion during the 2019 open enrollment season and lead to sticker shock for consumers who had switched to gold- or bronze-level plans this year.”

I think the GOP deserves a slow clap for this one.

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