Obamacare in a death spiral? It’s been a mantra of Republicans, who say the law is collapsing and they are riding to the rescue.
But the Congressional Budget Office, in a little-noticed part of its report last week, said that is not the case. In fact, the CBO analysts said, Obamacare’s exchanges are likely to “be stable in most areas” under the existing law.
The analysts said the key is the tax subsidies the government provides to most of those buying plans on the exchanges. As premiums go up, so does the amount the government pays out to help people buy their coverage — meaning there will always be a pool of customers.
If the subsides are the carrot, the stick is the tax penalty for those who shirk coverage.
“The subsidies to purchase coverage combined with the penalties paid by uninsured people stemming from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for the market to be stable,” the CBO said in its 28-page score of the Republican plan.
Democrats felt vindicated, saying the analysis directly contradicted repeated claims by President Trump and many other Republicans that the Affordable Care Act would collapse under its own weight, leaving Democrats in a political quandary.
“The CBO report said that the ACA has stabilized, so he’s wrong on that,” said Senate Minority Leader Charles E. Schumer, New York Democrat.
Republican leaders, though, said the CBO’s claim is just another place the scorekeepers have it wrong.
“There’s no way,” said House Ways and Means Committee Chairman Kevin Brady, Texas Republican. “All you have to do is look at the current fundamentals. These premiums are skyrocketing.”
Whether Obamacare is collapsing is central to Republicans’ argument.
Republican leaders say the choice isn’t between Obamacare and their option, but rather their plan or the chaos of a world stuck with Obamacare, where the death spiral has priced healthy customers out of the market, leaving only older, sicker customers.
The CEO of Aetna, which is pulling out of Obamacare’s exchanges at the end of this year, said last month that the death spiral has already begun.
Obamacare attracted more than 12 million people to sign up on the exchanges this year despite rampant talk of repeal. Enrollment was down slightly though, compared with 2016, and was short of Obama administration targets.
Many insurers increased their rates by double-digit percentages this year because earlier rounds failed to attract the types of young and healthy enrollees needed to keep costs down. Others withdrew from markets altogether.
Lanhee J. Chen, a fellow at Stanford University’s Hoover Institution who advised 2012 Republican presidential nominee Mitt Romney on health care policy, said the CBO is assuming that taxpayers should have to keep throwing money at rising rates while giving the individual mandate more credit than it deserves.
For instance, the IRS says more than 19 million people either paid the penalty or received an exemption from the mandate.
“To put that in context, that number is almost double the number of people who were enrolled in Obamacare’s exchanges as of last year,” he said.
Rep. Tom Cole, Oklahoma Republican, said the evidence speaks for itself in his state, where premiums for popular benchmark plans spiked by 69 percent this year, the second-biggest average percentage increase behind Arizona’s 116 percent. Oklahoma is also down to one insurer on the exchange.
Insurers raised rates by the single digits in several other states, however, while premiums were going down, on average, in Indiana, the Obama administration said in a highly publicized report last fall.
Nonpartisan analysts say it’s important to remember that insurance is pooled at the state level, so certain markets would remain fragile under Obamacare or a Republican alternative.
The CBO analysts also said the Republican bill, dubbed the American Health Care Act, would have a stable marketplace.
“CBO clearly does not see a death spiral under either the ACA or the AHCA. Though it is important to note their caveat, which is that the market would be stable in most areas,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation, with an emphasis on “most.”