Donald Trump’s election victory means their efforts will no longer be in vain. Yet despite Republicans’ confidence in Obamacare’s shortcomings, what exactly will happen to the law when remains something of a mystery.
Because Republicans lack the 60 votes necessary to overcome a filibuster in the Senate, they will be unable to pass a comprehensive health-care bill without Democratic votes. Instead, they must rely on a process dubbed “budget reconciliation”, which allows a simple majority to pass tax-and-spending measures. Republicans used this process to send a law repealing parts of Obamacare to the president’s desk. President Obama vetoed it early this year. Next year, President Trump will probably sign it.
That will be the beginning, rather than the end, of the Republicans’ task. On its own, the reconciliation bill is simply a "wrecking ball" of the ACA.
Why? It would remove the subsidies currently available to poor buyers on the ACA’s insurance exchanges. It would nix the individual mandate, which fines Americans who can afford health insurance but go without it. Both moves would reduce the number of healthy people buying coverage. But a rule banning insurers from turning away those with pre-existing medical conditions would remain. As a result, premiums, already up by an average of 22% this year, would rise further, deterring yet more healthy customers. The “death spiral” that some say already afflicts the exchanges would thus accelerate.
Eventually, there would be no market left to serve those who are not covered through their employers or by other government programs. This includes 12 million people who currently buy on the exchanges, and 9 million who purchase directly from insurers. As well as killing the individual market, the bill would also undo the expansion of Medicaid, government-provided insurance for the poorest, which was largely responsible for the fall in the number of uninsured Americans after the ACA was passed. Such a painful death for Obamacare will not reflect well on the executioners.
The best guess as to what a replacement might look like is a somewhat vague 20-page plan penned by Paul Ryan, Speaker of the House. This includes replacing Obamacare’s targeted subsidies for the poor with a universal tax credit increasing with age. Republicans insist that with enough deregulation, premiums will fall dramatically.
Freed from regulation, insurers are likely to design plans which appeal only to healthy buyers. Speaker Ryan’s fix is to put unhealthy people into “high-risk pools” with higher premiums and big subsidies. States have tried high-risk pools in the past. Typically, such high-risk premiums are very expensive, capped at 200% of standard insurance rates and too expensive for most people.
Whatever Congress decides to do, it must move quickly. Few insurers will want to remain in a wobbly market with an uncertain future. Mr. Trump’s changeable views complicate matters. He now says that he wants to retain the rules on pre-existing conditions, which Speaker Ryan would phase out. Having spent so long diagnosing the ills of the ACA, the Republicans must now agree on a cure - let's see what they do.
Michael is an executive coach, entrepreneur, investor, and strategist with 30 years of experience leading investor-backed, high-growth organizations.
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