If you want to understand how awkwardly constructed the House Republican health care bill is, and how unlikely its policy scheme is to work, look no further than its continuous coverage requirement. It’s just one of the many ways that Republicans are trying to embrace Obamacare’s ideas without technically embracing Obamacare.
The rule requires insurers to tack a 30 percent, one-year “premium surcharge” onto the bill for anyone who has gone more than 63 days without coverage. The requirement is designed to create an incentive for people to avoid going without coverage, in hopes of maintaining an insurance pool that is healthy enough to be viable and affordable. If too many people wait until they are sick to buy coverage, then insurance premiums rise, more people drop out of the system, and the whole thing collapses.
Basically, the continuous coverage provision is a replacement for the individual mandate—with a crucial difference: It is likely to be even less effective. Its chief virtue is that it allows Republicans to say that the GOP health care bill repeals Obamacare’s individual mandate.
Because the continuous coverage requirement is a mandatory charge levied by insurers rather than a penalty on individuals who fail to buy a product, it doesn’t raise the same sort of constitutional concerns that plagued Obamacare’s mandate.
But as a policy mechanism, it’s virtually certain to be worse than a failure. Instead of giving people an incentive to stay covered, it would give healthy people an incentive to avoid coverage until they needed it.
That’s because the main thing it really does it give people who don’t have coverage an incentive to avoid buying insurance. But someone who lacks coverage and then gets sick with some expensive malady suddenly has a fairly significant incentive to pay the surcharge, which only lasts a year and in many cases is unlikely to be greater than the cost of treatment, while someone who is still healthy has an incentive to stay uninsured.
Here’s how Robert Laszewski, a consultant for the health insurance industry, recently explained it:
The Republicans now want to create a scheme that doesn’t require anyone to sign up. But when they get sick enough that they need insurance, they will be able to quickly do so by paying a paltry 12-month 30% premium surcharge.
For example, a person paying $5,000 for health insurance would pay a one-time total $1,500 penalty! A family paying $10,000 in annual premium would pay only a $3,000 penalty for any late enrollment!
Obamacare is so poorly constructed it is literally an anti-selection machine. The Republican proposal is worse.
Health policy experts have found evidence that Obamacare’s mandate penalties are not particularly powerful motivators. The GOP’s provision isn’t just weak. It encourages the opposite behavior of what is intended.
The reason that Republicans included the provision is because the House health care bill leaves Obamacare’s key insurance regulations in place. Like Obama’s health law, the American Health Care Act requires insurers to sell to everyone, and restricts carriers from charging more based on an individual’s health history. Those regulations are what made the mandate a crucial part of Obamacare’s policy scheme. When states tried to implement the insurance market regulations without the mandate, their individual insurance markets melted down.
Reports this week suggest that House Republicans may soon ditch the provision. That merely leaves the original problem in place: How to make insurance markets viable with preexisting conditions rules in place? Obamacare’s attempt at a solution was the mandate. Republicans do not appear to have a solution at all.
The core problem for Republicans, and for the House health care bill, is that they are trying to replicate Obamacare’s basic structure in a form that is somehow not Obamacare. It is not the same exact plan, but like Obamacare it relies on a system of insurance market subsidies and regulations, along with financial penalties for those who don’t stay covered.
Obamacare was already a politically compromised piece of legislation with serious flaws and real uncertainty about its long-term stability. Republicans have decided to use an unstable version of its already-kludgy policy scheme for the individual market as a foundation for their own plan, buying into its essential ideas even as they claim to reject them.