Senate Republicans are gambling that repealing Obamacare’s individual mandate will make the math work on their tax bill.
But the $340 billion in savings comes at a huge cost: 13 million fewer Americans are projected to have insurance in 2027, and premiums are expected to rise.
That could put the votes of Sens. Susan Collins (R-ME) and Lisa Murkowski (R-AK) in jeopardy. Republicans can lose only two of their 52 members and still pass the tax legislation; Collins and Murkowski already voted against a bill that did little more than repeal the individual mandate over the summer.
So Senate leaders are making a counteroffer: They will simultaneously pass a bill to stabilize the Obamacare marketplaces, negotiated by Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA). The pitch is that this will help offset the consequences of repealing the mandate. The markets will be strengthened. Worried senators can thus support a tax bill with the mandate’s repeal.
Murkowski signaled this move might work for her.
“If the Congress is going to move forward with repeal of the individual mandate, we absolutely must have the Alexander-Murray piece that is passed into law,” she told Roll Call late last week, though she softened her stance slightly in a later statement.
Collins also sounded open to the possibility, though she wants an additional infusion of federal dollars to shore up the insurance markets.
But health policy experts say Alexander-Murray isn’t nearly enough to offset the consequences of repealing the mandate. The individual mandate, as unpopular as it is, is one of the pillars of the health care law. The stabilization bill does little more than guarantee payments to health insurers that were only in doubt because President Trump cut them off.
The truth is repealing the mandate but boosting Obamacare with Alexander-Murray would still leave the markets worse off — maybe even worse than if they had simply repealed the mandate on its own.
“Why would you make things worse when you just decided to make things better? That’s a logical question,” said Robert Laszewski, a consultant who works with the health insurance industry. “Nothing the Republicans have done about the insurance exchanges has made any sense since Inauguration Day!”
Why Alexander-Murray won’t fix the individual mandate’s repeal
The Senate tax plan would repeal the individual mandate, which requires every American to have insurance or pay a penalty, without replacing it. The Congressional Budget Office estimates that it would lead to 13 million fewer Americans having health coverage in 2027 and premiums increasing by an additional 10 percent in most years, compared to current law.
So the mandate’s repeal leads to a smaller, more expensive insurance market. The mandate is designed, after all, to bring healthier people into the market — without it, we would expect the remaining customers to be sicker and therefore cost more.
Alexander-Murray doesn’t really take any steps to address those problems. The stabilization bill is actually dealing with a whole different set of issues, brought on by Trump’s overt sabotage of the health care law.
That legislation would guarantee federal payments to health insurers for what are called cost-sharing reductions, discounts that insurers are required to provide to their lowest-income customers, for the next two years. Trump has ended those payments for now, amid an ongoing Republican lawsuit challenging the payments’ legality without congressional approval. (The bill would also give states some new flexibility under an Obamacare waiver program.)
The uncertainty around the cost-sharing payments raised premiums for 2018 by an additional 20 percent or more. Alexander-Murray would help restore confidence that they would be paid and prevent further increases in future year, but that doesn’t really do anything to counter the effects of repealing the individual mandate.
Alexander-Murray is best thought of as an attempt to mitigate the damage that Trump has already done to Obamacare’s insurance markets. But repealing the mandate in the tax plan would erode the markets even further, and this other bill doesn’t have any provisions designed to address that new harm.
“The primary benefit of Alexander-Murray would be symbolic. It would be a sign that some bipartisan effort aimed at stabilizing the insurance market is possible, potentially boding well for future efforts,” Larry Levitt, senior vice president at the Kaiser Family Foundation, told me. “But, beyond the symbolism, it really wouldn’t do much to offset the effects of repealing the individual mandate, and could arguably even make things worse.”
That’s because most states and health insurers found a way to price their plans after the loss of cost-sharing reductions so that they actually yielded better deals for many Americans who buy insurance through Obamacare. If Alexander-Murray were passed, it would make those strategies unnecessary, eliminating these cheaper deals for people.
Then when you add in the repeal of the mandate, and the resulting rise in premiums, you have a market that might be even worse off than if Republicans had simply repealed the mandate and not passed Alexander-Murray. (David Anderson at Balloon Juice broke down this counterintuitive possibility concisely here.)
The exact effects can be debated and might be simply unknowable. But what we can conclude, according to these experts, is that passing Alexander-Murray won’t be nearly enough to negate the consequences of repealing the mandate.
Republicans are asking Collins and Murkowski to ignore this problem
Nevertheless, for the time being, Senate leadership’s strategy will be to convince Murkowski and Collins, both of whom are uncomfortable with repealing the mandate because of its effects on the insurance markets, that passing Alexander-Murray would address their concerns.
Senate Republicans are taking advantage of the superficial logic — repealing the mandate and Alexander-Murray both affect the insurance market, so it makes sense to tackle them at once — to paper over the fact that the tax bill and the stabilization bill are actually dealing with two totally different issues within the health care law.
“Anybody who wants to sign up can,” Sen. Rob Portman (R-OH), who is deeply involved with the tax plan, told reporters last week about the mandate’s repeal. “All it says is you aren’t penalized if you don’t — and since the Supreme Court called it a tax, I think it’s appropriate to have it included in the tax bill.
“By putting it in there, we have a better chance of moving forward with something along the lines of what Sen. Alexander is talking about,” he continued. “Those, I think, complement one another.”
It’s a high-stakes gamble for Senate leaders. Collins or Murkowski could prove to be the decisive vote on the tax overhaul.
With two votes to spare, leadership doesn’t have much wiggle room. Sen. Ron Johnson (R-WI) has already said he’s opposed, though he has left the door open to backing the bill. Several others, including Sens. Jeff Flake (R-AZ) and Bob Corker (R-TN), have signaled their concerns about the bill’s $1.5 trillion increase to the federal deficit.
Collins is probably the toughest get — she has sounded bullish at times about tax reform, but she is easily the most moderate Republican member of the Senate. She has objected strongly to adding the mandate repeal to the tax bill, and she wants more insurance market aid than Alexander-Murray would provide: an infusion of federal reinsurance funding.
All of that makes Murkowski close to a must-have for Senate leaders, if Collins and one of Flake, Corker, or Sen. John McCain (R-AZ) ultimately oppose the bill.
She has said mixing health care with tax reform makes her uneasy.
“Tax reform is complicated enough, and when you add health care reform in at the same time, it continues to complicate it,” Murkowski told reporters last week — which might help explain why she wants Alexander-Murray to be passed in tandem.
It probably doesn’t help that Senate Democrats have also warned they’ll vote against Alexander-Murray if it is being used to help advance a tax bill that they oppose.
But regardless, the stabilization bill won’t solve the problems that the Republican tax plan would create. Passing Alexander-Murray is simply a cover, one divorced from the policy reality created by repealing the individual mandate.
Senate leaders are hoping that’s nevertheless enough for Murkowski and any other Republicans wavering about adding health care to the volatile tax debate.