Taking more time with the Obamacare replacement bill

Yuval Levin uses a National Review Online column to urge U.S. House Republicans to reconsider key components of their bill to replace the Affordable Care Act.

Three of its key features, corresponding to the CBO’s three questionable assumptions, should get some attention in particular.

First, most conservative health-reform plans in recent years proposed to make an individual mandate unnecessary by using “continuous coverage” protections to encourage healthier people to buy insurance. These protections would eliminate Obamacare’s form of community rating (by which insurers are prevented from basing premiums on individual health risks) and then reintroduce a version of community rating available only to people who have been continuously insured. So as a benefit of being continuously covered, consumers would get guaranteed renewability of their existing plan regardless of changes in health and also some constraint on risk rating when switching plans. That would make insurance much more attractive to healthier people, since they could get in at a lower rate and then either keep their plan at that rate or have some protection from the full effects of preexisting conditions on their premium when switching to another plan.

The new Republican proposal doesn’t do that. Instead, it imposes a 30 percent surcharge on the premiums of people who have been without coverage for more than three months. This is certainly an inadequate spur to get covered, and indeed it would tend to discourage healthier people from getting insured.

Second, the new tax credit envisioned by the Republican bill is means-tested at the top (phasing out for individuals with more than $75,000 in income) but not at the bottom (and so not phasing in with greater support for lower-income people just above the new Medicaid threshold). This means that, although the bill pursues a very aggressive and welcome reform of Medicaid’s basic funding mechanism, it does not do enough to enable people with incomes just above Medicaid eligibility to purchase attractive coverage.

And third, although the bill does deregulate some of Obamacare’s most onerous insurance rules — including the premium age bands that impose higher costs on younger people and the actuarial-value requirements that lead to higher premiums — it does not reverse Obamacare’s core federalization of insurance coverage. It leaves in place Obamacare’s guaranteed-issue and community-rating rules and most of its other insurance regulations.

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