The single biggest feature of Obamacare is its subsidies: if you buy health insurance from an Obamacare exchange, you’re eligible to receive federal tax credits that substantially reduce the net cost of your premiums. However, this applies only to health plans on the exchanges, which have to obey rules about minimum coverage levels.
Naturally, Donald Trump hates this—though for reasons that remain murky aside from his general hatred of Barack Obama and all his works. In any case, he’s now aimed a howitzer at Obamacare’s subsidies:
The Trump administration is urging states to tear down pillars of the Affordable Care Act, demolishing a basic rule that federal insurance subsidies can be used only for people buying health plans in marketplaces created under the law.
….States could allow the subsidies to be used for health plans the administration has been promoting outside the ACA marketplaces that are less expensive because they provide skimpier benefits and fewer consumer protections. Even more dramatic, states could let residents with employer-based coverage set up accounts in which they mingle the federal subsidies with health-care funds from their job or personal tax-deferred savings funds to use for premiums or other medical expenses.
So if you have a scammy little plan with huge deductibles and lots of stuff that’s not covered, no problem! Trump will let you use your Obamacare tax credits to pay for it.
Now, you may be wondering what’s wrong with this. Why not let people buy skimpy plans if they want to? The answer can get a little complicated, but there are two basic problems with this:
- First, one of the purposes of Obamacare was to set minimum federal levels for health care plans. This protects consumers from rip-off micro-plans with lots of fine print that you only notice after you try to file a claim and get rejected. If you want to take your chances with a plan like this, that’s fine, but there’s no reason that taxpayer dollars should fund this kind of junk. Obamacare insists on minimum quality levels, which makes shopping easier and keeps the scammers at bay.
- Second, and more important, Obamacare requires insurers to charge everyone the same amount. This means Obamacare creates one big pool of customers in each state, with the healthier folks essentially subsidizing the sicker folks—which is how health insurance is supposed to work. However, if healthy folks can choose cheap micro-plans, they’re removing themselves from the pool. The only people left are those with average or poor health, and naturally insurers will have to raise their prices if those are the only customers in the pool. Eventually, this produces two separate markets: a cheap, scammy one for the young and healthy and an expensive, high-quality one for everyone else.
Oh, and this plan to allow Obamacare subsidies to be used for non-Obamacare plans is probably illegal too.
In any case, this is something Republicans have been hellbent on ever since they took over in 2017. A key part of all their proposals has been something—anything—that will split up the market so that insurance becomes more expensive for the older and sicker. This price increase will cause even more people to drop out, leaving a pool that gets continually older, sicker, and more expensive. This is a well known doom loop that’s called a “death spiral” in the health insurance biz.
So this is the latest Republican attempt to touch off a death spiral and to just generally screw with health insurers, who have only recently begun to finally get a good handle on what the Obamacare pool looks like and what kind of premiums they need to charge. Previous attempts to scare insurers out of the Obamacare market looked promising until this year, when lots of insurers returned to Obamacare, so now it’s time to try again.
These guys will never give up. They are relentless in their efforts to ruin Obamacare and take away health coverage from millions. Why? At this point, after five years of experience, we know that Obamacare is working tolerably well and that it’s done little or no damage to the broader health care industry. But it is funded by some moderate taxes on the wealthy, and I guess that’s simply intolerable. The only plausible conclusion is that Republican leaders and their big donors are just bad people, meanspirited and insatiable in their greed. No other explanation really seems to work.