On Death Spirals
As we’ve noted at various points today, the GOP is reportedly getting ready to try to pass a “skinny” repeal of Obamacare. At the moment, that would mean effectively ending the individual mandate, in addition to ending the employer mandate and a tax on medical devices. Ending the individual mandate is a complicated matter. It’s one of the least popular aspects of the Affordable Care Act, but it’s also in theory what makes the law work: It requires most people to have insurance, which is supposed to help create a good mix of healthy and sick people in the insurance markets, which should in turn make insurance affordable.
The provision has had mixed success. On the one hand, there’s been a serious lack of enrollment among people whose incomes are far above the federal poverty line, which has certainly contributed to higher premiums. On the other hand, the markets have largely stabilized. What that latter point means is that, even though the markets are not working for everyone, they are also not in a death spiral, as the president and Republicans have repeatedly said. That’s because low-income people whose incomes fall just above the poverty line receive significant financial help to buy insurance; whether or not premiums go up, they pay the same amount for insurance, and they have generally stayed enrolled.
If you take away the individual mandate, those people will probably stay enrolled, meaning we still wouldn’t see a death spiral (though people currently enrolled on the marketplaces who receive few or no subsidies are likely to be priced out), so long as the Senate also keeps the subsidies that make insurance cheaper. That includes not only subsidies for premiums, but also “cost-sharing reductions” that help pay for co-payments and deductibles. It’s not clear how Congress and Trump will handle those latter payments, which are the subject of a federal court case and have been wrapped up in the repeal battle.