Republicans Mull Dropping Surcharge for Uninsured in Bill

  • Provision aimed at encouraging Americans to buy insurance
  • GOP bill faces criticism from conservatives and moderates

The GOP Alternative to Obamacare Explained

Republican leaders in Congress may scrap a provision in the House GOP’s Obamacare replacement bill that would require insurers to charge a 30 percent penalty to customers who go without coverage for at least 63 days.

“There was discussion of the 30 percent penalty for people” who don’t maintain continuous coverage, said Representative Phil Roe of Tennessee, a medical doctor and member of the GOP Doctors Caucus. He said lawmakers were “looking at it -- and saying, is this going to discourage people from getting insurance?”

John Cornyn, the No. 2 Republican senator, confirmed that scrapping the 30 percent surcharge is “being discussed,” but added, “I’m not aware of any decisions.” The Texan said the goal is to craft a bill that can pass the House and Senate.

Republicans face a narrow path for getting the health care measure through the House, particularly after the Congressional Budget Office estimated it could add 24 million Americans to the ranks of the uninsured in a decade. House leaders said they hope to put the measure up for a vote next week, but said the timing could slip. The House Budget Committee is set to advance the measure Thursday.

“The House bill does so much for you,” President Donald Trump said at a political rally in Nashville on Wednesday. “It repeals hundreds of billions of dollars in Obamacare taxes. It provides tax credits for people to purchase the care that is rightfully theirs.”

The bill, he said, “will get rid of Obamacare and make health care better for you and for your family.”

Vice President Mike Pence told House Republicans Wednesday afternoon that they’ve arrived at an important “moment of history,” according to Ways and Means Chairman Kevin Brady. 

Pence told the meeting that several changes to the bill are on the table, including changes to the phaseout of Obamacare’s Medicaid expansion and the new bill’s work requirement. But he avoided making any commitments on the various -- and sometimes conflicting -- changes being sought by different factions of House Republicans.

“We’re all collaborating to make sure we get this exactly right,” House Speaker Paul Ryan told reporters Wednesday evening. He said Trump’s administration is involved in working out the House bill.

Building a Healthy Pool

The 30 percent penalty — designed as a substitute for Obamacare’s requirement that almost everyone have health coverage — is aimed at encouraging young and healthy people to buy insurance.

Because the House health-care bill requires insurers to cover people with pre-existing conditions, economists say that rule must be paired with provisions to entice healthy people to get covered in order to avoid a sick and costly risk pool. Some lawmakers, however, are worried that the 30 percent penalty would have the opposite effect of discouraging more young people from buying insurance.

Roe said if it were dropped, it would need to be replaced with something else.

“There needs to be an encourager,” he said. “Right now, we have a mandate and many people are obviously choosing not to take it.”

It was unclear Wednesday what, if anything, would be the substitute. Roe said discussions of how to amend the bill are an “ongoing process.”

Trump said in Nashville that “at the very core of Obamacare was a fatal flaw: the government forcing people to buy a government-approved product.”

‘Drive Down Premiums’

One suggestion by Texas Senator Ted Cruz, is to scrap the requirement to cover pre-existing conditions along with other insurer regulations, which he called the “principal driver of skyrocketing premiums.”

“The only way to drive down premiums is to repeal the insurance mandates, and to do so immediately, not delayed over many years,” Cruz told reporters.

But those regulations are a popular feature of Obamacare that many Republicans have no appetite to repeal. Trump has also said he wants to maintain that element of the law.

The CBO and conservative health-care experts have raised questions about the effectiveness of the 30 percent penalty in encouraging young and healthy people to maintain coverage.

The CBO projected that about 1 million people would be induced by the penalty to purchase insurance in 2018. But in most years after 2018, about 2 million fewer people would buy insurance because they would either have to pay the surcharge or have to provide documentation that they’ve had continuous coverage.

The CBO also said that healthier Americans were more likely to be deterred from purchasing coverage under that system.

‘Exacerbate the Problem’

Yuval Levin, who has advised Ryan in the past on health-care policy, wrote in the National Review that a 30 percent penalty may "exacerbate the problem it is trying to mitigate" because it’s likelier to "drive away healthy people than sick people."

Senator Bill Cassidy of Louisiana, a physician, said he has heard conservative health care experts suggest that the 30 percent surcharge is "not strong enough" to achieve its goal.

"The CBO score is already quite remarkable," Cassidy said. "So it would just make it perhaps more remarkable, but I’m not sure the overall impact is different."

He also said he doubted it could clear a Senate rule that any provision in bills passed through the so-called reconciliation process directly affect taxes or spending.

Cornyn said there are "a number of items" in the House bill being discussed for changes, but wouldn’t elaborate. He said the goal was for the Senate to "take up and pass the bill that the House sends us," ideally without "substantial changes," but he said it may need to be amended in the Senate.

Meanwhile, Senator John Thune, a South Dakota Republican, said he is working on a plan to alter tax credits in the bill -- intended to help people buy insurance -- to provide more to lower-income people, while limiting how much goes to higher-income individuals. The subsidies in the GOP bill are largely based on age, and Thune’s proposal would make them more income-based by creating a larger tax credit for those who earn less than $40,600, his office said.

Thune’s proposal is designed to address complaints from Republican senators who say the House bill doesn’t do enough to help older, low-income Americans who are not yet 65, the age to qualify for Medicare.

— With assistance by Zachary Tracer, Erik Wasson, Anna Edgerton, and Shannon Pettypiece

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