No Obamacare Repeal, but Trump's New Rules Could Allow Cheaper Plans

Draft regulations would expand access to association health plans.


Ron Sachs/SIPA/Newscom

If you take President Trump's word for it, Obamacare is going, going gone. Trump may believe this, or at least wish it were true, but it's not. The law's persistence poses an ongoing challenge for Republicans in Congress, who still have no consensus about how to respond to either the law's continued existence or its structural flaws. But new proposed rules issued by the Trump administration today intended to expand access to low-cost coverage may provide a workaround to the health law.

In October, as the 2017 open enrollment period was about to begin, Trump declared that "Obamacare is finished. It's dead. It's gone." After months of unsuccessful efforts by congressional Republicans to pass repeal legislation, Trump made a belated decision to end payment of the law's cost-sharing reduction (CSR) payments to insurers, which a federal judge had ruled were unconstitutional. He also slashed the promotional budget for the health law by 90 percent. Republicans in Congress may have failed, but Trump had single-handedly wiped Obamacare from the books. "There is no such thing as ObamaCare anymore," he said.

Two months later, congressional Republicans passed, and President Trump signed into law, tax legislation that repealed Obamacare's individual mandate starting in 2019. Once again, Trump responded by insisting that the law was done for. "When the individual mandate is being repealed, that means Obamacare is being repealed," Trump said. "We have essentially repealed Obamacare, and we will come up with something much better."

Like a real estate developer saying that a building is essentially finished when the site has barely been cleared, Trump is vastly exaggerating the effect of the GOP's recent actions.

Although the mandate was a central component of the law's policy scheme, in no sense has Obamacare been essentially repealed. On the contrary, its major spending provisions and insurance market regulations remain in place. About 8.7 million people signed up for coverage through the federally run insurance exchange system, which is nearly as many as in the previous year. (The impact of the advertising budget was often overstated, and the cuts appear to have had little effect.) Millions more are enrolled in state-based exchanges and the law's Medicaid expansion.

Premiums are up by an average of 34 percent for typical exchange plans this year, but the decision to cut off payments for CSR payments has resulted in cheaper out-of-pocket premium prices for many people who receive subsidies. Obamacare may be partially hobbled, but it is hardly finished, dead, or gone.

The question for Republicans, then, is what to do next. And the problem, as always, is that there is little agreement amongst GOP lawmakers about how to proceed.

One approach would be to attempt to stabilize the law the law in its current form by making payments to health insurers. That is the approach favored by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.), who have jointly proposed legislation funding the cost-sharing subsidies, which were called for in the statute of the law but never appropriated. The argument for this approach is that it would bring some certainty to the exchanges, helping to reduce premiums and, in the long run, according to Congressional Budget Office estimates, overall spending on the law, because the government would end up spending less on subsidies. It's hard to see this approach gaining much traction, however, because Democrats don't mind the status quo, which makes the consumer-share of premiums cheaper for most people who get subsidies, and because Republicans don't want to be seen propping up the exchanges.

Another way of overhauling law would be to convert its spending on both the exchange subsidies and the Medicaid expansion into a system of block grants to states. This is roughly the idea proposed by Sens. Lindsey Graham and Bill Cassidy, who argue that doing so would provide states with more flexibility to manage their health care programs as they see fit. But it's hard to see this proposal moving forward either, thanks to a variety of objections from Republican lawmakers. Sen. Rand Paul (R-Ky.) has argued that it doesn't constitute true repeal because it would retain most of Obamacare's spending, and would mostly serve to reallocate money from blue states that expanded Medicaid to red states that did not. Sen. John Kennedy (R-La.) worried that the proposal would make it easier for states to set up single-payer systems. Although the block grants probably wouldn't be large enough to fully fund single payer programs, other critics have similarly noted that the proposal, which limits how states can spend the money, is designed in a way that would encourage states to expand government-run insurance programs.

The main structural barrier to these ideas is that would require action from Republicans in Congress. But after spending the better part of last year struggling, and ultimately failing, to pass major health care legislation, GOP legislators may be wary of returning to the project. Senate Majority Leader Mitch McConnell said as much last month, noting that Republicans were, if anything, at a disadvantage relative to last year following the Alabama special election. "Well, we obviously were unable to completely repeal and replace with a 52-48 Senate," he said. "We'll have to take a look at what that looks like with a 51-49 Senate. But I think we'll probably move on to other issues."

The problem, in other words, is Congress. Yet even if Congressional Republicans are unable or unwilling to act, that does not mean that no action is possible.

Last year, President Trump signed an executive order calling for federal agencies to expand access to association health plans and limited-duration insurance coverage. And this morning, the administration released new rules governing association plans. The proposal would allow small businesses to band together to form purchasing groups, enabling them to either buy insurance that is not subject to Obamacare's essential health benefits rules or to self-insure. Basically, it means that a group of small employers can opt to be treated more like a single large employer.

This idea has been a favorite of Sen. Rand Paul's for years, and he has already issued tentative praise for the proposed rules. The primary goal is to make it easier to purchase inexpensive coverage that is exempt from Obamacare's benefit mandates. In the process, it may have the effect of unwinding Obamacare, at least a little, by drawing people out of the exchanges. The exchanges might not fully unravel, or even be affected much at all. This year's enrollment numbers suggest that demand is fairly inelastic. But this is, at least, a thread that can be pulled.

There are risks to this strategy, namely that letting the exchanges degrade could create political pressure for more significant policy interventions; dysfunctional government programs have a tendency to create demand for even bigger government responses. It's clear, at this point, that congressional Republicans do not currently have the ability to coherently respond to this sort of pressure, or to make any concerted legislative effort to address health policy at all. But that is just to say that it does not resolve the fundamental problem that Republicans have struggled with for a decade, which is a lack of consensus on health policy goals, and the resulting inability to rally around legislation to achieve them.

If Republicans truly want to move past Obamacare, they will need to figure out what they want from health policy at the federal level, how to sell it to the public, and how to package their ideas as legislation. Otherwise, they risk ceding the issue entirely to Democrats. (Some Republicans appear to have already accepted that outcome. As a senior White House aide recently said to The Daily Beast, "Taxes are our issue. Health care is theirs.") Until that happens, proposals like the one released today provide a temporary, imperfect escape valve from a law that, despite the president's pronouncements of death, stubbornly refuses to go away.