Notice & Comment

Patching the ACA at the state level.

When it comes to repealing the ACA, one of the trickiest questions concerns timing. Congressional Republicans don’t want to pitch 20 million people off of their insurance right away. Nor do they want the midterm elections to be fought amidst the collapse of the individual market.

At the same time, they’re committed to repeal. To thread the needle, Republicans initially said they’d delay the effect of repeal until 2019 or maybe 2020. But even that might be too soon. Now, Republicans are toying with the idea of a four-year delay, until 2021.

Lost in all this, however, is precision about what will be delayed—and what won’t be. The reconciliation bill that Obama vetoed, and which is serving as a template for repeal, would have delayed the subsidy cuts and the repeal of the Medicaid expansion. All of the tax cuts, in contrast, would have taken effect immediately.

That included the individual mandate. Remember, it’s a tax. Heck, the reconciliation bill didn’t just eliminate the mandate. It made the repeal retroactive. If you paid the mandate penalty in 2015 or 2016, you could get your money back.

Congress doesn’t have to take the same approach when it repeals the ACA for real. Negotiations over timing are fluid and ongoing. But the individual mandate is the most unpopular part of the ACA and its repeal has been a centerpiece of Republicans’ political strategy. Retaining it for several years might be hard to stomach.

If Congress zeroes out the individual mandate—and my hunch is that it will—it’s game over for the exchanges, even if subsidies continue to flow for a few years. In many states, the exchanges are already precarious. Without the spur to get healthy people into the market, adverse selection will do its inexorable work.

Congress may try to devise an alternative—a continuous-coverage requirement, perhaps, or maybe auto-enrollment. But those alternatives probably can’t be passed in a reconciliation bill because they don’t involve revenues or outlays. Even if one or the other is adopted, it’s unlikely to be effective enough to forestall huge premium spikes for 2018 coverage.

So unless Republicans opt to retain the mandate for several years, the states should brace themselves for the collapse of their individual insurance markets. It’s that simple.

But here’s a wild idea. Nothing prevents state legislatures from adopting their own individual mandates. What if California, say, passed a law with the same structure as the federal mandate, to go into effect when and if the federal mandate lapsed?

The gambit might not work. Insurers might still head for the hills because they doubt that the Republicans will pass a viable replacement. But the California exchange is healthy and, if a mandate replacement is in place by mid-2017, the economic picture for insurers in 2018 and 2019 won’t look all that different than it does today. There’s a chance that California could save 1.6 million people from losing coverage.

The strategy won’t fly in most states. In Michigan, for example, a Republican-dominated legislature isn’t about to adopt an individual mandate. But its prospects might be brighter in blue states like New York, Connecticut, Washington, and Oregon.

Why not give it a shot? Republicans say they want to replace Obamacare with something that gives more power to the states to chart their own path. Maybe states should take them at their word.


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