A deal brokered by Sen. Susan Collins, R-Maine, that will allow her to support the Republican tax plan would reduce insurance premiums for Obamacare plans and increase enrollment, according to an analysis by the consulting firm Avalere Health.
But that analysis didn't take into account the effects of eliminating the individual mandate in Obamacare, something the Senate bill would effectively do by eliminating the penalty associated with not getting health insurance.
The estimate showed that Collins' proposed reinsurance program, which would inject $10 billion into the health insurance system distributed evenly over two years, would reduce premiums in 2019 by 4 percent and increase enrollment by 180,000 people. A reinsurance program, which has been proposed by Collins and by Sen. Ben Nelson, D-Fla., would help insurers pay for the medical costs of the most expensive enrollees, and allow premiums to go down for other enrollees.
“Reinsurance is an effective policy solution, but it requires considerable federal funding to have a meaningful effect for consumers,” said Caroline Pearson, senior vice president at Avalere. “In order to substantially lower premiums, a reinsurance program would need more federal funding over a longer duration.”
If a bipartisan Obamacare bill known as Alexander-Murray also passes, the analysis showed, then premiums in 2019 would decrease by 18 percent and enrollment would increase by 1.3 million people. That bill would provide cost-sharing subsidies to insurers to help reduce out-of-pocket costs to low-income people on Obamacare, and Collins pushed for both as a condition of supporting the GOP tax bill.
“Together, funding for reinsurance and paying the cost-sharing reductions would significantly reduce premiums,” Chris Sloan, senior manager at Avalere, said in a statement. “However, those effects only continue as long as the federal funding keeps flowing.”
Avalere experts note, however, that these stabilizing effects could be overshadowed by the consequences of repealing the Affordable Care Act’s individual mandate, which is included in the Senate’s version of the tax reform bill. Avalere’s modeling makes estimates relative to current law and does not assume the individual mandate is repealed, but the Congressional Budget Office has estimated increased premiums and reduced enrollment in the exchanges if it happens, and Avalere acknowledged that this change would have an impact.
“While funding reinsurance and cost-sharing reductions would help mitigate the impact of mandate repeal, eliminating the requirement to purchase coverage would create additional uncertainty in the market,” said Elizabeth Carpenter, senior vice president at Avalere. “As a result, it is important not to overlook the negative impact of repealing the individual mandate on long-term market stability."