![Media reports indicate that Senate Majority Leader Harry Reid (D-NV) and Republican Leader Mitch McConnell (R-KY) are nearing an agreement on temporarily funding the government and increasing its borrowing authority. [Credit: Huffington Post]](https://i0.wp.com/www.dougsbriefcase.com/blog/wp-content/uploads/2013/10/Credit-huffpost.jpg)
Media reports indicate that Senate Majority Leader Harry Reid (D‑NV) and Republican Leader Mitch McConnell (R‑KY) are nearing an agreement on temporarily funding the government and increasing its borrowing authority. [Credit: Huffington Post]
Senate leaders are reportedly closing in on a deal that would both fund the government and restore its borrowing authority for a few months. The deal reportedly contains two changes to the health care law, one proposed by Republicans, the other by Democrats. The provision backed by Republicans is politically misguided, unworkable and would do little to impede the law’s implementation; the provision backed by Democrats, by contrast, appears to complicate implementation of a law whose launch has so far not gone smoothly. Republicans who oppose Obamacare should join Democrats in seeking changes that would damage its implementation.
Before going on, I would note that this blog is based on media reports outlining the terms of a potential deal between Senate Majority Leader Harry Reid (D‑NV) and his Republican counterpart Mitch McConnell (R‑KY). At this writing, no deal has been concluded and no legislative language is available, so there remains a good deal of fuzziness about the potential agreement. I’ve elected to post this anyway, in an effort to keep pace with rapidly changing events. But I do so with a caveat that I will state more explicitly later in the post.
Here are the deal’s broad outlines, as reported last night by The Hill and Roll Call:
• Government funding would be provided through January 15;
• Its borrowing authority would be extended through February 7 or 15;
• A new committee would be created to formulate budgetary proposals by December 13;
• At Republican insistence, the government will more scrupulously check the income of applicants for health insurance to determine whether and to what extent they might qualify for subsidies; and
• At Democratic insistence, a tax levied on everyone who currently has employer-sponsored coverage would be delayed for one year.
The provision authored by Senate Republicans is aimed primarily at people with relatively low incomes. In states that have chosen to expand their programs, people with incomes under 138 percent of the federal poverty line ($15,856 for an individual, $32,223 for a family of four) will be eligible to enroll in Medicaid. In all states, those with incomes between 100 percent ($11,490 for an individual, $23,550 for a family of four) and 400 percent ($45,960 for an individual, $94,200 for a family of four) of poverty will be eligible for subsidized private health insurance coverage sold through the exchanges.
The Administration recently announced that it will determine eligibility for these subsidies in 2014 based on what critics have called an “honor system” – they will take an applicant at their word and not require him or her to document income unless it was more than 10 percent lower than what IRS and SSA data indicate. Verifying the income of all applicants, the Administration concluded, would be far too difficult and time-consuming, so they have delayed that verification for a year.
The impending deal, according to press reports, would eliminate the one-year delay in income verification. The provision would have little practical effect. The exchanges are struggling to complete their most basic function: telling people which plans are available and how much they would cost, something that the private sector, through portals such as ehealthinsurance, has been doing successfully for 20 years. If government exchanges can’t pull that off smoothly, how can they be expected to undertake more complicated procedures? More than likely, the Administration will agree to this provision, then simply not carry it out.
This is also a poorly conceived provision from a political perspective. Congressional Republicans inexplicably forced a government shutdown over a demand that they knew the Senate and the President would never meet – defunding Obamacare. Now they condition their support for reopening the government and averting default on an insistence that the law be enforced as written.
And enforced against people whose incomes make the purchase of insurance most burdensome. Many of these people, after all, can ill-afford to spend thousands of dollars on health insurance, but are being forced by the government to do so. They earn a fraction of what Members of Congress do. The government is allowing those Members to collect much larger subsidies, despite a provision in Obamacare that prevents them from receiving those subsidies. There is something politically unappealing about someone who earns $174,000 and collecting substantial premium subsidies demanding that somebody earning $34,000 jump through hoops to get a smaller premium subsidy.
The Democrats, by contrast, have included a more politically attractive proposal that could, depending on how it is written, seriously damage the success of Obamacare. At the behest of labor unions, Democrats have reportedly included a provision that would delay what is, in effect, a tax on all people enrolled in plans sponsored by employers (and labor unions). Beginning January 1, these plans will be assessed $63 per enrollee to subsidize health insurers who are participating in the exchanges. That adds up to a $10 billion subsidy for such companies [section 1341]. It is meant to cushion the losses that such insurers will encounter when they cover people whose medical bills greatly exceed their premiums.
Assuming the accuracy of press accounts of the proposed deal, this delay in reinsurance payments could be devastating to insurers who are selling coverage through the exchanges. Obamacare’s most politically attractive feature – that people who expect to run up huge medical bills can get insurance for the same premium that healthy people pay — is what makes it least attractive to insurers. $10 billion was a powerful inducement for them to agree to sell through the exchanges. They set their premiums on the assumption that they would get their share of that $10 billion for their most costly enrollees. To raise the $10 billion, the government is assessing a fee of $63 on each of the nearly 159 million people enrolled in employer-sponsored coverage. To raise that same $10 billion from the estimated 7 million people who will enroll in exchanges, insurers would have to hike their premiums by an average of more than $1,400. But their premiums already are set; it is too late to raise them to fill this $10 billion hole. Should Congress take away their reinsurance, some plans could face big losses.
And that would deal Obamacare a potentially crippling blow. The law simply cannot work without the cooperation of insurers. Should the reinsurance payments be delayed, insurers will be reluctant in the future to participate in the exchanges, rendering the law unworkable.
[It’s important here to insert a caveat: my assumption is that Democrats are proposing to delay section 1341 of Obamacare, which establishes the $10 billion government reinsurance program and funds it by assessing those with employer-sponsored coverage a $63 annual fee. If the provision simply eliminates the assessment but still requires the government to provide insurers with the $10 billion, then it will have no impact on insurers, although it would increase next year’s deficit by $10 billion.]
If Democrats are indeed willing to jeopardize Obamacare by eliminating a sweetener for health insurance companies, Republicans should follow suit. They should insist on delaying the individual mandate, which imposes a new tax on the uninsured. That tax is the weapon the government uses to strong-arm people who don’t want health insurance into buying it. Insurers who are participating in the exchanges are counting on this provision to provide them with premium dollars from healthy people that they can use to help pay medical bills for their less healthy enrollees. Without it, they would be put at risk of substantial losses.
Insurance companies love the mandate; so does the Administration. Few others do. A Kaiser Family Foundation poll taken last March found it the least popular among 11 provisions it polled. It was supported by just 40 percent of respondents; none of the other provisions polled below 57 percent. The Administration has delayed the employer mandate by one year. Republicans should insist on a similar delay for individuals.
Their opportunity could come within the next 24 hours. Should a deal be consummated, conservatives like Ted Cruz (R‑TX) could use various procedural tactics to delay its consideration. Delay increases the risk of default. Treasury estimates that the government will be down to its last $30 billion on Thursday. It could run short of money to pay its bills sometime between October 22 and November 1, according to estimates prepared by the Bipartisan Policy Center.
If Senate leaders conclude a deal, they will need to move fairly quickly, especially since many House Republicans will likely reject the agreement. There is a new Senate procedure under which Reid could circumvent a filibuster on bringing up the bill* if he agrees to allow Republicans to offer at least two amendments. Republicans should agree to this procedure and should make one of their amendments a delay in the individual mandate. If the Parliamentarian rules that this amendment is “germane,” it could pass by simple majority; if not, it would require 60 votes. If it fails, Democrats will be on record as supporting one of the law’s least popular provisions. It if succeeds, it could, along with delay of the $10 billion in reinsurance, effectively doom implementation of Obamacare.
Delaying the individual mandate will not be good enough for those who continue to insist that the President can be bullied into agreeing to defund or delay implementation of his signature domestic policy achievement. Many House Republicans may well oppose it. That will force the Speaker to rely on Democrats to win approval of the measure. My sense is that he will go forward with a House vote anyway, however reluctantly, if that is the only way to reopen the government and avert default. That will inspire even more criticism from the political right, which believes Boehner to be deficient in his hatred for Obamacare.
But if the final product delays both reinsurance and the individual mandate, he will have done far more to damage the law than those who have ineffectually insisted on its immediate repeal.
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*Technically, he would be moving to proceed to a House-passed tax bill, since revenue bills must originate in the House.
Sage advice here, Doug. It was always more politically prudent for the GOP to attack the individual mandate (either the mandate itself or at least waive the penalties) than income verification. I gotta believe the Democrats would cave on a mandate delay if pressed as part of a short term deal. But I’m against a special committee on long term fiscal issues. I’d rather move to regular order with an old fashioned budget conference, opening the door to tax reform and other forms of mischief during reconciliation.
Conferences seem to have gone the way of leisure suits and Nehru jackets, sadly, but you are dead on, Kelly. The two sides should pass their respective bills and negotiate an agreement within Congress’s well-established rules and traditions. That said, if they are going to continue to play this game, Rs need to get a little smarter. If one of their goals is to sink Obamacare, they should target provisions that were inserted to induce insurance companies to participate: the individual mandate, the $10 billion in “reinsurance” payments, and “risk corridors,” in which the government limits each participating insurance company’s losses (sec. 1342). Absent these sweeteners, few insurance companies could survive Obamacare. And without insurance companies, this whole law turns into one giant (and ill-advised) Medicaid expansion.
One side effect of last night’s deal is that the House and Senate will appoint conferees on the budget resolution. It would be nice if this conference were to succeed in producing an agreement on fiscal policy. Such an agreement would perhaps help clean up the wreckage that the federal budget process has become.