The Effects of the Repeal of ObamaCare Through Reconciliation

How ObamaCare Could be Defunded Starting in 2017, Before a Replace Plan is Enacted

The GOP has promised to repeal and replace ObamaCare, but step one might be a repeal of ObamaCare through the budget reconciliation process. Step two, “the replace part,” could come after the 2018 mid-term elections when many Republicans in Congress will attempt to win seats. This could begin to affect coverage as early as 2017 (although a “delay” of the implementation of repeal measures is likely), and Congress has already begun the process.

UPDATE 2019: This plan never passed, and thus some specifics here are of historical interest only.

TIP: The image above features a conservative estimate of the cost of an ObamaCare repeal. Estimates vary widely based on what might be repealed and what might be replaced. Learn more about the cost of repeal.

What Does it Mean to Repeal ObamaCare Through Budget Reconciliation?

What does it mean to “repeal of ObamaCare through the budget reconciliation process?”

It means that the parts of the ACA that can be defunded by striking them from the budget may be repealed while the rest of the law stands. This process involves a few parts including “budget resolution” (get the details here).

• Aspects of the Affordable Care Act that can be changed through reconciliation include cost assistance, Medicaid expansion, and the individual and employer mandates.
• Elements that would likely remain in place include guaranteed issue, the prohibition on preexisting condition exclusions, modified community rating, essential health benefit requirements, and actuarial value standards.
• This could, by extension, affect the cost of health insurance, as insurers would be forced to cover everything and follow ratios, but people wouldn’t have cost assistance.
• Why would anyone do this? This would break ObamaCare and ensure the GOP kept its “repeal ObamaCare” promise. One can expect people to be increasingly angry with “ObamaCare” as it is gutted and loses its ability to help people. The GOP could then sweep in with a “new program” and save the day, making it look as though they were saving America from the Democrat’s “broken” healthcare.

TIP: Below is an analysis of the effects of a repeal via reconciliation from the Urban Institute.

FACT: The uninsured rate is at an all-time low under the Affordable Care Act. Reconciliation potentially not only costs low-income Americans their health care, but it is also bound to drastically increase the uninsured rate. If this does not bring costs down for the middle-class, then it means higher uninsured rate, high costs, no cost assistance, and millions left uninsured.

the Urban Institute Report on the Implications of Partial Repeal of the ACA through Reconciliation

FROM THE URBAN INSTITUTE: In this brief, we compare future health care coverage and government health care spending under the ACA and under the passage of a reconciliation bill similar to one vetoed in January 2016. The key effects of the passage of the anticipated reconciliation bill are as follows:

• The number of uninsured people would rise from 28.9 million to 58.7 million in 2019, an increase of 29.8 million people (103 percent). The share of non-elderly people without insurance would increase from 11 percent to 21 percent, a higher rate of uninsurance than before the ACA because of the disruption to the non-group insurance market.
• Of the 29.8 million newly uninsured, 22.5 million people become uninsured as a result of eliminating the premium tax credits, the Medicaid expansion, and the individual mandate. The additional 7.3 million people become uninsured because of the near collapse of the non-group insurance market.
• Eighty-two percent of the people becoming uninsured would be in working families, 38 percent would be aged 18 to 34, and 56 percent would be non-Hispanic whites. Eighty percent of adults becoming uninsured would not have college degrees.
• There would be 12.9 million fewer people with Medicaid or CHIP coverage in 2019.
• Approximately 9.3 million people who would have received tax credits for private non-group health coverage in 2019 would no longer receive assistance.
• Federal government spending on health care for the non-elderly would be reduced by $109 billion in 2019 and by $1.3 trillion from 2019 to 2028 because the Medicaid expansion, premium tax credits, and cost-sharing assistance would be eliminated.
• State spending on Medicaid and CHIP would fall by $76 billion between 2019 and 2028. Also, because of the larger number of uninsured, financial pressures on state and local governments and health care providers (hospitals, physicians, pharmaceutical manufacturers, etc.) would increase dramatically. This financial pressure would result from the newly uninsured seeking an additional $1.1 trillion in uncompensated care between 2019 and 2028.
• The 2016 reconciliation bill did not increase funding for uncompensated care beyond current levels. Unless different action is taken, the approach will place very large increases in demand for uncompensated care on state and local governments and providers. The increase in services sought by the uninsured is unlikely to be fully financed, leading to even greater financial burdens on the uninsured and higher levels of unmet need for health care services.
• If Congress partially repeals the ACA with a reconciliation bill like that vetoed in January 2016 and eliminates the individual and employer mandates immediately, in the midst of an already established plan year, a significant market disruption would occur. Some people would stop paying premiums, and insurers would suffer substantial financial losses (about $3 billion); the number of uninsured would increase right away (by 4.3 million people); at least some insurers would leave the non-group market midyear harming consumers financially.
• Many, if not most, insurers are unlikely to participate in Marketplaces in 2018—even with tax credits and cost-sharing reductions still in place—if the individual mandate is not enforced starting in 2017. A precipitous drop in insurer participation is even more likely if the cost-sharing assistance is discontinued (as related to the House v. Burwell case) or if some additional financial support to the insurers to offset their increased risk is not provided.

This scenario does not just place the country back in the situation we were in before the ACA. It moves the country to a situation with higher numbers of uninsured people than was the case before the ACA’s reforms. The federal government would have to raise new taxes, substantially cut spending, or increase the deficit to replace the ACA after reconciliation with new policies designed to increase insurance coverage.