Op-Ed: The GOP Obamacare replacement would help the rich, hurt the poor and unleash chaos

Republicans have finally released their long-awaited alternative to the Affordable Care Act. As expected, the bill would give a huge tax cut to the wealthy and gut the federal spending that the poor and the middle class depend on for their health insurance.

No one knows exactly how many tens of millions of people will lose coverage. In a break with tradition, Republicans will vote on the bill before congressional budget experts can crunch the numbers. (That’s like buying a house before the broker tells you how much it costs — except if you buy the house, millions of people suffer as a result.) But make no mistake: The Republican bill would undo most of Obamacare’s gains.

Bad as that will be for the entire country, it will be especially bad for states like California, where the Affordable Care Act is working well. Before health reform, 1 out of every 6 Californians was uninsured. By 2016, only 7.4% lacked coverage.

Because it expanded its Medicaid program, California has provided insurance to its most vulnerable residents. An additional 1.6 million people get coverage through California’s exchange, where premiums are among the cheapest in the country and the average rate increase for 2017 was just 5%, a strong sign of a stable market.

In his joint address to Congress, President Trump claimed that “Obamacare is collapsing.” Has he ever visited California?

All of this progress is now in jeopardy, and even congressional Republicans seem to understand that their Obamacare “fix” is folly. That’s why the bill delays the harshest spending cuts until 2020, when the 2018 midterm elections are behind them.

But the Republican bill would set chaos in motion because it would immediately eliminate the individual mandate — that is, the tax penalty imposed on those who don’t purchase insurance. Without that mandate, some healthy people will choose to forgo coverage, knowing they can always enroll later if they get sick. Those who keep their insurance will therefore be less healthy than average. Insurers will have to jack up their premiums to cover those sicker enrollees.

That means California’s stable market will start to teeter. Large premium spikes are likely; in some rural areas, insurers might pull out altogether. The Commonwealth Fund estimates that 1 out of 4 people on the exchanges would lose their coverage.

Here’s the takeaway, then: Obamacare wasn’t collapsing — but it could if the Republicans get their way.

California has a shot at preventing that collapse, however, as do other states where Democrats are in charge, including New York, Connecticut, Washington and Oregon. For 2018 and 2019, almost every part of Obamacare except for the individual mandate will remain intact. California can patch that hole by replacing the individual mandate at the state level. Call it the Golden State Mandate.

The Legislature would have to act fast. The substitute mandate probably would have to be in place by the summer in order to give insurers time to set their rates before the start of open enrollment on Nov. 1. Even then, the gambit might not work: Insurers are skittish about the long-term future of health reform. Some may head for the hills.

But the California exchange is healthy and, with a substitute mandate in place, the economic picture for the next two years shouldn’t look all that different than it does today. Instead of the premium surge that other states will experience, California residents could see a more moderate increase in premiums. At a minimum, it’s worth a shot.

A patch also would buy time to figure out how to cope with a post-Obamacare world. Two California legislators already have floated a single-payer plan for the state; New York is considering whether to impose a state version of the Affordable Care Act. Proposals like these will be controversial, and they can’t be adopted overnight. A substitute mandate, however, would give policymakers two years to work out their differences.

State-level mandates are perfectly legal, by the way. Nothing in the proposed legislation strips states of their traditional authority to tax their residents. Nor would a Golden State Mandate interfere with the congressional design: Speaker of the House Paul Ryan has said that the states “should be empowered to make the right trade-offs between consumer protections and individual choice, not regulators in Washington.”

Although there’s a chance that the existing repeal bill will fall victim to intra-party bickering, Republicans are dead serious about gutting the Affordable Care Act one way or another. They may well succeed. And by the time the dust settles on the congressional debate, it may be too late to patch Obamacare.

California and other blue states should take the GOP, and Ryan, at their word — and take matters into their own hands, not in the future, but now.

Nicholas Bagley is a professor of law at the University of Michigan.

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