The Democrats Are About to Set a Whopper of an Obamacare Political Time Bomb for Republicans

Contained inside the Democrats' $1.9 trillion coronavirus stimulus bill is a political time bomb for Republicans.

Included in the bill's long list of stimulus spending is a provision that delivers on President Biden's promise to strengthen the Affordable Care Act, or Obamacare.

Obamacare's big failure has been what it did not do to help––and actually hurt––middle class buyers of individual health insurance. Since the health law's inception, consumers, who are eligible for little or no Obamacare subsidy, have faced daunting premiums and out-of-pocket costs.

In 2021, for example, a family of four with mom and dad age-40 in the Alexandria, VA zip code would find that the cheapest unsubsidized Silver Plan would cost $18,046.32 in annual premiums, with a per person deductible of $6,500 a year.

Candidate Biden's plan would fix that by capping what people at any income level would pay for marketplace plans at 8.5% of their income––the 400% of the federal poverty level cap on subsidy eligibility would no longer apply.

A family of four making the current 400% of poverty level annual income of $106,000 would pay no more than $9,010 in annual premiums (8.5% of their income) under the new rules.

The House passed stimulus package includes this and goes even further by letting people who earn up to 150% of the federal poverty level get full subsidies and also by extending full subsidies to those receiving unemployment benefits.

At 150% of the federal poverty level, four person families earning up to $39,750, and individuals earning up to $19,320, would pay nothing in premiums for their Obamacare individual health insurance under the House passed plan.

The House stimulus bill would also cover 95% of Medicaid expansion costs for states that have not yet expanded––up from the baseline 90% match.

The Congressional Budget Office has estimated that these changes would cover 1.3 million more people and cost $34 billion.

If these changes survive in a Senate passed coronavirus stimulus bill, they would dramatically improve the costs middle class individuals and families face on the Affordable Care Act's insurance exchanges and encourage states to expand their Medicaid programs.

But here's the catch. These improvements are part of a temporary stimulus bill and would only apply to health insurance subsidies and federal Medicaid costs in 2021 and 2022.

On January 1, 2023, the Obamacare insurance subsidies would revert to the old levels that have caused middle class families to face these huge premiums. 

What else is happening at the end of 2022? The Congressional elections.

This would make Obamacare another huge election-year issue.

Would Republican House and Senate candidates support making these middle class improvements to the Affordable Care Act permanent, or would they call for letting them drop?

Now, that is one heck of an ugly election-year choice for Republicans who have consistently called for Obamacare to be repealed and replaced.

If Democrats can succeed in keeping these substantial improvements to Obamacare in a stimulus bill they can get passed through the Senate, they will have set one whopper of a political time bomb for Republicans come November 2022.

Health Care First Steps for President Biden and the Democratically Controlled Congress

After four years of the Trump administration's undermining of The Affordable Care Act/Obamacare, what can we expect over the next few months from the new administration?

On the regulatory side, not as much as you might expect.

During the campaign Biden talked about building on the law's success in covering the people it has covered––primarily through the Medicaid expansion and for lower income people who get the best subsidies in the insurance market.

A big difference will be an administration promoting the law, particularly during the fall's open enrollment, rather than decrying it as a complete failure

Democrats were harshly critical of the Trump administration's regulations to end the insurance exchange cost sharing subsidies as well as opening the market to lower cost short-term plans that did not comply with the ACA's benefit minimums.

But Trump's killing the cost sharing subsidies, that went to insurance companies, backfired by increasing consumer subsidies enabling people to buy the best Gold Plans while the carriers just raised the rates for the unsubsidized. If the Biden administration were to now repeal those regulations, before passing new legislation to improve the subsidy structure, it would mean that lower income people would see their subsidies reduced.

The Biden administration will have the same dilemma over the short-term plans. We now have about two million people covered by these plans, that critics often refer to as "junk insurance." These people largely bought these alternative plans because of the prohibitive premiums that those with minimal or no subsidies were faced with under Obamacare. If the Biden administration now repeals those rules, without first expanding the subsidies for these people, they will be left without any kind of insurance.

My sense is that the biggest short-term difference with this new administration will be one of attitude and support for the existing law and some minor regulatory changes around the edges. But, I would expect to see a backing off of Medicaid waivers that gave states the ability to broaden work requirements among other state flexibility that moved away from Medicaid's traditional entitlement promises.

Candidate Biden called for two major health care legislative initiatives: Controlling prescription drug prices through government price negotiation and expanding the ACA's insurance subsidies for the middle-class as well as adding a government-run public option.

The Trump administration began a regulatory process of having the federal government, through a pilot program, use a basket of other nation's negotiated drug prices here as well as to allow the "reimportation" of drugs from nations that have achieved lower prices for the same drugs. I would expect the Biden administration to take a careful look at these first steps in using government negotiation––albeit––another government's negotiation––short of getting the Congress to formally approve drug price regulation.

Candidate Biden also called for ending the income cap on who would be eligible for individual market insurance subsidies and lowering the maximum families would have to pay as a percentage of their incomes. Both of these steps would go a huge way toward making individual health insurance affordable for people who make too much for the best subsidies, or any subsidy.

First, it will likely be later this year before the Democrats can move on any major health care legislation. The slow start the Biden administration has had in the face of the election controversy, plus the time and political oxygen a Trump impeachment trial will take, doesn't make any quick action possible.

The Democrats will also have to use the Senate's budget reconciliation rules in order to move any such legislation with a simple majority.

The need to find a way to pay for any ACA/Obamacare expansion will also mean coupling health efforts with the budget reconciliation and Biden's promised tax increases for the wealthy.

Democrats have lots of spending priorities. Some of them could be wrapped up in an upcoming stimulus bill that will not be paid for with offsetting revenue. But under budget reconciliation rules, there will have to be offsets. The Democrats will have to first settle on just what they will do with the revenue from any tax increases.

None of this will be a slam dunk for a Democratic Congress that has a very slim working majority in the House and only a tie-breaking vice presidential vote in the Senate.

I don't doubt the votes will be there in both chambers to increase the subsidies. But passing a public option, taking on the drug industry lobby, and big tax increases to pay for it all, even on just the wealthy, will be by no means easy.

Report From Inside the Beltway––We Kept It!

Wednesday was maybe the most disheartening and embarrassing days in history for all of us as Americans. But, in the end, it was a day to be proud of.

In 1787, Ben Franklin was walking out of Independence Hall after the Constitutional Convention, when he was asked, “Doctor, what have we got? A republic or a monarchy?”

Franklin responded: “A republic, if you can keep it.”

We kept it. Within hours of the mob's debacle at the Capitol, the Congress met, and in what turned from one of the most partisan to bipartisan sessions in a long time, they quickly affirmed the 2020 election and began the traditional peaceful transfer of power.