What’s this “Skinny Repeal” Thing?

The hot new thing in health reform that everyone’s talking about tonight is the “skinny repeal.” After trying and failing to get enough votes on two repeal bills today, GOP Senators are trying to get their colleagues to pass something that is being referred to as a “skinny repeal.”

(For the record, I haaaaaate this stupid name that almost makes it sound silly and trivial. Reforming a huge chunk of the healthcare system is not trivial and it shouldn’t have a cutesy nickname.)

Anyway, there are two things to understand about this process before I explain what they are talking about:
1. As with many proposed bills in this repeal/replace/revision process, we have no text of a “skinny repeal” bill to review. The information that we do have comes from Senate staffers and insiders, though, so I’m confident enough to write about what the bill seems to contain.
2. The belief among many insiders is that the Senate’s GOP members are trying to pass this “skinny repeal” just so they can take the passed bill into a conference to hammer out a totally new bill that will contain totally new provisions. So chances are that even if this skinny thing passes, it will not actually be the final bill.

Still, it’s up for consideration now, so it’s important to know what this policy is all about. Vox has some good posts here and here discussing this bill. Now, I’ll take a swing at it.

As best as anyone can tell, this “skinny repeal” would include a repeal of the individual and employer mandates and possibly a repeal on medical devices. These have been very unpopular aspects of Obamacare, so it’s unsurprising that they’re trying to ram through a repeal bill that ONLY repeals these unpopular provisions.

But what would that do to the individual health insurance market?

I discussed the importance of the individual mandate a little bit in an earlier post, but let’s discuss it again.

In order for the individual health insurance marketplace (where everyone is paying their full premiums with no employer help) to work, it’s critical to have a large, diverse pool of enrollees signed up for the individual plans at a particular insurance company. You want older people and younger people, sicker people and healthier people (hopefully with a higher proportion of the latter in each category).

This balance works best for the same reason that larger companies usually have better employee health plans than tiny little companies — if one person on the insurance plan gets sick, there are still plenty of healthy people who are paying premiums to the same insurance company, so their premiums help to offset the costs of that one sick person.

The same basic structure exists in the individual insurance marketplace. I’ve always found it easiest to think about this like this: you and everyone else who buys individual policies from the same insurance company throw your premium payments into a huge empty swimming pool outside of the insurance company’s headquarters. You do this for months and months, with everyone’s premium money piling up and up in the huge empty pool. Every time one of you gets sick, your insurance company grabs money out of that pool to pay for your treatment.

This is no big deal if people are just getting strep throat and the occasional sprained ankle, right? The little bit of money coming out for one person’s minor illness is dwarfed by the amount of money coming in from EVERYONE’S premium payments. The swimming pool account still has a net positive balance. Everything still runs smoothly.

But if one person gets catastrophically sick and runs up hundreds of thousands of dollars in medical bills, the stockpile of dollars in that pool is going to disappear VERY quickly. The insurance company will soon run out of money in that pool if something doesn’t change. Either the medical bills have to stop, or lots more premium dollars need to come in.

Before the ACA, insurance companies could put “lifetime caps” on what they would pay for your care. This meant that the first situation would occur — the medical bills would stop getting paid after the person hit their cap. No more money leaves the pool!

Pre-ACA, insurance companies were also allowed to deny sick people coverage when they applied for an individual (or sometimes group) plan— so the insurance could avoid signing up sick people who would be a drain on their swimming pools of money in the first place.

But the ACA changed the rules. That law made is so that insurance companies could no longer put caps on sick people’s care (no “lifetime maximums”), and also made it so that insurance companies could not turn away sick people from buying policies (no “preexisting condition” exclusions). Once that happened, the only way to keep the swimming pool pile of premium money somewhat full was for more healthy people to sign up for plans so that their premium dollars would keep flowing in but not coming out.

The easiest way to do this, of course, is to encourage people who are fairly healthy (and probably fairly young) to sign up for insurance policies.

Now certainly, the Obama administration (and your mom, and your doctor) worked hard on asking young healthy people VERY nicely to sign up for insurance policies. But they knew that that probably wouldn’t be enough. So the Obama administration set coverage mandates in the ACA, which penalized individuals (and businesses with 50 or more employees) with tax penalties if they didn’t purchase a health insurance plan.

These mandates are not anyone’s favorite provision of the bill, but hopefully this explanation helps you understand why they were necessary. Without them (particularly the individual mandate), only sick people would sign up for insurance and either the insurance companies would go bankrupt or they would have to charge people massively higher premiums in order to pay for the bills their sick enrollees were racking up.

So if this “skinny repeal” passes, the mandates will be gone. However, this bill will still leave the other rules in place — insurance companies will still have to accept every applicant regardless of how sick they are, and they will have to pay every bill their patients rack up with no limit. But no one will be compelled to buy a plan.

You can see where this is going, right? Right or wrong, insurance companies will assume that the people who will be signing up for coverage will be the sickest of the sick, so they will start charging the people who want to sign up for coverage higher premiums. They’ll do this in order to offset the costs of the expensive bills they assume they will have to start paying — and as premiums increase, more and more people who don’t really need the coverage badly will stop buying it. The balance between “money flowing in” and “money coming out” of the pool will become unstable again, and patients will suffer.

Obamacare plans are what people buy if they are self-employed, or underemployed, or if they work at a small business. It’s reliable coverage they can get for (ideally) an affordable premium, that covers them if they’re between jobs or opening a small business or going to work at their friend’s small startup that can’t offer health insurance yet.

The mandates aren’t popular and they aren’t pretty, but without them it’s very likely that premiums will increase significantly, putting these ACA plans out of financial reach for most people who don’t desperately need the care. It’s a recipe for disaster for people who need individual insurance but don’t want to pay an arm and a leg for it.

This “skinny repeal” would be a very bad policy for the Senate to pass.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade