Health care policy, like tax policy, is difficult. One of the reasons it’s difficult is that policy choices can interact in ways that aren’t immediately obvious. If you’re trying to do health care and tax policy at the same time — as Republicans in the Senate are now attempting by repealing the Affordable Care Act’s individual mandate in their tax bill — the problems compound yet again.
Which may be part of the reason for Senator Lisa Murkowski’s confusing ultimatum regarding the repeal of the individual mandate. Murkowski was one of three Republican Senators who voted against the “skinny repeal” in the Senate, which at the time seemed to doom the Repeal and Replace project (it was later briefly revived as Graham-Cassidy before failing again). Skinny repeal was basically just a repeal of the individual mandate. Some Republican Senators voted for it under the agreement that it would be turned into an entirely different bill in conference with the House of Representatives. But certainly all of the Senators who voted against it, including Murkowski, thought repealing the individual mandate was a bad idea.
One significant development in health care policy since the demise of “skinny repeal” is that the Trump administration stopped making Cost Sharing Reduction (CSR) payments to insurers. In most states, this decision forces insurers to increase premiums on silver plans (the ones that offer Cost Sharing Reductions to those who qualify). However, silver plans are *also* the ones that determine premium subsidies — the higher the premiums, the higher the subsidies. So in effect, ending the CSR payments has made health insurance much cheaper for the vast majority of exchange customers who qualify for subsidies. Bloomberg reports that 80% of exchange enrollees will be able to buy a plan for $75 a month or less.
Now, Senator Murkowski says that she won’t back a repeal of the individual mandate unless the bipartisan Alexander-Murray deal is passed, which includes funding for, and therefore re-instatement of, CSR payments. You can kind of make out some initial logic to it. Repealing the individual mandate would raise premiums, because healthy people would be the first to drop insurance, which means the remaining pool of enrollees would be more expensive to insure. Not making CSR payments also raises premiums. So, the thinking goes, maybe you can afford the first increase if you counteract the second increase.
But under closer inspection, the policy logic falls apart. As I explained above, for subsidized enrollees, meaning most of exchange enrollees, not paying CSRs *lowers* premiums. This *strengthens* the case for dropping the mandate. If anything, you’d want to demand that CSRs *not* be paid before agreeing to drop the individual mandate. Consider how insurance works through your employer — you are not required to buy it. If there were no subsidy from the employer, there would be some danger that the healthy people wouldn’t buy insurance, which would stick the less healthy people who do need insurance with high premiums. But since your employer likely pays a good chunk of the premium themselves and only asks you to pay the remainder, most people — even healthy people — sign up without being required to do so. The employer’s subsidy is a substitute for a mandate. Without the subsidy, you’d need a mandate to keep healthy people from fleeing the risk pool.
Likewise on the ACA exchanges, with an increased subsidy from CSR non-payment, the individual mandate is less necessary — if it went away, many healthy enrollees may still maintain insurance since the subsidies make it so cheap. If the CSRs were paid, and subsidies therefore reduced, the individual mandate would be more important in maintaining a stable risk pool that included healthy enrollees.
Even if the above reasoning doesn’t convince you, recall that Lisa Murkowski already voted against repealing the individual mandate in July when the CSR were being paid. The Alexander-Murray compromise that she’s demanding now does little besides restoring that status quo ex ante, and the other things it does (loosening requirements for waivers, allowing more catastrophic plans for under-30-year-olds) again make repealing the individual mandate relatively less attractive.
I can’t think of a compelling policy reason that Murkowski would demand passing Alexander-Murray before repealing the individual mandate. And I don’t think Lisa Murkowski and her staff are stupid. So either there’s a good reason I’m not thinking of (possible) or her reasons are not policy-related but political. I think the second reason is a good candidate, because the political case is quite good.
Lisa Murkowski will be under a lot of pressure from the Republican Party to vote yes on the tax bill, just as she was under a lot of pressure to vote yes on the health care bill. But like the health care bill, the tax bill is very unpopular, and also may cost Alaskans a bunch of money. One thing about making passing Alexander-Murray a pre-condition of voting for the tax bill is that it has almost no chance of happening. Even if Alexander-Murray were passed by the Senate, it would stand little chance in the more conservative House of Representatives, which was made clear by the response to Alexander-Murray that Rep. Kevin Brady worked out with Orrin Hatch.
So by demanding Alexander-Murray first, Murkowski gets to seem like a reasonable Republican eager to find a compromise (which is her brand), while also voting with Democrats against a deeply unpopular tax bill. If indeed this is an indication of Murkowski’s thinking, she joins Susan Collins (who is unhappy with the individual mandate repeal as well as regressive redistribution in the tax bill) and Ron Johnson (who doesn’t like how the pass-through rates work) in opposing the current bill. That’s three, and Mitch McConnell can only afford to lose two.