What the Republicans Don't Tell You

by Jonathan Cohn | February 23, 2010

Who says the Republicans don’t have a health care plan? Appearing on ABC’s “Good Morning America” on Tuesday, House Minority Whip Eric Cantor reminded viewers that he and his colleagues introduced a proposal in July. Even better, he said, it would bring down insurance premiums.

We have a better way... it's a plan that is focused very squarely on bringing down costs and health care costs for the American people. Our House bill is validated by the Congressional Budget Office and will bring down health care insurance premiums.”

Of course, the CBO also pointed out that the House Republican plan would barely put a dent in the number of uninsured, bringing coverage to just 3 million people out of a total of 52 million that would be uninsured by 2020. But to many Republicans, that’s ok.

The problem with the Democrats’ idea of health care reform, according to the Republicans, is that it tries to do too much at once--that it expands coverage and reduces costs simultaneously. It’s better to go slow, the Republicans insist. Start by bringing down the cost of insurance for people who already have it and then, maybe, think about ways to help the uninsured get coverage of their own.

Politically, it’s an effective argument, and not only because it appeals to the public’s fear of change. It also reinforces the idea that Democratic plans will require middle class people with insurance to make sacrifices, in the form of higher taxes or reduced health benefits, in order to help the uninsured. 

But when the Republicans make this argument, they fail to mention one small thing. Their method of reducing costs also asks the insured to give up something. And it's something important.

Consider how the House Republican plan lowers premiums. By allowing people to buy coverage across state lines, permitting small businesses to create “Association Health Plans,” and expanding the use of “Health Savings Accounts,” the Republican plan would--deliberately and explicitly--reduce regulations on what insurance policies must cover and how insurers sell them.

As with the Democrats’ health care plans, people who get coverage through medium and large employers wouldn’t feel much effect, at least right away. But people who buy coverage on their own or through small business would see a more significant transformation. The effects would be to segregate, further, the healthy from the sick--and to expose people to a much larger share of medical expenses.

As the Congressional Budget Office noted in its assessment of the Republican plan, the majority of people buying coverage on their own or through small businesses really would see their premiums fall, by as much as 10 percent in the case of some small business employees. But the CBO also made two very important caveats.

One was that not everybody would see premiums fall. In particular, people with ongoing or severe medical problems would see their premiums rise:

Many individuals and families would experience changes in premiums that differed from the changes in average premiums in their insurance market. ... some provisions of the legislation would tend to decrease the premiums paid by all insurance enrollees, while other provisions would tend to increase the premiums paid by less healthy enrollees or would tend to increase the premiums paid by enrollees in some states relative to enrollees in other states.

In some cases, CBO went on to explain, premiums would rise so much that people with pre-existing conditions would simply drop coverage altogether. So while the Republican plan would mean slightly fewer people had health insurance overall, it would also mean that "the pool of people without health insurance would end up being less healthy, on average, than under current law."

The other caveat is that coverage itself would become leaner, leaving people more exposed to medical costs.

With other factors held equal, insurance policies that cover more benefits or services or have smaller copayments or deductibles have higher premiums, while policies that cover fewer benefits or services or have larger copayments or deductibles have lower premiums. Provisions in the amendment that would reduce insurance premiums by affecting the amount of coverage purchased include the State Innovations program, which would encourage states to reduce the number and extent of benefit mandates that they impose, and provisions that would allow individuals or affiliated groups to purchase insurance policies in other states that have less stringent mandates.

Again, the healthy would in most cases benefit from this, since they tend not to have huge medical expenses anyway. But the sick, the people who have to deal with high costs, would see their personal medical bills go even higher.

And that’s the trade-off here. If your method of reducing costs is simply to reduce regulations, then the people who benefit from those regulations now are going to suffer. Since the regulations, on balance, help people with serious medical problems, they are going to struggle more under the Republican plans.

To be sure, if you're in good health right now, this distinction may seem irrelevant. But anybody can get cancer, end up in car accident, or suffer some other unforeseen (and unpreventable) medical crisis. Protecting against that possibility the whole reason people buy insurance.

Come to think of it, the same argument applies to expanding coverage: Just as anybody can get sick, anybody can lose his or her insurance. All it takes is one pink slip or a sudden, unaffordable spike in premiums.

The Republicans would like you to believe that they're on your side while the Democrats are out to protect somebody else. It's a narrative they've been exploiting for decades.

Before you buy into it, just remember one thing: Tomorrow the person who can't pay his or her medical bills might just be you.

Update: I originally described the transformation for individuals and small business as "more sweeping," but, in retrospect, that seems a bit overstated. So I changed it to "more significant."

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