What the health insurance industry wins and loses in the Senate health care bill

The major health insurance companies made a tactical decision to work with Republicans on their plan to repeal and replace Obamacare rather than lobby to stop it.

That bet seems to be paying off in some important ways, based on the bill the Senate released Thursday, though the GOP’s plan to overhaul Medicaid is still a concern for the industry.

The bill would reduce Obamacare’s financial aid for people who buy private coverage on the law’s marketplaces and would give states more leeway to roll back the law’s insurance protections. But it would give insurance companies more than $200 billion in tax cuts and additional federal funding.

The Better Care Reconciliation Act, the bill drafted by Senate Majority Leader Mitch McConnell, also overhauls Medicaid and ends the generous federal funding for Obamacare’s Medicaid expansion, which could lead to billions of dollars in funding cuts and millions fewer people covered by the program.

For insurers, at least for now, there is a lot to like in the Senate plan. It repeals Obamacare’s tax on health plans, a $144 billion tax cut over 10 years, per an analysis of the House bill. It provides $50 billion in federal funding in the short term to shore up the private insurance market and $62 billion over the longer term for state programs that help stabilize their insurance markets.

“This bill does a lot of good things for immediate stability,” Kristine Grow, a spokeswoman for America’s Health Insurance Plans, told me on Friday. She cited the funding of key Obamacare subsidies that President Trump had previously threatened to cut off, the repeal of Obamacare’s tax on insurers, and the stabilization funding.

Health plans aren’t getting everything they want. The Senate bill repeals Obamacare’s individual mandate, the requirement that every American buy health insurance, which insurers say is essential to making the markets work. But there is no replacement to compel people to buy coverage, which could put the markets at risk of a death spiral under the Senate bill.

Grow said that issue must be addressed from the industry’s perspective. As Vox reported earlier, the GOP’s proposals to replace the mandate might not comply with the complex Senate rules Republicans are using to pass the bill.

The bill’s cuts to Medicaid — ending the generous funding for Medicaid expansion and instituting a federal spending cap — could also hit insurers, because so much of the insurance program is now administered by private plans.

“I think what we need to think about here, however they’re formulating the funding, what’s the impact going to be on the states? What hard decisions are the states going to have to make?” Grow said. “It’s too much, too fast, creating too much of a burden on the states.”

But the tax cuts and additional funding for health plans may help assuage those concerns in the short term. The Senate plan also loosens Obamacare’s requirements on how much money insurers must to spend on health care, as opposed to administrative costs.

“It’s positive for health insurers,” the analysts at Capital Alpha, which track health policy for investors, said in a review of the Senate bill. They cited the bill’s guaranteed payment of the Obamacare subsidies and the short-term stabilization funding.

Grow said AHIP was not opposing or supporting the legislation for now because it was still reviewing the plan. But she emphasized that both pieces — changes to the private insurance market and to Medicaid — were important to health insurers.

“If you look at this bill, it’s not about one part of the market. It’s about the individual market. It’s about the Medicaid market,” she said, noting “how interrelated those two markets are. Many individuals ebb and flow between these two markets.”

Some conservative senators are opposing the plan for now, explicitly over these provisions like the stabilization funding that benefit the insurance industry.

“It’s just not fiscally conservative,” Sen. Rand Paul (R-KY) told reporters Thursday. “This bill has probably, we think, more Obamacare subsides or at least as much as is already in Obamacare. We think when you add in the stabilization fund, and you look at the subsidies, you’re looking at something that may exceed Obamacare.”

“We also are acknowledging that the death spiral of Obamacare will continue,” he said. “They don’t fix the death spiral. They subsidize it.”