The Upton Amendment is out. It is $8 billion dollars to pay for the late enrollment penalty of people in states who elect to waive non-underwritten guarantee issue so that these people don’t get dropped into the high cost risk pool.
— Adrianna McIntyre (@onceuponA) May 3, 2017
The AHCA has a 30% penalty for up to one year if a person applies for coverage on the individual market after having a 63 day gap in qualified coverage. The theory is that this aligns the individual market with the employer sponsored market and it will act as a pool participation mechanism. The CBO disagreed as it projected the penalty would enhance the value of staying out of the market for the healthy far more than it would keep low cost people in the market.
This amendment makes the CBO position a highly probable underestimate. It does not change the incentive for the healthy to avoid the market until they have to get in. However, it weakens the incentive for the modestly sick to stay in if they have reason to believe that they are going to have a low cost year, they can drop coverage and then get back in at the next open enrollment.
The AHCA has thrown other key elements of conservative health policy goals overboard. The HSA life cycle model of savings in youth and health to self-fund expenses in age and infirmity was thrown overboard early in the process.
In the original version of the AHCA, the subsidies were set up so that they could be split. If a person found a policy that cost less than the subsidy, the remaining portion of the subsidy would be deposited into an HSA. This makes a decent amount of mechanical sense. The young and healthy people would buy dirt cheap policies and deposit a significant amount of the subsidy into an HSA. Over time, the HSA would grow until the cohort of people who were once young, healthy and cheap to cover are no longer young, no longer healthy and no longer cheap to cover. At that point, the savings they had accumulated in their HSA would be available to pay for either care or premiums…..
The Monday Manager’s amendment took away the ability of a subsidy to be split between a premium and the HSA…. The second is that it completely destroys the mechanical theory of change for an HSA system. People can’t use [the subsidy] to pay part of their first dollar expenses in the current year. And more importantly, the young can not partially prefund their health care expenses when they become old as they can’t rollover a partial subsidy into their HSA.
Upton makes a complete hash of any personal responsibility and anti-free rider logic ever advanced in the bill. This is a mess.