Healthcare in focus.

We are looking at a near-worst case scenario on healthcare reform.

On Tuesday Congressional Republicans formally began debate on measures that would repeal and replace Obamacare. Shortly after this vote the Senate rejected Republican leadership's comprehensive plan to replace the law, a bill similar in many respects to that passed by the House of Representatives in June.

Over the next several days the Senate is expected to take up multiple versions of health care reform, some as-yet-undefined. The first measure, expected on Wednesday, is called the Better Care Reconciliation Act, a bill reportedly similar to one offered by Republican leadership in 2015 and one designed to repeal and replace as much of Obamacare as the Senate Parliamentarian will allow.

Although they control the Senate, Republicans do so only by a bare majority. As a result, they can't pass legislation without eliminating the filibuster, overcoming it or relying on a procedure known as "reconciliation." This process allows senators to end debate without a 60 vote supermajority, but is restricted only to bills that address financial matters.

As the Parliamentarian recently ruled, a comprehensive overhaul of the health care system is not a strictly financial matter.

This, combined with the reported deep unpopularity of the Better Care Reconciliation act, has raised the specter of the "skinny repeal."

This measure, which is expected as Senate Majority Leader Mitch McConnell's last-ditch effort, would enact no new measure and limit repeal only to Obamacare's individual mandate, possibly along with the employer mandate and some taxes which Republican legislators oppose. As long as it doesn't increase budget deficits, this would satisfy the rules of reconciliation.

It would also be an unmitigated public policy disaster if it ever became law… and probably a pretty big mess either way. By repealing the individual mandate, without any regulatory changes, Republican lawmakers would throw the health insurance marketplace into chaos, raising prices and causing millions of people to lose their insurance.

Here's why.

Obamacare is often described as a three legged stool: its subsidies help everyone afford to buy insurance, its coverage guarantees makes sure everyone can buy insurance, and its individual mandate makes sure everyone does buy insurance. Tug at any one leg of that and the whole system collapses.

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Paul Ryan.
Paul Ryan.

Although the individual mandate has always been the least popular part of Obamacare (in fact, by some measures, one of the only unpopular parts), it's necessary to make the overwhelmingly popular coverage guarantees work. Otherwise health insurance would encourage free riders, consumers who wait to buy insurance until their sick then cancel their policies immediately after.

It's fear of these consumers that led many health market experts to insist that an individual mandate has always been necessary to make coverage guarantees work.

But under reconciliation senators can't undo those coverage guarantees, and Republicans have long promised not to touch that beloved aspect of health care reform anyway. As a result the law would continue to ensure that anyone who wants insurance can buy it with no coverage or price discrimination based on pre-existing condition.

This would lead to what insurance experts call a "death spiral": when sick people buy insurance but healthy people don't, driving premiums up and causing fewer healthy people to buy insurance in a self-perpetuating cycle.

Contrary to the claims of Republican leadership, no insurance markets in America are currently experiencing a death spiral. Prices in many markets have gone up, but according to institutions like the Kaiser Family Foundation and the CBO, Obamcare's markets are generally stable and in the entire country only about 25,000 Obamacare enrollees face losing access to a viable plan in 2018.

That doesn't mean that these markets cannot enter a death spiral however, and if healthy people en masse began to ditch their insurance that's exactly what would happen.

It wouldn't just affect the individual market either. This would have consequences for employer and other group markets as well, driving up the cost to insure virtually everybody.

Big picture: the CBO expects that 15 million people would lose their health insurance due to a repeal of the individual mandate, and two million of those losses would come from employment-based coverage.

Even simply discussing "skinny repeal" may very well make insurance more expensive in 2018.

As has been well reported, insurance companies have already begun adjusting their rates up because of the uncertainty surrounding health care reform. The idea that the Senate would pass a bare-minimum repeal of the individual mandate without touching coverage guarantees will make that uncertainty look tame by comparison.

It's possible that Congress could come up with a worse idea for health care, but hard to see precisely how. If lawmakers enter the fall with this still as an open possibility, expect chaos in both employer and individual rates alike. (Besides, Congress has another deadline it really should be worried about this autumn.)

Still, for all that, skinny repeal may very well be realistic. After months of chaos on this issue, Republican lawmakers are publicly gnashing for a health care win. Repealing the individual mandate would allow them to keep their seven year promise to destroy Obamacare, or at least to look like they're doing so on TV.

In the process they would create untold chaos in the health insurance market but they would get a win.

If either measure passes in the Senate, it will then proceed to a conference committee with the House of Representatives. The two chambers will create a bill acceptable to both (not an easy task, considering the far more conservative House) and then the final bill will have to return to the Senate for a vote.

It is to be hoped it will look nothing like a skinny repeal.

The mere prospect is bad enough.

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