What the house republican bill gets wrong about the health insurance market – marketwatch

House Republicans are betting that their way of getting people to buy health insurance will be more popular than the Affordable Care Act’s method.

But experts have long said that approach, delineated in a new health plan proposal released late Monday, ignores the fundamental nature and high turnover of the health insurance market.

House Republicans’ plan would penalize those who went some time — at least 63 continuous days — without health insurance, requiring they pay a 30% penalty on their health coverage each month for a year.

That’s “continuous coverage” requirement comes in contrast with the ACA’s “individual mandate,” which came as a tax penalty that was prorated per month of being uninsured, and exempted those who were uninsured for less than three consecutive months.


House Republicans unveil plan to repeal, replace Obamacare (2:54)

House Republicans took a step toward repealing and replacing Obamacare Monday, releasing their new ‘American Health Care Act’ plan.

The health insurance market is often described as “churning.” As consumers’ lives and finances change, many move in and out of health coverage, and even among multiple different plans.

That churn affects consumers who are insured through their work or under Medicaid much less than others, including those who buy coverage directly from health insurers, or are covered by Medicare or military health care, according to a September 2016 Department of Commerce report.

Related: Trump embraces HSAs as a pillar of repeal and replace, but they will need work

The House Republican plan runs the risk of locking people without health insurance out of the market.

Low-income people are more likely to lose their coverage because they can’t afford it. Health insurance quotes florida Thus, making health coverage more expensive after a gap incentivizes consumers to continue to not have health insurance, since they won’t pay a penalty, experts say.

Read: The economics of skipping health-care insurance under both Obamacare and the Republican plan

“It’s a mistake to assume that individuals are choosing not to have insurance because they are trying to game the system,” said Spencer Perlman, director of health care research at Veda Partners.

Though some of that is going on, he said, “I think in some ways [the continuous coverage penalty is] trying to address a problem that might not be as substantial as Republicans think it is.”

See: What is the individual health insurance market and why is everyone so worried about it?

Between 2004 and 2007, 89 million people were uninsured for at least one month, according to a 2014 study by researchers at Harvard and Penn State.

Of the 11.2 million people during that period who were transitioning into getting health coverage — and would be affected by the 30% penalty — the majority, or about 74%, had been uninsured for five or more months.

A 2014 study by Harvard and Penn State researchers found that 89 million people were uninsured for at least one month between 2004 and 2007.

Related: Republicans’ Obamacare repeal plan would cut taxes for wealthy

Republicans have long favored this kind of continuous coverage requirement as the free market alternative to the individual mandate.

Though the two are structured quite differently — the individual mandate is a tax penalty, while continuous coverage would be through health insurers, such as Anthem Inc.

— both attempt to allow for coverage of pre-existing conditions by stabilizing the pool of people with health insurance.

If consumers are penalized for not having coverage, the thinking goes, they won’t only sign up for coverage once they get sick.

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