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Republicans were asked about the Obamacare 'death spiral'

We asked Republicans to explain the Obamacare 'death spiral.'


Republicans for months now have been using an ominous phrase to describe the problems with the Affordable Care Act (ACA) - "death spiral."

Time and time again we've heard GOP leaders say they have to get rid of the health care law because "Obamacare is in a death spiral," but what does that mean?

Ask a Republican in Washington, D.C. and they will give you a vague answer.

"A death spiral is when the insurance markets collapse and we're seeing indications of that already, despite the current law," Sen. Susan Collins (R-ME) said.

"In my state we have 135,000 people who are paying the fine rather than purchase insurance," Sen. John Neely Kennedy (R-LA) said, referring to the individual mandate.

"They'd rather pay the fine than buy the insurance, now why do you think that is?" he asked. "It's because they can't afford the insurance. All the Affordable Care Act has done is given people a bus ticket but there's no bus."

Translation: a death spiral is the death or collapse of the individual insurance market.

So what causes that to happen? House Speaker Paul Ryan (R-WI) summed it up in March during a power point presentation for reporters on health care.

"A death spiral is a system where, in an insurance pool, only sicker people who absolutely have to have insurance buy it and healthier people won't pay those really high prices because it's too expensive," he said.

Basically, if there aren’t enough healthy people buying plans on the individual market, then the cost to insure people who are sick will get more and more expensive, eventually causing insurance markets to collapse.

Democrats under President Obama tried to solve this problem through the ACA's individual mandate, which requires everyone to have health insurance or else pay a fine.

But in some parts of the country, premiums have become so expensive that many people have opted to pay the fine rather than buy insurance, just as Kennedy described in his home state.

Now several major insurers like Aetna and United Health have pulled out of the Obamacare exchanges, citing massive revenue losses, leaving millions without an affordable option for coverage.

"Insurers set premiums in the first couple years of the market below what the actual claims cost would be and so they did indeed incur significant losses over the first couple of years," said Matthew Fiedler, a health policy scholar with the Brookings Institution. "I think that led some insurers to panic about where this market was headed and lead them to withdraw."

This "death spiral" is what Republicans say they want to stop, and they want to halt it by repealing and replacing Obamacare entirely, but they're struggling to come to an agreement on how to do that.

So now, the most likely solution that Senate Republicans might be able to get both conservatives and moderates to agree on is something called a "skinny repeal," which is a bill to repeal certain parts of the ACA, including the individual mandate.

But experts say that actually helps create the death spiral.

"If your concern is that not enough healthy people are buying coverage in the individual market and premiums are too high as a result, this type of policy would go exactly in the opposite direction," Fiedler said.

If the individual mandate is repealed, then even more healthy people who don't need insurance right away will likely leave the markets, setting off the death spiral.

It's something that some Republicans are already worried about.

"If we send a skinny repeal over, and if the House passes it then, if we don't have a delayed implementation on some of the repeals, such as the individual and the group mandates, what you end up with is still the requirement for insurers to cover anybody with preexisting conditions even if they're not carrying insurance but they pick it up on the way to the hospital for a surgical procedure," said Sen. Mike Rounds (R-SD).

"Carriers aren't stupid. They'll understand that it will be all outgoing and no income, and those plans will collapse. That's my concern."

But Republicans say they don't know for sure how their bill will impact the insurance markets because they don't know what the final bill will be yet.

There's also no guarantee that if the Senate passes a "skinny" repeal that the House will then conference with the Senate to offer up amendments on the bill.

So how do Republicans make sure their bill doesn't perpetuate the death spiral?

"The way that you fix it is you’ve got to have a number one a delayed implementation, I believe, or some sort of an assurance that it will definitely go to a conference committee," Rounds said.

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