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Editor: Paul L. Caron
Pepperdine University School of Law

Friday, March 17, 2017

Hemel & Herzig:  The GOP Health Care Plan’s Fatal Flaw

New York Times op-ed:  The G.O.P. Health Care Plan’s Fatal Flaw, by Daniel Hemel (Chicago) & David Herzig (Valparaiso):

[N]early seven years after his death, Senator Byrd may ensure that the Affordable Care Act, also known as Obamacare, lives another day. One of Byrd’s many legislative accomplishments over a half-century in the Senate was the eponymous “Byrd rule,” which governs the process of budget reconciliation. Republicans on Capitol Hill are trying to use the reconciliation process to repeal and replace the Affordable Care Act. The Byrd rule stands in their way.

Reconciliation is a fast-track process that allows budget-related legislation to pass the Senate without the prospect of a filibuster. The Byrd rule prevents reconciliation from being used to pass any measure for which the budgetary effects — “changes in outlays or revenues” — are “merely incidental to the non-budgetary components.” Republicans know they lack the 60 votes to break a filibuster in the Senate, so they designed their repeal-and-replace bill to satisfy the Byrd rule’s requirements. Yet there is a surprising flaw in their design — one that has so far drawn little notice, but that Senate Democrats will surely seize on.

The flaw is found in a provision of the bill with the innocuous title “Encouraging Continuous Health Insurance Coverage.” Under that provision, individuals who go without coverage for more than two months must pay a penalty the next time they buy health insurance. The penalty is equal to 30 percent of their new plan’s premium. Significantly, individuals must pay this 30 percent penalty to their new insurer, not to the federal government.

And therein lies the problem. If the penalty were paid to the federal government, as with the individual mandate penalty under the Affordable Care Act, the provision would comply with the Byrd rule because it would have an obvious positive budgetary effect: Penalty payments would increase federal revenues. But the drafters of the repeal-and-replace bill chose not to adopt that approach, lest the penalty look too much like the Obamacare mandate. Instead, they are hoping that the threat of a future penalty averts an insurance market “death spiral,” in which healthy individuals run for the exits and the sick are left behind. ...

The problem for Republicans is that the Byrd rule does not allow these sorts of non-budgetary measures to pass through reconciliation and avoid the filibuster. If the repeal-and-replace bill passes the House and reaches the Senate, a Democratic senator will raise a point of order to strike the penalty provision for violating the Byrd rule.

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