Since the Presidential election, GOP leadership has adopted a “repeal, then replace” approach to Obamacare: quickly pass a repeal bill with a two to three-year delay and draft a replacement bill during a “transition period.” But Republicans cannot count on stability during an interim period.
Insurers are in the business of risk, and few would consider participating in a market with a looming end date and no predictable replacement. A repeal of the ACA without a defined replacement plan would catalyze a series of exits from the exchanges, which would both limit choices for Americans and cause premiums to spike. Consequently, only the sick will find insurance worthwhile, and healthy Americans drop out—causing catastrophic loses for insurers. To achieve near universal coverage, protection for pre-existing conditions, and affordability, repeal and replace go hand in hand.
One measure to manage market uncertainty would be to extend the risk-mitigation programs, such as the risk corridor program and reinsurance, to help defray unanticipated expenses. Under the risk corridor program, profits and losses are shared if the actual health spending by enrollees varies substantially from the forecasts. If the insurance companies earn a high profit, a portion of it is paid to the government. If insurance companies suffer a significant loss, a portion of this loss is reimbursed by the government. This provides greater certainty to the insurance companies and must be reinstated ahead of any debate over how to repeal or replace Obamacare.