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Why the GOPs 'skinny' health bill won't pass either

  • Republicans are now turning to a plan B dubbed the "skinny bill" in the Obamacare repeal and replace effort.
  • But this bill still runs afoul of the highly protected health insurance industry.
  • Several GOP senators are simply not likely to support it.
Senate Majority Leader Mitch McConnell, accompanied by Senator John Cornyn (R-TX) and Senator John Barrasso (R-WY), speaks with reporters on Capitol Hill in Washington earlier this year.
Aaron P. Bernstein | Reuters
Senate Majority Leader Mitch McConnell, accompanied by Senator John Cornyn (R-TX) and Senator John Barrasso (R-WY), speaks with reporters on Capitol Hill in Washington earlier this year.

Now that the Senate has fallen well short of being able to to pass its more comprehensive Obamacare repeal and replacement bill, the Republican leadership's hopes are increasingly pinned to a plan B some are calling the "skinny bill."

Those hopes are about to be dashed too.

The "skinny bill" is a measure that would keep Obamacare's Medicaid expansion and insurance subsidies in place but would eliminate the mandate requiring everyone to get insurance coverage or face a penalty. It would also kill the Obamacare medical device tax. Some people are calling it a "half a loaf" bill that at least moves the ball in the right direction for those who want to see all of Obamacare eventually abolished.

In theory, they're right. Politics is about compromise, and ending the onerous insurance requirement for individuals and businesses would be a big victory for the repeal forces and those who favor less government intrusion.

The problem is, it's not going to happen.

The reason is simple. Even with the mandate currently in place, there haven't been enough younger and healthier people signing up for coverage. The Congressional Budget Office and lots of other supposed experts were way off the mark when they estimated how many people would sign up for insurance to avoid the penalties for not doing so. Without a robust stream of premium revenues from younger people who are less likely to need expensive care, many insurers have exited the least profitable ACA exchanges. This is what some call the "Obamacare death spiral."

The skinny bill would accelerate this scenario in a big way. If the penalties and requirements for health insurance coverage haven't coerced the expected number of people to buy insurance, just imagine how quickly those coverage levels will drop without them. More and more insurers would bolt the exchanges in that scenario as they wouldn't want to wait around to lose money when enrollment numbers fall. And those who think there are 50 or more GOP senators who will allow that to happen are kidding themselves.

Because a closer look at the map of states where the Obamacare exchanges are already without multiple insurer options is decidedly Republican-dominated. It's filled with red states like Alaska, South Carolina, Wyoming, Arizona, Mississippi, Alabama, and Oklahoma. Not all the GOP senators in those states will resist ending the mandate, but Arizona's Senator John McCain said Tuesday he wasn't ready to vote for any replacement bill and his state's dwindling insurance options could be why. Without McCain alone, the "skinny bill" is doomed, and don't be surprised if a few other Republicans like Alaska Senator Lisa Murkowski vote against it too.

But this isn't just about protecting constituents from losing all their insurance coverage choices. From the beginning, Senate Majority Leader Mitch McConnell has put insurance company priorities at the top of his list in this Obamacare replacement process. The one thing he's fought to keep in every bill is some form of subsidies to help Americans buy insurance plans, which is an indirect taxpayer money hand off to the insurance industry.

Even the "skinny bill" keeps those subsidies in place. But that won't be enough for the insurance companies if the mandate is killed and fewer people are buying insurance. The Obamacare insurance mandate is a clear example of a government-imposed rule meant to boost a private industry; its powerful lobbyists aren't letting go of it easily.

Throw in the very powerful argument that private health insurance exchanges in several states across the country could disappear in a hurry if the "skinny bill" is passed, and you can see why this measure is already dead on arrival.

Commentary by Jake Novak, CNBC.com senior columnist. Follow him on Twitter @jakejakeny.

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