UPDATE: The word is that the House will reject the deal. The Senate deal is balanced (GOP and Dems both get minor concessions) whereas the House deal has major giveaways to the GOP, a minor concession to the Dems, and a huge poison pill.

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Here’s a brief foray into federal policy, so that we can better understand the compromise in the Senate.

Apparently, it’s a short-term debt limit increase and budget to allow time for another Supercommittee to fail to reach an agreement. The “compromise” portion is in two tweaks to Obamacare. There’s more depth on those tweaks here and here, but I’ll give a quick-and-dirty version.

1. The Republicans get tighter income verification on the exchanges, an existing PPACA provision which had been delayed until 20151. Basically, the income that you claim needs to match the income you declare to the IRS; this isn’t a big deal, because any discrepancies will be taken out of your tax return.

The reason for the delay is that after the first year, income verification will be much easier; most people will get basically the same tax credit as the year prior. This year, it will be a lot more labor-intensive for the IRS as they look up your 2012 tax return.

There’s some risk that this provision will make it harder to enroll, but probably not. Your exchange account is already linked to your tax return, so this should only be onerous for IRS workers. Also, this doesn’t actually change the law in any way.

2. The Democrats get a delay in the $63 reinsurance tax on all health insurance plans. This will lower all insurance premiums by 1% or so for 2014.

“Reinsurance” is insurance for insurance companies: if their costs greatly exceed their income, they can borrow from a reinsurance fund. This is very important for the first few years of the exchanges, because overall costs are really a shot in the dark until we know who has enrolled.

To pay for the reinsurance, there’s a temporary tax on all health insurance plans. This is a slight discount for insurers who operate on the exchange, but self-insured corporations (and unions) pay the tax without seeing any benefit.

The deal in the Senate would keep the reinsurance pools, but pay for them a year later. That’s exactly the sort of fiscal policy we need! This sounds like a corporate giveaway, but it should be a wash for insurers, and lower premiums (by around 1%).

Both provisions are bigger politics than they are policy, so they seem pretty ideal for the current situation. The GOP gets to say “we got negotiations!” and the American people get to reopen the government without having to pay ransom.

I’m not in love with the deal, but it’s 1) not actively bad and 2) very minor.

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1 This is being called “the Honor System” by reporters who aren’t very smart. If you lie about your income to get lower premiums, you’ll get hit by a huge bill when you file your tax return.

Since your tax credits are run through the eeeevil IRS, there’s no easy way to scam the system.

Since “being poor” is one of my areas of expertise, I’m also inclined to say that this provision will shield a lot of hourly earners from a shocking tax bill in 2015.

 

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