Republicans, at long last, are coalescing around a broad Obamacare replacement plan, set to be released by House leadership later this month. While Republicans will undoubtedly use it to pummel vulnerable Democrats in November, the $1.4 trillion question is really what happens after November.
You might think that there’s no middle ground between repeal and replace, and repeated Democratic claims that they want to “tweak” or “fix” the law but will not roll it back. The reality is much more complicated. First, Republicans might take back the Senate, but they’re not getting a veto-proof supermajority. That ties their hands at least until there’s a Republican White House (i.e., 2017), in terms of repeal and replace.
Democrats, on the other hand, can’t help but notice that President Barack Obama has twisted the black letter law of the Affordable Care Act into an origami pretzel to avoid blowback from millions of canceled policies and irate businesses stung by the law’s expensive mandates and penalties. Every day brings another Obamacare delay, a tacit acknowledgement that the law is too heavy on mandates, regulations and penalties, and too light on provisions that lower insurance and health care costs for families, businesses and consumers.
The facts on the ground bear this out. Surveys of the most recent enrollees suggest that less than one-third were previously uninsured, with the remainder re-enrolling in exchange coverage to take advantage of taxpayer subsidies.
Many of the uninsured are finding Obamacare insurance too expensive and are opting to remain uninsured. The result: More than a decade from now, the Congressional Budget Office estimates 30 million Americans will remain uninsured — despite the U.S. government spending more than a trillion dollars on expanding Medicaid and new insurance subsidies.
One bipartisan solution to the cost problem is to deregulate the Obamacare exchanges, offering more competition, more choices and better transparency, allowing individuals and families to pick plans that meet their real needs.
Sens. Mark Warner, D-Va., and Mark Begich, D-Alaska, have already taken a critical step in this direction. They’ve offered legislation that would create a new tier of insurance on the exchanges, “Copper Plans”, with lower actuarial values and thus lower premiums. To take full advantage of this change, Congress should raise caps on out-of-pocket deductibles, offer plans with fewer mandatory benefits and allow subsidies to flow to people who pick Copper plans.
There’s clearly an appetite for these plans, which could cost 30 percent less than Silver plans — currently the benchmark for exchange coverage. At eHealthInsurance, a private health insurance exchange, less expensive Bronze plans are almost twice as popular as Silver plans; as a share of total enrollment, far more young people (39 percent versus 25 percent) are buying insurance from eHealth than Obamacare’s public exchanges, too. Bottom line: If you want the remaining price-sensitive uninsured to buy coverage, offer cheaper options.
Several other changes would noticeably expand the market for more affordable coverage. First, allow government subsidies to flow through private exchanges. Companies now operating in the private exchange space, like Aon Hewitt, might be able to set up and run exchanges more efficiently than current state or federal exchanges. They could also offer “wrap-around” coverage — such as disability or indemnity insurance — that pair well with low-cost, high deductible plans.
Finally, all exchanges should be required to clearly and simply label plans that are eligible for health savings accounts. This would likely require simplification of existing HSA rules at the federal level, while allowing anyone to build up, tax free, money to set aside against future health care costs. (To equalize the tax treatment of health care spending, people should also be allowed to pay premiums out of their HSAs.)
Over time, these changes would help transform the health insurance market into a truly individual market, where plans would have to compete to keep your business and individuals would have an incentive to stay with plans offering the best care at the best price. On issues like pre-existing conditions, both parties already agree there is no going back to the pre-Obamacare status quo. President Obama has already re-written large swaths of the law through executive fiat. After November, Congress should recognize the “facts on the ground” and offer millions more families more affordable coverage options. Neither party will be able to claim total victory, but both could claim that they were fixing the law’s most pressing flaws. The rest of the debate can be settled in 2016.
Paul Howard is a senior fellow and director of the Center for Medical Progress at the Manhattan Institute.