Warren Advisor Admits Her Health Plan Raises Middle Class Taxes

That didn’t last long. Five days after Sen. Elizabeth Warren released a health plan (chock full of gimmicks) that she claimed would not raise taxes on the middle class, one of the authors of that plan contradicted her claims.

In an interview with Axios published on Wednesday, but which took place before the plan’s release, Warren advisor and former Centers for Medicare and Medicaid Services Administrator Donald Berwick said the following:

Q: Many people may not know their employers cover 70% or more of their entire premium — money that otherwise would go to their pay. Is this the main problem when talking about reforms?

DB: The basics are not that complicated. Every single dollar — every nickel spent on health care in this country — is coming from workers. There’s no other source. [Emphasis mine.]

Compare that phraseology to what Joe Biden’s campaign spokesperson said on Friday about Warren’s plan and its effects:

For months, Elizabeth Warren has refused to say if her health care plan would raise taxes on the middle class, and now we know why: Because it does….Senator Warren would place a new tax of nearly $9 trillion that will fall on American workers. [Emphasis mine.]

In response to the Biden campaign’s criticism, Warren said last Friday that her health plan’s projections “were authenticated by President Obama’s head of Medicare”—meaning Berwick. Unfortunately for Warren, Berwick, by virtue of his comments in his interview with Axios, also “authenticated” Biden’s attack that her required employer contribution will hit workers, and thus middle-class families.

Warren also tried to defend her plan on Friday by claiming that “the employer contribution is already part of” Obamacare. Obamacare does include an employer contribution requirement, but that requirement:

  • Is capped at no more than $3,000 per worker, far less than the average employer contribution for workers’ health coverage—$14,561 for family coverage as of 2019— which will form the initial basis of Warren’s required employer contribution;
  • Does not apply to employers at all if the firm offers “affordable” coverage—an option not available under Warren’s plan, which would make private insurance coverage “unlawful;” and
  • Will raise an estimated $74 billion in the coming decade, according to the Congressional Budget Office—less than 1 percent of the $8.8 trillion Warren claims her required employer contribution would raise.

While Obamacare and Warrencare both have employer contributions, the similarities pretty much end there. Calling the two equal would equate a log cabin to Buckingham Palace. Sure, they’re both houses, but differ greatly in size. Warren’s “contribution”—which Berwick, her advisor, admits will fall on middle-class workers—stands orders of magnitude greater than anything in Obamacare.

Public Accountability?

In the same Axios interview, Berwick highlighted what he termed a tradeoff “between public accountability and private accountability.” He continued: “By not having a publicly accountable system, we are paying an enormous price in lack of transparency.”

His comments echo prior justification of his infamous “rationing with our eyes open” quote in a 2009 interview. As he explained to The New York Times as he departed CMS in late 2011, “Someone, like your health insurance company, is going to limit what you can get….The government, unlike many private health insurance plans, is working in the daylight. That’s a strength.”

Except that Berwick, as CMS administrator, went to absurd lengths to hide from public scrutiny after his series of remarks. He would gladly meet with health-care lobbyists behind closed doors, but refused to answer questions from reporters, going so far as to duck behind curtains and request security escorts to avoid doing so.

Warren apparently has taken a lesson in opacity from Berwick’s time as CMS administrator. At first, she avoided releasing a specific health care proposal at all, only to follow up by issuing a “plan” containing so many absurd assumptions as to render it irrelevant as a serious blueprint for legislating.

Unfortunately for her, however, Berwick committed the unforgivable sin of speaking an inconvenient truth about the effects of her proposal. Eight years after leaving office as CMS administrator, Berwick, however belated and however unwittingly, delivered some much-needed public accountability for Warren’s health plan.

This post was originally published at The Federalist.

Analyzing the Gimmicks in Warren’s Health Care Plan

Six weeks ago, this publication published “Elizabeth Warren Has a Plan…For Avoiding Your Health Care Questions.” That plan came to fruition last Friday, when Warren released a paper (and two accompanying analyses) claiming that she can fund her single-payer health care program without raising taxes on the middle class.

Both her opponents in the Democratic presidential primary and conservative commentators immediately criticized Warren’s plan for the gimmicks and assumptions used to arrive at her estimate. Her paper claims she can reduce the 10-year cost of single payer—the amount of new federal revenues needed to fund the program, over and above the dollars already spent on health care (e.g., existing federal spending on Medicare, Medicaid, etc.)—from $34 trillion in an October Urban Institute estimate to only $20.5 trillion. On top of this 40 percent reduction in the cost of single payer, Warren claims she can raise the $20.5 trillion without a middle-class tax increase.

Separating Fact from Fiction on Trump’s Health Care Proclamation for Immigrants

On Friday, President Trump issued a proclamation requiring certain immigrants entering the country either to purchase health insurance, or demonstrate they can pay their medical bills. The order prompted no small amount of hysteria from the left over the weekend.

If you’re puzzled by this development, you might not be the only one. After all, don’t liberals want everyone to have health insurance? They have spent significant time and effort attacking President Trump for a (slight) increase in the number of uninsured people while he’s been president.

What the Proclamation Says

The proclamation itself, which will take effect on November 3 (30 days from Friday), limits “the entry into the United States as immigrants of aliens who will financially burden” the American health care system. It requires aliens applying for immigrant visas to become “covered by approved health insurance…within 30 days” of entry, or “possess…the financial resources to pay for reasonably foreseeable medical costs.”

The proclamation includes numerous different acceptable forms of health insurance: employer plans (including association health plans and COBRA coverage), catastrophic plans, short-term limited duration insurance, coverage through Tricare or Medicare, or visitor health coverage lasting a minimum of 364 days. The list of acceptable forms of insurance does not, however, include subsidized Obamacare exchange plans, or Medicaid coverage for individuals over age 18—likely because these options involve federal taxpayer subsidies.

What the Proclamation Doesn’t Say

It shouldn’t need stating outright, but contrary to claims that the proclamation constitutes a “racist attack on a community who deserves health care,” the order says not a word about a specific race, or national or ethnic group. It also exempts “any alien holding a valid immigrant visa issued before the effective date of this proclamation,” meaning the requirement will apply prospectively and not retrospectively.

Liberal reporters claimed that “the move effectively creates a health insurance mandate for immigrants,” after Republicans eliminated Obamacare’s individual mandate penalty. But this charge too ignores the fact that the proclamation—unlike Obamacare—includes an exception for those who “possess…the financial resources to pay for reasonably foreseeable medical costs.” (The proclamation does not define this term, meaning that the administration will presumably go through a rulemaking process to do so.)

The Real Story

Liberals’ hysteria over the issue demonstrates a massive shift leftward in recent years. Consider that in 1993, Hillary Clinton testified before Congress that she opposed extending benefits to “illegal aliens,” because it would encourage additional migration to the United States:

We do not think the comprehensive health care benefits should be extended to those who are undocumented workers and illegal aliens. We do not want to do anything to encourage more illegal immigration into this country. We know now that too many people come in for medical care, as it is. We certainly don’t want them having the same benefits that American citizens are entitled to have.

Even in 2009, Barack Obama felt the need to claim that his health plan wouldn’t cover those in the country illegally (even if the claim didn’t stand up to scrutiny). The fact that Democrats have now gone far beyond Obama’s position, and have attacked President Trump for ensuring foreign citizens will not burden our health care system—a position liberals claim to support for Americans—speaks to the party’s full-on embrace of both socialism and open borders.

This post was originally published at The Federalist.

Skyrocketing Premiums Show Obamacare’s Failure to Deliver

According to a recently released report, extending employer-provided health coverage to the average American family equates to buying that family a moderately-priced car every single year. This provides further proof that Barack Obama “sold” a lemon to the American people in the form of Obamacare.

The inexorable rise in health care costs—a rise that candidate Obama pledged to reverse—shows how Obamacare has failed to deliver on its promise. Yet Democrats want to “solve” the problems Obamacare is making worse through even more government regulations, taxes, and spending. Struggling American families deserve relief from both the failed status quo, and Democrats’ desire to put that failed status quo on steroids.

Study of Employer Plans

Obamacare has failed to deliver on that pledge, as premiums continue to rise higher and higher:

Why has Obamacare failed to deliver? Several reasons stand out. First, its numerous regulatory requirements on insurance companies raised rates, in part by encouraging individuals to consume additional care.

The pre-existing condition provisions represent the prime driver of premium increases in the exchange market, according to a Heritage Foundation paper from last year. However, because employer-sponsored plans largely had to meet these requirements prior to Obamacare, they have less bearing on the increase in employer-sponsored premiums.

Second, Obamacare encouraged consolidation within the health care sector—hospitals buying hospitals, hospitals buying physician practices, physician practices merging, health insurers merging, and so on. While providers claim their mergers will provide better care to patients, they also represent a way for doctors and hospitals to demand higher payments from insurers. Reporting has shown how hospitals’ monopolistic practices drive up prices, raising rates for patients and employers alike.

Same Song, Different Verse

More Regulations: On issues like “surprise” billing or drug pricing, Democrats’ favored proposals would impose price controls on some or all segments of the health care industry. These price controls would likely limit the supply of care provided, while also reducing its quality.

More Spending: Most Democratic proposals, whether by presidential candidates, liberal think-tanks, or members of Congress, include major amounts of new spending to make health care “affordable” for the American people—an implicit omission that Obamacare (a.k.a. the “Affordable Care Act”) has not delivered for struggling families.

More Taxes: Even though some don’t wish to admit it, the Democratic candidates for president have all proposed plans that would necessitate major tax increases, from the hundreds of billions to the tens of trillions of dollars—even though at least two of those candidates have failed to pay new taxes imposed by Obamacare itself.

The latest increase in employer-sponsored health premiums demonstrates that hard-working families deserve better than Obamacare. It also illustrates why the American people deserve better than the new Democratic plans to impose more big government “solutions” in the wake of Obamacare’s failure.

This post was originally published at The Federalist.

Two Factors Behind the Medicaid Enrollment Explosion

While enrollment in Obamacare’s exchanges has fallen below original projections, largely due to unaffordable premiums for health insurance coverage, enrollment in its Medicaid expansion has exploded. By the end of 2016, enrollment in 24 states that expanded Medicaid enrollment to able-bodied adults exceeded the states’ original projections by an average of 110 percent.

New studies and data suggest two related reasons why: Ineligible individuals getting on (or staying on) the Medicaid rolls, and people dropping private coverage to enroll in Medicaid expansion.

Ineligible Enrollees

The study caused a political firestorm in Louisiana. Eventually, the state dropped approximately 30,000 individuals from the Medicaid expansion rolls. Ironically enough, the Medicaid program came in approximately $400 million under budget in the fiscal year ended June 30—due in large part to the enrollment purge. To put it another way, Louisiana taxpayers had spent $400 million in the prior fiscal year on ineligible Medicaid enrollees.

A study released this month provides new evidence that the phenomenon of ineligible enrollees may go far beyond Louisiana. The study examined Census data in states that expanded Medicaid when Obamacare’s expansion took effect in 2014 and compared it to states that have not expanded. Upon analyzing the data by income, the authors found that

There is strong evidence that Medicaid participation increased for groups for whom Medicaid was not intended to be the source of insurance coverage. Neither excluding those who might be categorically eligible [e.g., individuals with disabilities already eligible for Medicaid], nor focusing on those whose income was far from the threshold alters the fundamental results. The estimated program effect grows over time.

For instance, the authors found that for individuals making more than 250 percent of the federal poverty level—nearly double the eligibility threshold for Medicaid expansion—fully 65 percent of the gains in insurance coverage after Obamacare took effect came not from people enrolling in employer coverage or other insurance (e.g., exchange plans), but from increased Medicaid enrollment.

However, the scope of this phenomenon and the fact that it occurred comparatively high up the income scale suggests widespread problems with rooting out ineligible Medicaid enrollees. People could fail to report income increases to state authorities, improperly estimate their income when applying for coverage, or—as the authors suggest—friendly social workers could decide to cast potential enrollees’ circumstances in the best possible light when filling out application forms on their behalf.

Government Programs ‘Crowding Out’ Private Coverage

In other cases, Medicaid expansion appears to have accelerated the phenomenon of “crowd out,” whereby people drop their private coverage to enroll in government-funded benefits. Crowd out enrollees are not necessarily ineligible for benefits—that is, they meet income limits and other criteria for Medicaid—but every dollar spent on covering people who already had health insurance prior to expansion arguably represents a sub-optimal use of scarce taxpayer dollars.

As part of my work with the Pelican Institute, I recently reported that the Louisiana Department of Health compiled internal data showing that, once Medicaid expansion went into effect in the state in July 2016, several thousand individuals each month dropped their private coverage to go on Medicaid. The Department of Health, claiming the data inaccurate, stopped compiling it altogether late in 2017—even though their stated explanation for the inaccuracy meant their data arguably under-stated the number of individuals dropping coverage.

The data raise the obvious question of why states would want to follow Louisiana’s lead and spend hundreds of millions of dollars (at minimum) subsidizing individuals who previously had private insurance.

Will Congress Act?

The twin developments suggest a major role for Congress, to say nothing of the states, in combating these sizable expenditures on Medicaid waste, fraud, and abuse. More rigorous eligibility checks would help, for starters, as would the widespread adoption of a new Medicaid waiver program approved in Utah.

Beginning in January, the Utah waiver will require individuals with an offer of employer coverage to remain enrolled in that employer plan, with Medicaid reimbursing premiums—a change designed to avoid the crowd-out seen in Louisiana.

This post was originally published at The Federalist.

Why Republicans Should Preserve Obamacare’s Cadillac Tax

Those seeking to understand why the United States faces out-of-control health-care costs need look no further than this week’s congressional agenda. On Wednesday, the House of Representatives will likely vote on legislation to repeal Obamacare’s “Cadillac tax” on high-cost health plans, a provision Congress has already delayed repeatedly.

Most economists agree that reforming the tax treatment of health insurance represents one key way to slow the growth of health-care costs. Yet neither party wants to take the courageous decisions required to do just that — even when, in this case, the “action” involved merely requires allowing a legislative provision already enacted to take effect.

The Conservative Approach to Controlling Costs

But from a conservative perspective, controlling health care costs in a broader sense involves getting incentives right. Reforming incentives can involve injecting more competition into the health care system — for instance, by improving generic drugs faster to help bring down prices. But it also requires reforms that encourage people to serve as smarter consumers of health care.

Health costs continue to skyrocket, in large part because individuals love to spend other people’s money. Few people can afford to pay for all their health care, such as major surgeries, out-of-pocket. Funding more care through third-party payments — a majority of Americans consume most of their health care through an insurer, and many insurers are chosen by an employer — increases spending.

The tax code exacerbates the third-party payment problem by allowing employers to provide health insurance to their workers on a tax-free basis. Economists agree that this tax preference encourages people to use more expensive health insurance than they need, and thus more health care than they need.

Why Do Conservatives Oppose a Conservative Reform?

However, the law used a clumsy approach to imposing this tax, on two levels. First, it applied the same 40 percent rate to all employer-provided policies, regardless of whether the particular affected workers came from a high-tax bracket, such as corporate CEOs, or a low-tax bracket, such as office janitors. Second, it imposed the tax as part of an overall package of revenue increases used to fund Obamacare.

Nonetheless, the “Cadillac tax” represents an important measure to control health care costs. Because Congress included this provision as part of Obamacare, Republicans could easily allow the measure to take effect while disclaiming responsibility for having enacted it. After all, everyone knows Obamacare passed with only Democratic votes.

Yet Republicans have spent the better part of the past decade trying to repeal this measure, without enacting a similar or better replacement that could control health care costs. Moreover, the House will apparently vote on the repeal this week without a full Congressional Budget Office score showing the sizable fiscal impact of that action.

Liberals’ Approach To Controlling Health Costs

Conservatives might not think a battle over the “Cadillac tax” is worth fighting. President Barack Obama’s attack ads from 2008 showed that “taxing health benefits” can prove incredibly politically powerful. (All the more ironic since the Obama White House insisted on including the “Cadillac tax” as part of Obamacare.)

But after watching the Democratic debates last month, conservatives should know that liberals have an “easy solution” to controlling health care costs: price controls, greater regulations, and more government control. After all, Sen. Bernie Sanders’ single-payer legislation exists in no small part to extend Medicare’s price controls over health care goods and services to all Americans, rather than just seniors.

If conservatives cannot support and implement changes that reform the incentives in the health care system, including reasonable limits on the tax treatment of employer-provided health coverage, they may end up bringing about the liberal alternative. And sooner than they think.

This post was originally published at The Federalist.

The Trump Administration’s Innovative Solution Regarding Pre-Existing Conditions

Last Thursday afternoon, the Trump administration released its final rule regarding Health Reimbursement Arrangements (HRAs). The 497-page document will take lawyers and employment professionals weeks to absorb and digest fully. But in a nutshell, the rule will help to make coverage more portable and affordable—while also going a long way to resolve the problem of pre-existing conditions.

As I first explained when the administration proposed this HRA rule back in October, much of the problem surrounding pre-existing conditions revolves around portability. Because most Americans don’t own their own health coverage—their employers do—when people lose their job, they lose their health coverage. The pre-existing condition problem emerges when people develop a costly medical condition while at one job, then have to switch jobs or otherwise leave their employer plan.

But if people owned their own insurance policies, they could change jobs easily, without fear of losing their coverage. Moreover, they would get to pick the kinds of benefit designs and doctor networks they want, rather than being stuck with what their employer picks for them.

The final rule accomplishes both objectives. It enhances portability by allowing employers to give their workers a (tax-free) contribution to an HRA, so employees can buy the plan that works best for them. If there’s any difference between the employer’s contribution and the total premium—for instance, an employer contributes $300 per month, and the worker selects a plan with a $350 monthly premium—the worker can pay the difference on a pre-tax basis, so long as he purchases the plan outside of the Obamacare exchanges. Best of all, because employees own the plans and not the employer, they can keep their coverage when they change jobs.

This change also improves affordability, in two key respects. First, individuals can buy just the coverage they want, rather than the coverage their employer gives them. Currently, if an employer plan offers particular benefits that an employee does not value, or a provider network a worker does not need, the worker can only buy an alternative plan by forfeiting their employer’s subsidy towards their health insurance—an unattractive and irrational option for most. The HRA option will allow workers to retain their employer’s subsidy, yet purchase more tailored coverage.

Second, more people purchasing coverage individually will create a more robust marketplace, increasing competition. Carriers may move into the market for individual coverage, and even create new options to attract additional business—both changes that will help consumers, and mitigate premium increases.

The final rule does include important safeguards to ensure that businesses don’t just try to “dump” their sickest employees onto individual insurance plans, raising premiums on the Obamacare exchanges. Most notably, if they elect the HRA option, firms must apply it to an entire class of workers—for instance, all full-time workers, or all workers in a certain geographic area. Moreover, employers cannot vary their contributions to workers’ HRAs, except by the employee’s age and number of dependents.

The rule could eventually lead to dramatic changes in Americans’ health-coverage options, but it includes provisions designed to phase those changes in over time. Under the rule, employers cannot offer traditional group health coverage to any class of workers that has access to an individual coverage HRA. In other words, employers can choose the “new” HRA model to deliver benefits to their workers, or the “old” (i.e., existing) model for their workers, but not both (at least not for the same class of workers).

However, the final rule also includes a critically important grandfathering provision, which will provide businesses the option for a smoother transition. Under this provision, an employer can apply the HRA model to new hires, while allowing existing employees to maintain their traditional group insurance. For instance, an employer could state that any worker joining the firm after the HRA rule takes effect (on January 1, 2020) would receive health coverage using the new rules, while current workers would remain on the firm’s existing employer plan.

Conservatives concerned about pre-existing conditions should study this rule closely, and cite it every time the left mounts political attacks over the issue. Liberals want the government to control all of health care, as evidenced by their single-payer push. Conversely, conservatives want doctors and patients to make their own health-care decisions. Last week’s HRA rule will accomplish just that.

This post was originally published at The Federalist.

D.C. Council’s Motto: “Obamacare for Thee — But Not for Me!”

On the first of the month, D.C. Mayor Muriel Bowser held an event at Freedom Plaza to celebrate the start of Obamacare’s annual open enrollment period. She appeared with Mila Kofman, head of the District’s health insurance exchange, D.C. Health Link. In conjunction with the event, the mayor issued a proclamation declaring the open enrollment period “Get Covered, Stay Covered” months, and noting that “residents should visit [D.C. Health Link’s website] to shop for and compare health insurance.”

But in encouraging others to “get covered,” and promoting the D.C. Health Link site, Bowser omitted one key detail: She does not buy the policies that D.C. Health Link sells. My recent Freedom of Information Act request confirmed that Bowser, like most of her D.C. Council colleagues, received taxpayer-funded insurance subsidies to purchase their coverage through the District government, rather than through D.C. Health Link. Thus, DC spent nearly half a million in taxpayer funds because the mayor and council won’t be bothered to enroll in Obamacare.

Forfeiting generous employer subsidies might seem like an unreasonable request to make of the mayor and council. But earlier this year, the council passed, and Bowser signed, legislation requiring all District residents to buy health coverage or pay a tax — including tens of thousands of residents who do not qualify for subsidies.

According to public records, Bowser receives an annual salary of $200,000; council members receive $140,600 annually. This year, I will receive less income than any of them, and as a small business owner my income is far from guaranteed, unlike public officials’ salaries. Yet the mayor and council have required me to buy health coverage without a subsidy, even as they refuse to do so themselves.

I asked Bowser about this obvious inequity. Under Obamacare, an individual with income of $50,000 — one-quarter of Bowser’s salary — does not qualify for an income-based subsidy. Bowser required this individual to buy coverage without assistance, while earning much more in salary and retaining her employer subsidy. Did she see a double standard in her conduct?

When it came to the issue of equity and fairness, she didn’t have a substantive answer, nor did her council colleagues. I asked staff for each council member about their health insurance coverage, and any subsidies received. Most staff never responded to my outreach. Staff for Councilman Robert White said they would ask him about his coverage, but never sent a reply. Staff for two councilmembers, Phil Mendelson and Brandon Todd, replied with explanations about the subsidies being provided as an employer benefit.

But neither Bowser nor the council members could justify requiring other District residents, including many with lower incomes than they, from buying coverage without a subsidy even as they will not do so themselves. And how could they? Quite often, it seems liberals who preach frequently about “fairness” regarding others’ actions fall eerily silent when doing so would cost them personally. “Obamacare for thee — but not for me” doesn’t provide a particularly compelling slogan, but the mayor and council have sent that very message by their actions.

Official Washington contains numerous examples of hypocrisy and double standards, but that doesn’t make either a “D.C. value.” If Bowser wishes to abide by the D.C. values she campaigned on, she and the council members should give up their subsidies and buy health insurance just like ordinary residents do. If they find that task too difficult or costly, then perhaps they should repeal the exact same requirement they put on everyone else.

This post was originally published at The Federalist.

Let the Individual Mandate Die

In May New Jersey imposed a health-insurance mandate requiring all residents to buy insurance or pay a penalty. More states will feel pressure to follow suit in the coming year as the federal mandate’s penalty disappears Jan. 1 and state legislatures reconvene, some with new Democratic majorities intent on “protecting” Obamacare. But conflicts with federal law will make state-level health-insurance mandates ineffective or unduly onerous, and governors and legislatures would do well to steer clear.

While states can require citizens to purchase health coverage, they will have trouble ensuring compliance. Federal law prohibits the Internal Revenue Service from disclosing tax-return data, except under limited circumstances. And there is no clear precedent allowing the IRS to disclose coverage data to verify compliance with state insurance requirements.

Accordingly, mandates enacted in New Jersey and the District of Columbia earlier this year created their own coverage-reporting regimes. But those likely conflict with the Employee Retirement Income Security Act, or ERISA, which explicitly pre-empts “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.” The point is to protect large employers who self-insure workers from 50 sets of conflicting state laws.

No employer has used ERISA to challenge Massachusetts’ 2006 individual mandate, which includes reporting requirements, but that doesn’t mean it’s legal. Last month a Brookings Institution paper conceded that “state requirements related to employer benefits like health coverage may be subject to legal challenge based on ERISA preemption.”

A 2016 Supreme Court ruling would bolster such a challenge. In Gobeille v. Liberty Mutual, the court struck down a Vermont law that required employers to submit health-care payment claims to a state database. The court said the law was pre-empted by ERISA.

Writing for a six-justice majority, Justice Anthony Kennedy noted the myriad reporting requirements under federal law. Vermont’s law required additional record-keeping. Justice Kennedy concluded that “differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability.”

Justice Kennedy’s opinion provides a how-to manual for employers to challenge state-level insurance mandates. A morass of state-imposed insurance mandates and reporting requirements would unnecessarily burden employers with costs and complexity. It cries out for pre-emptive relief.

Unfortunately, policy makers have ignored these concerns. Notes from the working group that recommended the District of Columbia’s individual mandate never mention the reporting burden or ERISA pre-emption. And in August the federal Centers for Medicare and Medicaid Services approved New Jersey’s waiver application that relied in part upon funding from that state’s new individual mandate, even though money from the difficult-to-enforce requirement may never materialize.

States already cannot require federal agencies to report coverage. This means their mandates won’t track the 2.3 million covered by the Indian Health Service, 9.3 million receiving health care from the Veterans Administration, 8.8 million disabled under age 65 who are enrolled in Medicare, 9.4 million military Tricare enrollees and 8.2 million federal employees and retirees.

If a successful ERISA challenge also exempts some of the 181 million with employer-based insurance from coverage-reporting requirements, state insurance mandates become farcical. States would have to choose between mandates that run on the “honor system”—thus likely rife with cheating—or taking so much time and energy to verify coverage that administration becomes prohibitively expensive.

States should take the hint and refrain from even considering their own coverage mandates. But if they don’t, smart employers should challenge the mandate’s reporting requirements. They’d likely win.

This post was originally published at The Wall Street Journal.

Four Better Ways to Address Pre-Existing Conditions Than Obamacare

n a recent article, I linked to a tweet promoting alternatives to Obamacare’s pre-existing condition regulations, which have raised health insurance premiums for millions of Americans.

I offered those solutions when asked about a Republican alternative to Obamacare, and specifically the pre-existing condition provisions. While I no longer work in Congress, and therefore cannot readily get legislative provisions drafted and scored, I did want to elaborate on the concepts briefly mentioned, to show that other solutions to the pre-existing condition problem do exist.

1. Health Status Insurance

I mentioned both “renewal guarantees” and “health status insurance,” two relatively interchangeable terms, in my tweet. Both refer to the option of buying coverage at some point in the future—insurance against developing a health condition that makes one uninsurable.

Other forms of insurance use these types of riders frequently. For instance, I purchased a long-term disability policy when I bought my condo, to protect myself if I could no longer work and pay my mortgage. The policy came with two components—the coverage I have now, and pay for each year, along with a rider allowing me to double my coverage amount (i.e. the monthly payment I would receive if I became disabled) without going through the application or underwriting process again.

Since I bought that policy in 2008, my doctors diagnosed me with hypertension in 2012, and I went through two reconstructive surgeries on my left ankle. I don’t know if these ailments would prevent me from buying a disability policy now if I went out and applied for one. But because I purchased that rider with my original policy in 2008, I don’t need to worry about it. If I want more disability coverage, I can obtain it by paying the additional premium, no questions asked.

Health status insurance would complement employer-sponsored coverage. Most people get their coverage through their employers. Because employers heavily subsidize the coverage, and the federal government provides tax breaks for employer-sponsored plans, more than three in four people who are offered employer-sponsored insurance sign up for it.

But employer-based insurance by definition isn’t portable. When you switch your job, or (worse yet) lose your job because you’re too sick to work, you lose your coverage. Health status insurance would get around that portability problem. Individuals could sign up for their employer plan but pay for health status insurance “on the side.”

This coverage, which they and not their employer own, would protect them in case they develop a pre-existing condition or move to a job that doesn’t provide health insurance. It would also cost a lot less than buying a complete insurance plan—remember, they’re paying for the option to purchase insurance at a later date, not the insurance itself.

2. Insurance Portability

A proposed regulation issued by the Trump administration last month would permit just that. Under the proposal, employers could provide fixed sums to their employees to buy individually owned insurance—that is, a policy the employee buys and holds—through Health Reimbursement Arrangements (HRAs). Employees could pay any “leftover” premiums not covered by the employer subsidy on a pre-tax basis, as they do with their current, employer-owned coverage, through paycheck withholding.

I recently wrote about the regulation; feel free to read that article for greater detail. But as with health status insurance, better portability of individual coverage would allow people to buy—and hold, and keep—coverage before they develop a pre-existing condition, reducing the number of people who have to worry about losing their coverage when battling a difficult illness.

3. High-Risk Pools

Of course, health status insurance only helps those who purchase it prior to becoming sick. For people who already have a pre-existing condition, perhaps because of an ailment acquired at birth or in one’s youth, high-risk pools provide another possible solution.

Critics of risk pools generally cite two reasons to argue against this model as a workable policy solution. First, risk pools prior to Obamacare were not well-funded—in many cases, a true enough criticism. While some state pools worked well and offered generous subsidies (even income-based subsidies in some states), others did not.

It would take a fair bit of federal funding to set up a solid network of state high-risk pools. One article, published in National Affairs a few months after Obamacare’s enactment, estimated that such pools would require $15-20 billion per year in funding—probably more like $20-30 billion now, given the constant rise in health care costs. This figure represents a sizable sum, but less than the overall cost of Obamacare, or even its insurance subsidies ($57 billion this fiscal year alone).

Second, risk pool critics dislike the surcharges that many risk pools applied. Most pools capped monthly premiums for enrollees at 150 or 200 percent of standard insurance rates. Of course, individuals with chronic heart failure or some other costly condition generally incur much higher actual costs—costs that the pool worked to subsidize—but some believe that making individuals with pre-existing conditions pay a 50 to 100 percent premium over healthy individuals discriminates against the sick.

Personally, when designing a high-risk pool, I would distinguish between individuals who maintained continuous coverage prior to joining the pool and those who did not. Charging higher premiums to individuals who maintained continuous coverage seems unfair. On the other hand, it seems very reasonable to impose a surcharge for individuals who joined a high-risk pool because they didn’t purchase insurance until after they became sick.

As a small government conservative, I generally oppose intrusive attempts like an individual mandate to require individuals to behave in a certain manner. While I view going without health insurance an unwise move, I believe in the right of people to make bad decisions. However, I also believe in people paying the consequences of those bad decisions—and a surcharge on individuals who sign up for a high-risk pool while lacking continuous coverage would do just that.

4. Direct Primary Care

Direct primary care, which encompasses a personal relationship with a physician or group of physicians, can help manage individuals with chronic (and potentially costly) diseases. In most cases, patients pay a monthly or annual subscription fee to the practice, which covers unlimited doctor visits, as well as phone or electronic consultations and some limited diagnostic tests. Patients can get referrals to specialist care, or purchase a catastrophic insurance policy to cover expenses not included in the subscription fee.

Of course, primary care would not work well for a patient with advanced cancer, who needs costly pharmaceutical therapies or other very specialized care. But for patients with chronic conditions like diabetes, COPD, or chronic heart failure, direct primary care may offer a way better to manage the disease, potentially reducing health care costs while improving patient access to care and quality of life—the most important objective.

As noted above, these types of solutions are not one size fits all. Health status insurance would not work for patients born with genetically based diseases, and direct primary care might not help patients with advanced tumors.

But in some respects, that’s the point. Obamacare took a comparatively small universe of truly uninsurable patients—a few million, by some estimates—and uprooted the individual market of about 20 million people (to say nothing of other Americans’ health coverage) for it. Unfortunately, millions of Americans have ended up dropping insurance as a result, because the changes have priced them out of coverage.

A better way to reform the system would use a more specialized approach—a scalpel instead of a chainsaw. Health status insurance, improved portability, high-risk pools, and direct primary care represent four potential prongs of that better alternative.

This post was originally published at The Federalist.