The Better Solution for Our Health Insurance System: A Plan You Can Actually Keep

Sometimes, liberals and conservatives agree on a policy problem, but disagree strongly on the best solutions to that problem. Our health insurance system presents one case of such a disconnect between problems and solutions.

In the last Democratic presidential debate, hosted by CNN in March, Vermont Sen. Bernie Sanders said that the coronavirus pandemic made the “dysfunctionality of the current health care system … obviously apparent.” He elaborated in an April op-ed in Politico, in which he noted that “already, an estimated 9.2 million workers have lost their employer-sponsored insurance, and as many as 35 million people might lose coverage by the end of the crisis.”

Sanders makes a valid point: The pandemic does illustrate the shortcomings of our system of health coverage. But his single-payer health care plan — or even Joe Biden’s proposal for a (purportedly) voluntary government-run “option” in which individuals could enroll — would take the system in the exact opposite direction.

The dysfunctionality of the system exists largely because employers control most Americans’ health insurance. Most conservatives would therefore support letting individuals control their health coverage, rather than liberals’ plan to replace employer control with government control. Thankfully, the Trump administration has moved health policy in that exact direction, laying the groundwork for a movement toward more personalized insurance options.

The Problem: Employer-Provided Health Insurance

Sanders cited a study from Health Management Associates stating that as many as 35 million individuals could lose access to employer-sponsored insurance due to coronavirus-related layoffs. A revised paper, released in late May, did not specifically update estimates for the number of people losing employer insurance, but still showed significant coverage losses. Other estimates have indicated similarly large numbers of Americans losing their employer coverage.

The sudden job losses sparked by coronavirus lockdowns have illustrated one of the three major problems with employer-provided health insurance. Individually and collectively, these flaws have represented a problem hidden in plain sight for decades.

Lack of choice: The largest survey of employer-provided health insurance found that in 2019, exactly three-quarters of firms (75%) offered only one type of health insurance plan. In general, large firms offer more choices than small businesses, but even among the largest firms — those with more than 5,000 workers.

Because the employer and not the employee owns the insurance policy, workers often end up stuck with whatever plan their employer chooses. An individual who doesn’t want to enroll in an HMO, or whose doctors lie outside his or her employer’s provider network, might have few choices but to switch jobs or accept a plan that does not meet his or her needs.

In its first season, the U.S. version of “The Office” satirized this dynamic, when resident megalomaniac Dwight Schrute got charged with picking the office health plan — and let the power go to his head. While Americans don’t have to worry about contracting “Count Choculitis,” one of the fictitious diseases Schrute’s co-workers invented to needle him in the episode, they do face the very real worry that their employer’s choices and wishes regarding health care might not align with their own.

Flawed incentives: A conversation with one of my friends several years ago illustrated this problem. My friend said he loved the insurance plan his employer provided: “I can go to the doctor and it only costs me a $5 co-pay.”

I posed a thought experiment: What if your health insurance suddenly became taxable, and you had to pay $1,500 or so in taxes on that coverage? (At the time, a top-of-the-line plan cost about $6,000 for an individual, and I assumed a 25% state and local tax rate.) He responded immediately: “I wouldn’t want the plan — I would tell them to raise my co-pays and deductibles.”

That response illustrates the policy problem of employer-sponsored insurance: Everyone thinks they’re spending everyone else’s money. Employees don’t pay taxes on employer coverage; an IRS ruling during World War II, later codified by Congress, exempts employer-provided benefits from both income and payroll taxes.

All the incentives regarding employer-provided health care point in the wrong direction. Exempting employer coverage from taxation encourages individuals to take more compensation in untaxed health insurance benefits rather than taxable wages. Many employees don’t even realize that the employer’s share of the contribution for their coverage — which averaged nearly $15,000 for a family policy in 2019 — comes out of their own wallets in the form of lost wages.

All the flawed and misaligned incentives mean that the co-pay of “only” $5 my friend talked about years ago costs far more than that — to workers, employers and the economy as a whole. It’s one major reason why our health care system represents such a large, and rising, share of our economy.

Lack of portability: This issue arises because employers and not individuals own their health plans. As a result, when individuals lose their jobs, they also lose their health coverage. That dynamic results in the double whammy Americans have experienced during the pandemic, when workers lose their coverage at the same time they have unexpectedly lost their job — compounding families’ financial distress.

Lack of portability also exacerbates the problem of pre-existing conditions. Upon entering the workforce in their teens or 20s, most individuals have yet to develop a pre-existing condition like cancer or diabetes. But every time individuals switch jobs, they lose their employer-provided health coverage — making them vulnerable if they have developed a condition in the intervening time.

The worst kinds of situations occur when individuals must leave their jobs because they have become too sick to work. These patients face not one but two potential sources of financial ruin: They have lost their source of income, and face the prospect of astronomical medical bills without a means to fund them.

Cure the Disease, Not the Symptoms

In the past several years, Democrats have spent lots of time talking about the need to protect individuals with pre-existing conditions. But in focusing on pre-existing conditions, the left focuses on the symptom, rather than the underlying problem.

Remember: When Obamacare went into effect in January 2014, at least 4.7 million individuals received cancellation notices, according to The Associated Press. These individuals had plans that they liked, and wanted to keep — but the Obama administration wouldn’t let them. Politifact called the promise that Americans could keep their plan the 2013 “Lie of the Year,” and that lie affected many individuals who had developed, or feared that they would develop, a pre-existing condition. Let’s spare the notion that Democrats want to “protect” people with pre-existing conditions, when they “protected” millions of people right out of their coverage.

Liberals don’t talk about the underlying policy issue that creates the pre-existing condition problem — that people don’t own their own health coverage — because they don’t want people to own their own insurance. They want Washington to control health care decisions, not individual patients. It’s the classic example of former President Ronald Reagan’s nine most terrifying words in the English language: “I’m from the government and I’m here to help.”

But if individuals could buy an insurance policy upon joining the workforce — one that they owned, not their employer — and retain that policy from job to job for decades, most individuals could buy coverage well before they develop a pre-existing condition, and keep that coverage after they do so, the pre-existing condition problem would rapidly diminish. (Yes, a small percentage of Americans, most notably those born with congenital illnesses, develop pre-existing conditions very early in life, but other policy solutions can address this population.)

Trump Administration’s Solution

You wouldn’t know it, given all the carping and hostility from the left, but the Trump administration has put forward a very positive solution that answers the policy problems associated with employer-provided health coverage. It should increase portability in ways that help solve the pre-existing condition problem, while also providing additional choice and competition.

The administration’s policy, implemented through regulations finalized in 2019, allows employers to contribute funds to workers on a pre-tax basis through Health Reimbursement Arrangements. These HRAs allow individuals to purchase coverage that they own, not their employers — making the coverage portable from job to job.

The HRA concept provides wins for employers, employees and the economy as a whole:

• Employers get predictability when it comes to their health insurance offerings. By providing employees a fixed sum (say, $300 or $500 a month) into the HRA, they will not have to worry about changing plans from year to year, a sudden spike in costs because of a sick employee, or many of the other paperwork hassles associated with offering coverage.
• Employees get both choice and portability. They can select the insurance plan that best meets their needs — the doctors, deductibles and plan features that they want. Not only can they keep the plan when they switch jobs, the fact that they and not their employer chose the coverage in the first place will make them more likely to do so.
• The economy will benefit from individuals selecting the plans they want, rather than the plans employers select for them. Insurers will have to provide better, more customized plans that fit individuals’ needs, and employees will have incentives to make better choices to stretch the HRA dollars their employers provide them.

Ideally, Congress would amend the law regarding Health Savings Accounts, to allow individuals to use HSA dollars to fund health insurance premiums. Because HSA funds cannot pay insurance premiums in most cases under current law, the Trump administration had to use Health Reimbursement Arrangements (which are owned by employers) rather than Health Savings Accounts (which are always owned by individuals) to fund individual coverage.

Providing contributions via an HSA, as opposed to an HRA, would allow employees to control any unused employer contributions upon leaving a job. That way, individuals would not only have a source of coverage in the event of a layoff, they could develop a source of savings to pay for that coverage while unemployed. But until Congress acts, the Trump administration’s Health Reimbursement Arrangement regulations represent a tremendous step forward toward a more logical, patient-centered insurance system.

Empower Patients, Not Government

Coronavirus has made the problems with government control of health care apparent. As Joe Biden (of all people) noted in the March CNN debate, Italy has a single-payer system — and that nation had to ration access to ventilators, whereas the United States did not.

The pandemic has exposed the flaws in our health insurance system. But it comes just as the Trump administration has shown a better path forward. By empowering patients rather than government bureaucrats, Health Reimbursement Arrangements can help transform the coverage system into something that lowers costs and provides the care American patients prefer.

This post was originally published at the Daily Caller’s American Renewal blog.

No, $400 in Routine Health Care Costs is Not a Reason to Socialize Medicine

Sometimes, even heated discussions on Twitter can bring both light and heat by illuminating policy discussions. On Wednesday evening, Elizabeth Bruenig wrote a since-deleted tweet, using her transition from a writing position at the Washington Post to one at The New York Times to argue for single-payer health-care system:

Vance made a compelling point on policy, but one that conflated two issues. I wholeheartedly agree with his position on wanting to make coverage portable. But I don’t believe that a movement to de-link health coverage from employment means the government should pay for the health costs of comparatively affluent individuals.

Need for Portability

In her tweet, Bruenig admitted her period of uninsurance came from switching jobs. As a mother of two, including a newborn, Bruenig quite likely—and understandably—arranged some time between her two positions to spend with her young children.

On that front, I agree with both Bruenig and Vance about the good policy reasons to move away from individuals obtaining health coverage from their employers. As I outlined in prior writings, much of the problem of pre-existing conditions comes from our employer-based health insurance system: When you lose your job, you lose your coverage, which causes understandable worry for employees who have pre-existing conditions.

Making health coverage portable would allow individuals to take their insurance from job to job. This change would eliminate the friction people like Bruenig face when they’re between jobs, and greatly reduce (but not eliminate) the problem of pre-existing conditions, because people who develop such conditions during their working careers would own their own coverage, purchased before they became ill. The Trump administration has taken big strides on that front, publishing a regulation that will allow individuals—not their employers—to select and own their own health coverage, while still receiving an employer subsidy to cover some or all of the cost of their premiums.

However, people on the left talk about making health coverage portable not by giving power to individuals but by giving power to government. To borrow a medical metaphor, most liberals and socialists focus on the symptom (pre-existing conditions) rather than the underlying disease (lack of portable insurance). They favor either government regulation regarding pre-existing conditions, which encourages people to wait until they become sick to buy insurance, or in Bruenig’s case, an entirely government-run system.

Affordability for Individuals—And Taxpayers

While I agree with both Bruenig and Vance on the need to improve coverage portability (even if I disagree with the former on the way to go about it), I disagree in this instance about the separate question of who should pay for those costs.

But context matters, and in this case, the context looks quite different. Bruenig’s husband Matt also works; a former attorney for the National Labor Relations Board, he heads the People’s Policy Project, a socialist think-tank. As a result, their family has a second source of income, and another source of employer-based health insurance. (While Bruenig referenced health bills for her children, she didn’t say that her children faced an insurance gap. Given that context, I assume, but do not know for certain, that her husband’s insurance covers her children.)

Consider also the most recent breakdown of IRS tax filing data by income. As of 2017, households with adjusted gross income exceeding $97,870 represented the top quintile (i.e., top 20 percent) of filers, and households with adjusted gross income exceeding $145,135 represented the top 10 percent of filers. Bruenig and her husband almost certainly exceed the threshold to put themselves in the top 20 percent, and quite possibly the top 10 percent as well. Do I believe someone with that kind of income should receive government assistance for health insurance costs? In a word, no.

I haven’t yet completed my tax returns for 2019, but based on my paperwork compiled to date, I expect to declare just over $100,000 in income from my business last year. Of course, because I run my own business, I have to pay my own health insurance premiums. And my age (I’m roughly ten years older than Bruenig) means I pay more in premiums for Obamacare exchange coverage than she would if she bought temporary insurance there—and I do it month after month, not just when I have a gap between jobs.

In short, the Twitter mob calling me an “elite” for my tone and comments about savings ignore the fact that, based upon their station in life, Bruenig and her husband qualify on that front too. Unlike them, however, I don’t believe the federal government has a place subsidizing my insurance costs.

A Question of Priorities

I’ll give the last word to a Democrat: Maryland Rep. Steny Hoyer. As I mentioned in my book, in 2009, Hoyer, then as now the House majority leader, took to the House floor to make this compelling statement about entitlement spending and federal priorities:

At some point in time, my friends, we have to buck up our courage and our judgement and say, if we take care of everybody, we won’t be able to take care of those who need us most. That’s my concern. If we take care of everybody, irrespective of their ability to pay for themselves, the Ross Perots of America, frankly, the Steny Hoyers of America, then we will not be able to take care of those most in need in America. [Emphasis added.]

I agree with both Vance and Bruenig on the need to make health coverage more portable. But on the separate question of who pays, and saving scarce taxpayer resources for those who need them most, I stand with Hoyer.

This post was originally published at The Federalist.

Elizabeth Warren’s Health Care “Choice:” Dishonesty

In Thursday night’s Democratic presidential debate, Sen. Elizabeth Warren (D-MA) may debut before a nationwide audience a surprising mantra for someone openly committed to enacting a single-payer system of socialized medicine: Choice.

NBC reports that Warren said on Saturday: “We’re going to push through…full health care coverage at no cost for everyone else who wants it—you can buy it for a modest amount. You don’t have to, but it’s your choice.”

To clarify her “you can buy it” comments, Warren’s most recent health care plan said she would immediately make “free” coverage available to anyone making less than two times the federal poverty level ($51,500 for a family of four in 2019), with sliding-scale premiums capped at no more than 5% of income for those making more than 200% of poverty. Her recent speeches have focused on selling this “transition” plan—“free” coverage if you want it, but only if you want it—rather than her earlier single-payer program.

Some conservatives have claimed that Warren’s change in rhetoric marks the “last gasp” for the left’s move towards socialized medicine. Don’t you believe it. Warren hasn’t given up on anything. Nor have Pete Buttigieg and the other candidates who have campaigned against “Medicare for All.” They, and she, have just chosen to become less candid with the American people about how they hope to achieve their ultimate objectives.

Why Warren Pivoted

Two reasons in particular explain why Warren suddenly embraced the mantra of choice. First, most Americans who have health insurance right now like their plan. A Gallup survey found that nearly seven in ten Americans find their health coverage either excellent (27%) or good (42%). In the 18 years since Gallup first started asking this question, the approval number for Americans’ health coverage has never dropped below 63%.

When millions of people received cancellation notices as Obamacare took effect, Barack Obama found out in 2013 how much people like their current coverage. He felt compelled to issue a public apology for his “Lie of the Year,” telling people they could keep their existing plans when many could not. In part due to these events six years ago, the fear of taking people’s coverage away has dominated the health care discussions at this year’s Democratic presidential debates.

By emphasizing choice, Warren seeks to minimize this potential source of controversy for key constituencies. In the Democratic primaries, union households who have negotiated generous health benefits may blanch at losing those benefits; one confronted Sen. Bernie Sanders (I-VT) about the issue in Iowa this past summer.

Then in next year’s general election, educated and affluent voters who have good health coverage will similarly fear a new plan taking that coverage away. As Philip Klein recently noted in the Washington Examiner, proposing the eradication of existing insurance options could well cost Warren in places like the suburbs of Philadelphia, Detroit, and Milwaukee—critically important battleground areas in battleground states.

De-Emphasizing (Middle Class) Tax Increases

Second, Warren’s earlier rhetoric about taking coverage away from all Americans implies another, similarly awkward question: How will you pay for this massive expansion of government? Warren tried to answer this query by releasing a funding proposal in early November, but in truth, it raised more questions than it answered.

To give but one example: Since Warren released her plan, one study found that her proposed wealth tax would raise $1 trillion less in revenue than she claimed. That $1 trillion gap represents money that she would have to get from somewhere else.

Her revenue plan has myriad other gimmicks buried inside (analyzed in detail here). For instance, her estimates didn’t take into account the fact that the tax increases will shrink the economy, and therefore by definition won’t produce all the revenue she claims.

Warren released her revenue plan claiming that she could fund the full cost of her single-payer plan without raising taxes on the middle class. But the more she pushed that plan, the more people would pick apart all the gimmicks—and Warren’s opponents would rightly claim the gap between what she said her plan would raise and what it actually does would end up coming from the middle class. As a result, Warren “chose” to pivot to her “choice” mantra, navigating away from the Scylla and Charybdis of taking away people’s coverage, and raising taxes on the middle class to do so.

Forcing People to ‘Choose’ Socialism

The change in Warren’s tone doesn’t mean she’s changed her ultimate objective, however. Consider her comments at a town hall on Monday: “When tens of millions of people have had a chance to try [the buy-in proposal], I believe, at that point, we’re going to be ready to vote for” single payer (emphasis added).

Like Buttigieg, Warren sees a buy-in program—call it a “government-run plan,” call it a “public option,” call it “Medicare for All Who Want It”—as creating a natural “glide path” to single payer. They remain quite outspoken in their goal: They want to achieve a socialized medicine system. If given the opportunity, they will use policy to accomplish that objective—just slightly more slowly than under an immediate transition to single payer.

A throwaway line in a recent Vox article got at this same point. The article focused on open enrollment for exchange plans, and the fact that insurers must limit enrollment to a certain period of time, because Obamacare’s costly pre-existing condition provisions encourage individuals to wait until they become sick to sign up for coverage. The penultimate paragraph included this claim:

Under the various public options that have been proposed, uninsured people would be automatically enrolled in the new optional government plan. One advantage the government has over private insurers is it doesn’t need its books to balance perfectly; adverse selection [a disproportionate number of sick people signing up] isn’t as big a concern. [Emphasis mine.]

The highlighted line demonstrates how liberals would use taxpayer funds for the government-run plan: subsidizing coverage in advance, or bailing out the government plan after the fact if premiums are set too low, or too many sick people enroll, or both. Vox’s line hints at the left’s true goal through a “public option:” To sabotage private plans, and force people into socialized medicine, one person at a time.

Warren’s “choice” mantra sounds innocuous, but its underlying premise—by her own admission—seeks to create a single-payer system, just over a slightly longer period. Conservatives who think her approach represents anything other than a change in tactics should think again. The wolf attacking private insurance hasn’t disappeared so much as put on a disguise of sheep’s clothing.

This post was originally published at The Federalist.

Medicare for Pets IS as Crazy as You Think

Recently, business writer David Lazarus penned a column in the Los Angeles Times called “Medicare for Pets—It’s Not as Crazy as You Think.” The column argued for a “Peticare for all” program (I’m not making that up—that’s really what he called it) of mandatory insurance for pets.

Unfortunately for Lazarus, the idea is as exactly as crazy as one might think: Both an impractical and unwise use of government resources. But the fact that he would propose such a concept—and that a major newspaper would devote column inches to the idea—shows how people now expect government to solve their every waking problem.

Why It Wouldn’t Work

California law requires that all dogs over the age of 4 months be vaccinated against rabies and licensed through the local animal care agency. Many cities and counties, including Los Angeles, also require that cats be vaccinated for rabies and licensed. How about if we insure dogs and cats as part of the licensing process?

The proposal raises several obvious problems. First, confining the proposal to cats and dogs could prompt outrage from owners of non-feline, non-canine breeds, like the 9.4 million reptiles kept as pets. The most recent national pet owners’ survey reveals Americans keep more fish as pets (139.3 million) than cats (94.2 million) or dogs (89.7 million). Of course, including more species, particularly exotic ones, could make “Peticare” tougher and costlier to implement.

Pet Licensing Ineffective, So Why Would This Work?

More importantly, Lazarus didn’t mention it—perhaps he didn’t even bother to check—but a simple Google search reveals that, legal requirements notwithstanding, a large percentage of pets remain unlicensed. A 1998 House of Commons Library paper notes that Britain abolished its licensure requirement in 1987, because the license “was held by only around half of dog owners.”

More recent surveys in the United States indicate a similar rate of non-compliance with pet licensure laws. For instance, as of 2014, “98.8 percent of pets living in Richmond,” Virginia’s capital, were unlicensed, even though city code requires dog and cat owners to pay $10 annually for a license. The nearby counties of Henrico and Chesterfield, which require licenses for dogs but not cats, fared little better, with compliance rates of only about 50 percent and 34 percent, respectively.

Britain’s Kennel Club opposes a renewal of that country’s dog licensing laws, because “it is the responsible dog owner who will end up paying a further tax on dog ownership, whilst the irresponsible will continue to flout the law.” Adding an insurance requirement to go with the licensing fee would only compound the incentives for individuals to disobey—and compound the financial punishment inflicted on those law-abiding individuals who comply.

Lazarus’ concept of linking pet insurance to licensure would only work if government officials created a massive (and expensive!) bureaucracy to enforce those requirements. One can easily see how this “nanny state” proposal would cause all sorts of ramifications—neighborhood disputes escalating as someone reports “uninsured” pets to the authorities, for instance. Libertarians have already outlined good reasons to forgo pet licensure, with this proposal to add an insurance requirement merely the latest.

Big Government Has Gone to the Dogs

Apart from the fact that the “Peticare” proposal wouldn’t work, the fact that some people might take it seriously speaks to the desire for government to solve all their problems. Lazarus began his article by telling the story of a woman whose dog could well need a hip replacement, but whose pet insurance policy won’t cover the treatment because it’s a pre-existing condition. The owner asked Lazarus, “If you’re going to have loopholes for pre-existing conditions, why offer insurance at all?”

The question has a simple answer—albeit one the owner likely does not want to hear. If a health condition pre-exists the issuance of the policy, then by definition covering it doesn’t constitute insurance. Insurance consists of protection against an event that could occur in the future but that has not occurred yet. The problem occurs when individuals want “insurance” for conditions they (or in this case, their pets) have already developed.

And that’s the problem: People who want, or worse yet expect, government—meaning someone else—to solve their problems, and give them something for “free.” Lazarus’ “Peticare” represents a more absurd manifestation of that desire, but by no means the only one.

After all, if people didn’t expect something for nothing from the federal government, future generations wouldn’t face the prospect of paying off nearly $23 trillion in debt for things other people got and they won’t.

This post was originally published at The Federalist.

Another Study Confirms Obamacare as the Unaffordable Care Act

Despite the high level of partisanship in the United States, both sides can agree on something even as controversial as health care: Both Democrats and Republicans believe Obamacare has failed to deliver.

Based on their last primary debate, Democrats running for the 2020 presidential nomination can’t give away more health care subsidies fast enough. Some of them want to abolish Obamacare outright. But all of them agree the law has not lived up to Barack Obama’s claims during the 2008 campaign, when he repeatedly promised that hisplan would reduce premiums by $2,500 for the average family.

Shrinking Without Subsidies

The CMS analysis of risk adjustment data submitted by insurers focuses on the unsubsidized marketplace. These individuals, who make more than 400 percent of the federal poverty level ($103,000 for a family of four in 2019), do not receive any subsidies from the federal government to offset their premiums.

The analysis concludes that, while the subsidized marketplace has remained steady for the past several years, the number of unsubsidized people purchasing insurance has steadily shrunk as premiums continue to decline. In 2018, even as average monthly subsidized enrollment increased by a modest 4 percent, average monthly unsubsidized enrollment plummeted by 24 percent.

From 2016 through 2018, the unsubsidized market shrank by an even larger amount. Successive price increases — an average 21 percent premium rise in 2017, followed by another 26 percent jump in 2018 — priced many people out of the market.

During those two years, the average monthly enrollment by unsubsidized people fell by 40 percent, from 6.3 million to 3.8 million. Six states saw their unsubsidized enrollment drop by more than 70 percent, with Iowa’s unsubsidized enrollment shrinking by a whopping 91 percent.

The large percentages of unsubsidized people dropping coverage in many states — in most cases, because they could not afford their rapidly escalating premiums — show the unstable nature of the Obamacare “marketplaces.” With only people who qualify for subsidies able to afford their premiums, most states’ insurance markets have become dependent on the morphine drip of subsidies from Washington.

‘Popular’ Preexisting Conditions?

Why have premiums skyrocketed so that only people receiving federal subsidies can afford to pay their insurance rates? A Heritage Foundation analysis from last year provides a clear answer:

A cluster of [Obamacare] insurance-access requirements — specifically the guaranteed-issue requirement and the prohibitions on medical underwriting and applying coverage exclusions for pre-existing medical conditions — accounts for the largest share of premium increases.

In other words, the preexisting condition provisions have proven the largest factor in pricing literally millions of people out of their health insurance coverage. This means, ironically enough, such people now have no coverage should they develop any such condition.

The left does not want to talk about these people. While the liberal Kaiser Family Foundation will survey Americans about the supposed popularity of the preexisting condition provisions, the organization refuses to survey Americans about the cost of these regulations — for instance, whether people think those “protections” are worth spending an extra several thousand dollars a year in higher insurance premiums. As the old legal saying goes, “Don’t ask a question to which you don’t want to know the answer.”

But the American people need to know the answers and need to understand the effects of Obamacare. Liberals wouldn’t have you know it, but families care more about the affordability of health coverage than about losing their coverage due to a preexisting condition. Reforms codified by the Trump administration will help provide portable and more affordable coverage to many Americans and represent one of several better solutions to tackle the preexisting condition problem.

The left’s “solutions” to Obamacare’s skyrocketing premiums represent more of the same — more taxes, more spending, and more subsidies to make coverage “affordable” for a select few. But sooner or later, the left will eventually run out of other people’s money. The Unaffordable Care Act’s failure to deliver demonstrates that the American people need and deserve a better approach than the left can devise.

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.

Why Do Louisiana Republicans Want to Replace Obamacare with Obamacare?

For the latest evidence that bipartisanship occurs in politics when conservatives agree to rubber-stamp liberal policies, look no further than Louisiana. Last week, that state’s senate passed a health-care bill by a unanimous 38-0 margin.

The bill provides that, if a court of competent jurisdiction strikes down all of Obamacare, Louisiana would replace that law with something that…looks an awful lot like Obamacare. Granted, most remain skeptical that the Supreme Court will strike down all (or even most) of Obamacare, not least because the five justices who upheld its individual mandate in 2012 all remain on the bench. Notwithstanding that fact, however, the Louisiana move would codify bad policies on the state level.

If a federal court strikes down the health-care law, the bill would re-codify virtually all of Obamacare’s major insurance regulations on the state level in Louisiana, including:

  • A prohibition on pre-existing condition exclusions;
  • Limits on rates that insurers can charge;
  • Coverage of essential health benefits “that is substantially similar to that of the essential health benefits required for a health plan subject to the federal Patient Protection and Affordable Care Act as of January 1, 2019,” including the ten categories spelled out both in the text of Obamacare and of the Louisiana bill;
  • “Annual limitations on cost sharing and deductibles that are substantially similar to the limitations for health plans subject to the federal Patient Protection and Affordable Care Act as of January 1, 2019”;
  • “Levels of coverage that are substantially similar to the levels of coverage required for health plans subject to the federal Patient Protection and Affordable Care Act as of January 1, 2019”;
  • A prohibition on annual and lifetime limits; and
  • A requirement for coverage of “dependent” children younger than age 26.

The Louisiana bill does allow for slightly more flexibility in age rating than Obamacare does. Obamacare permits insurers to charge older individuals no more than three times younger enrollees’ premiums, whereas the Louisiana bill would expand this ratio to 5-to-1. But in every other respect, the bill represents bad or incoherent policy, on several levels.

First, the regulations above caused premiums to more than double from 2013 through 2017, as Obamacare’s main provisions took effect. Reinstating these federal regulations on the state level would continue the current scenario whereby more than 2.5 million people nationwide were priced out of the market for coverage in a single year alone.

Second, the latter half of the Louisiana bill would create a “Guaranteed Benefits Pool,” essentially a high-risk pool for individuals with pre-existing conditions. Given that the bill provides a clear option for individuals with pre-existing conditions, it makes little sense to apply pre-existing condition regulations—what the Heritage Foundation called the prime driver of premium increases under Obamacare—to Louisiana’s entire insurance market. This provision would effectively raise healthy individuals’ premiums for no good policy reason.

Third, the legislation states that the regulations “shall be effective or enforceable only” if a court upholds the Obamacare subsidy regime, “or unless adequate appropriations are timely made by the federal or state government” in a similar amount and manner. Curiously, the bill does not specify who would declare the “adequa[cy]” of such appropriations. But should a court ever strike down most or all of Obamacare, this language provides a clear invitation for Democratic Gov. John Bel Edwards to demand that Louisiana lawmakers raise taxes—again—to fund “adequate appropriations” reinstating the law on the state level.

As on the federal level, conservatives in Louisiana should not fall into the trap of reimposing Obamacare’s failed status quo for pre-existing conditions. Liberal organizations don’t want to admit it, but the American people care most about making coverage affordable. Obamacare’s one-size-fits-all approach undermined that affordability; better solutions should restore that affordability, by implementing a more tailored approach to insurance markets.

Recognizing that they will get attacked on pre-existing conditions regardless of what they do, conservatives should put forward solutions that reduce people’s insurance costs, such as those previously identified in this space. Conservatives do have better ideas than Obamacare’s failed status quo, if only they will have the courage of their convictions to embrace them.

This post was originally published at The Federalist.

Six Things about Pre-Existing Conditions Republican “Leaders” Still Don’t Get

“If at first you don’t succeed, go ahead and quit.” That might be the takeaway from excerpts of a conference call held earlier this month by House Minority Leader Kevin McCarthy (R-CA), and published in the Washington Post.

McCarthy claimed that Republicans’ “repeal and replace” legislation last Congress “put [the] pre-existing condition campaign against us, and so even people who are [sic] running for the very first time got attacked on that. And that was the defining issue and the most important issue in the [midterm election] race.” He added: “If you’ll notice, we haven’t done anything when it comes to repealing Obamacare this time.”

Problem 1: Pre-Existing Condition Provisions In Context

I first noted this dilemma last summer: Liberals call the pre-existing condition provisions “popular” because their polls only ask about the policy, and not its costs. If you ask Americans whether they would like a “free” car, how many people do you think would turn it down? The same principle applies here.

When polls ask about the trade-offs associated with the pre-existing condition provisions—which a Heritage Foundation study called the largest driver of premium increases under Obamacare—support plummets. Cato surveys in both 2017 and 2018 confirmed this fact. Moreover, a Gallup poll released after the election shows that, by double-digit margins, Americans care more about rising health premiums and costs than about losing coverage due to a pre-existing condition.

The overall polling picture provided an opportunity for Republicans to push back and point out that the pre-existing condition provisions have led to skyrocketing premiums, which priced 2.5 million people out of the insurance marketplace from 2017 to 2018. Instead, most Republicans did nothing.

Problem 2: Republicans’ Awful Legislating

The bills’ flaws came from a failure to understand how Obamacare works. The law’s provisions requiring insurers to offer coverage to everyone (guaranteed issue) and price that coverage the same regardless of health status (community rating) make insurers want to avoid covering sick people. Those two provisions necessitate another two requirements, which force insurers to cover certain conditions (essential health benefits) and a certain percentage of expected health costs (actuarial value).

In general, the House and Senate bills either repealed, or allowed states to waive, the latter two regulations, while keeping the former two in place. If Republicans had repealed all of Obamacare’s insurance regulations, they could have generated sizable premium savings—an important metric, and one they could tout to constituents. Instead, they ended up in a political no man’s land, with people upset about losing their pre-existing condition “protections,” and no large premium reductions to offset that outrage.

Looking at this dynamic objectively, it isn’t surprising that McCarthy and his colleagues ended up with a political loser on their hands. The true surprise is why anyone ever thought the legislative strategy made for good politics—or, for that matter, good (or even coherent) policy.

Problem 3: Pre-Existing Conditions Aren’t Going Away

Within hours after Sen. Thom Tillis (R-NC) introduced a bill last year maintaining Obamacare’s pre-existing condition provisions—the requirement that all insurers offer coverage at the same rates to all individuals, regardless of health status—liberals weighed in to call it insufficient.

As noted above, Obamacare encourages insurers to discriminate against people with pre-existing conditions. Repealing only some of the law’s regulations would exacerbate that dynamic, by giving insurers more tools with which to avoid enrolling sick people. Liberals recognize this fact, and will say as much any time Republicans try to modify any of Obamacare’s major insurance regulations.

Problem 4: Better Policies Exist

According to the Post, McCarthy said he wants to recruit candidates who would “find a solution at the end of the day.” A good thing that, because better solutions for the problems of pre-existing conditions do exist (I’ve written about several) if McCarthy had ever bothered to look for them.

Their political attacks demonstrate that liberals focus on supporting “insurance” for people once they develop a pre-existing condition. (Those individuals’ coverage by definition really isn’t “insurance.”) By contrast, conservatives should support making coverage more affordable, such that people can buy it before they develop a pre-existing condition—and keep it once they’re diagnosed with one.

Regulations proposed by the Trump administration late last year could help immensely on this front, by allowing employers to subsidize insurance that individuals hold and keep—that is, coverage that remains portable from job to job. Similar solutions, like health status insurance, would also encourage portability of insurance throughout one’s lifetime. Other options, such as direct primary care and high-risk pools, could provide care for people who have already developed pre-existing conditions.

Using a series of targeted alternatives to reduce and then to solve the pre-existing condition problem would prove far preferable than the blunt alternative of one-size-fits-all government regulations that have made coverage unaffordable for millions. However, such a solution would require political will from Republicans—which to date they have unequivocally lacked.

Problem 5: Republicans’ Alternative Is Socialized Medicine

Instead of promoting those better policies, House Republican leaders would like to cave in the most efficient manner possible. During the first day of Congress, they offered a procedural motion that, had it been adopted, would have instructed the relevant committees of jurisdiction to report legislation that:

(1) Guarantees no American citizen can be denied health insurance coverage as the result of a previous illness or health status; and (2) Guarantees no American citizen can be charged higher premiums or cost sharing as the result of a previous illness or health status, thus ensuring affordable health coverage for those with pre-existing conditions.

Guaranteeing that everyone gets charged the same price for health care? I believe that’s called socialism—and socialized medicine.

Their position makes it very ironic that the same Republican committee leaders are pushing for hearings on Democrats’ single-payer legislation. It’s a bit rich to endorse one form of socialism, only to denounce another form as something that will destroy the country. (Of course, Republican leaders will only take that position unless and until a single-payer bill passes, at which point they will likely try to embrace it themselves.)

Problem 6: Health Care Isn’t Going Away As An Issue

The federal debt this month passed $22 trillion, and continues to rise. Most of our long-term government deficits arise from health care—the ongoing retirement of the baby boomers, and our corresponding obligations to Medicare, Medicaid, and now Obamacare.

Any Republican who cares about a strong national defense, or keeping tax rates low—concerns most Republicans embrace—should care about, and take an active interest in, health care and health policy. Given his comments about not repealing, or even talking about, Obamacare, McCarthy apparently does not.

But unsustainable trends are, in the long run, unsustainable. At some point in the not-too-distant future, skyrocketing spending on health care will mean that McCarthy will have to care—as will President Trump, and the Democrats who have gone out of their way to avoid talking about Medicare’s sizable financial woes. Here’s hoping that by that point, McCarthy and Republican leaders will have a more coherent—and conservative—policy than total surrender to the left.

This post was originally published at The Federalist.

Do House Republicans Support Socialized Medicine?

Health care, and specifically pre-existing conditions, remain in the news. The new Democratic majority in the House of Representatives has lined up two votes — one last week and one this week — authorizing the House to intervene in Texas’ lawsuit against the Affordable Care Act, also known as Obamacare. Speaker Nancy Pelosi, D-Calif., claims that the intervention will “protect” Americans with pre-existing conditions.

In reality, the pre-existing condition provisions represent Obamacare’s major flaw. According to the Heritage Foundation, those provisions have served as the prime driver of premium increases associated with the law. Since the law went into effect, premiums have indeed skyrocketed. Rates for individual health insurance more than doubled from 2013 through 2017, and rose another 30-plus percent last year to boot.

As a result of those skyrocketing premiums, more than 2.5 million people dropped their Obamacare coverage from March 2017 through March 2018. These people now have no coverage if and when they develop a pre-existing condition themselves.

A recent Gallup poll shows that Americans care far more about rising premiums than about being denied coverage for a pre-existing condition. Given the public’s focus on rising health care costs, Republicans should easily rebut Pelosi’s attacks with alternative policies that address the pre-existing condition problem while allowing people relief from skyrocketing insurance rates.

Unfortunately, that’s not what the Republican leadership in the House did. Last Thursday, Rep. Kevin Brady, R-The Woodlands, offered a procedural motion that amounted to a Republican endorsement of Obamacare. Brady’s motion instructed House committees to draft legislation that “guarantees no American citizen can be charged higher premiums or cost sharing as the result of a previous illness or health status, thus ensuring affordable health coverage for those with pre-existing conditions.”

If adopted — which thankfully it was not — this motion would only have entrenched Obamacare further. The pre-existing condition provisions represent the heart of the law, precisely because they have raised premiums so greatly. Those premium increases necessitated the mandates on individuals to buy, and employers to offer, health insurance. They also required the subsidies to make that more-expensive coverage “affordable” — and the tax increases and Medicare reductions needed to fund those subsidies.

More to the point, what would one call a health care proposal that treats everyone equally, and ensures that no one pays more or less than the next person? If this concept sounds like “socialized medicine” to you, you’d have company in thinking so. None other than Kevin Brady denounced Obamacare as “socialized medicine” at an August 2009 town hall at Memorial Hermann Hospital.

All of this raises obvious questions: Why did someone who for years opposed Obamacare as “socialized medicine” offer a proposal that would ratify and entrench that system further?

Republicans like Brady can claim they want to “repeal-and-replace” Obamacare from now until the cows come home, but if they want to retain the status quo on pre-existing conditions then as a practical matter they really want to uphold the law. Conservatives might wonder whether it’s time to “repeal-and-replace” Republicans with actual conservatives.

This post was originally published in the Houston Chronicle.

Bill Clinton’s Right: Pre-Existing Condition Vote IS “The Craziest Thing in the World”

The new House Democratic majority is bringing to the floor a resolution on Wednesday seeking to intervene in Texas’ Obamacare lawsuit. The House already voted to approve the legal intervention, as part of the rules package approved on the first day of the new Congress Thursday, but Democrats are making the House vote on the subject again, solely as a political stunt.

I have previously discussed what the media won’t tell you about the pre-existing condition provisions—that approval of these Obamacare “protections” drops precipitously when people are asked if they support the provisions even if they would cause premiums to go up. I have also outlined how a Gallup poll released just last month shows how all groups of Americans—including Democrats and senior citizens—care more about rising premiums than about losing their coverage due to a pre-existing condition.

Bill Clinton Got This One Right

The current system works fine if you’re eligible for Medicaid, if you’re a lower income working person, if you’re already on Medicare, or if you get enough subsidies on a modest income that you can afford your health care. But the people that are getting killed in this deal are small business people and individuals who make just a little too much to get any of these subsidies. Why? Because they’re not organized, they don’t have any bargaining power with insurance companies, and they’re getting whacked. So you’ve got this crazy system where all of a sudden 25 million more people have health care, and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half. It’s the craziest thing in the world.

Why did people “who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half”? Because of the pre-existing condition provisions in Obamacare.

Clinton knew of which he spoke. Premiums more than doubled from 2013 to 2017 for Obamacare-compliant individual coverage, only to rise another 30 percent in 2018. A Heritage Foundation paper just last March concluded that the pre-existing condition provisions—which allow anyone to sign up for coverage at the same rate, even after he or she develops a costly medical condition—represented the largest driver of premium increases due to Obamacare.

The Congressional Budget Office concluded that the law would reduce the labor supply by the equivalent of 2.5 million workers. Because so many people cannot afford their Obamacare coverage without a subsidy now that the law has caused premiums to skyrocket, millions of Americans are working fewer hours and earning less income precisely to ensure they maintain access to those subsidies. Obamacare has effectively raised their taxes by taking away their subsidies if they earn additional income, so they have decided not to work as hard.

Why Do Republicans Support This ‘Crazy’ Scheme?

Given this dynamic—skyrocketing premiums, millions dropping coverage, taxes on success—you would think that Republicans would oppose the status quo on pre-existing conditions, and all the damage it has wrought. But no.

Guarantees no American citizen can be charged higher premiums or cost sharing as the result of a previous illness or health status, thus ensuring affordable health coverage for those with pre-existing conditions.

I’ve said it before, but I’ll say it again: As a matter of policy, any proposal that retains the status quo on pre-existing conditions by definition cannot repeal Obamacare. In essence, this Republican proposal amounted to a plan to “replace” Obamacare with the Affordable Care Act.

Even more to the point: What’s a good definition for a plan that charges everyone the exact same amount for health coverage? How about “I’ll take ‘Socialized Medicine’ for $800, Alex”?

There are better, and more effective, ways to handle the problem of pre-existing conditions than Obamacare. I’ve outlined several of them in these pages of late. But if Republicans insist on ratifying Obama’s scheme of socialized medicine, then they are—to use Bill Clinton’s own words—doing “the craziest thing in the world.”

This post was originally published at The Federalist.