Congress has failed to pass a bill to repeal and replace Obamacare. Meanwhile, the system is imploding. Premiums and deductibles are rising, making the exchanges unaffordable without subsidies. For a bronze plan, deductibles are more than $12,000 per family and $6,000 per individual. The situation is spiraling out of control. What to do?
The Democrats’ solution is for the federal government to increase subsidies to lower costs to consumers—but this will not solve the fundamental problem of increasing costs. It will just paper over the problems.
The best solution is to repeal Obamacare. If Congress cannot repeal Obamacare, here are five proposed changes to improve it, creating a parallel system that would enable people to purchase the plans they want to buy.
1. Allow All Plans on the Exchange. Obamacare mandates a one-size-fits all, overly-generous plan, with required free preventive care, mandatory mental health and drug abuse coverage, free contraceptives, and no lifetime maximum. Combined with the requirement that people can sign up anytime, health insurance becomes very expensive, with the young subsidizing the old.
Federal and state exchanges should be allowed to offer multiple health insurance choices, including catastrophic health plans for those who want to pay for routine costs out of pocket and insure only against major medical events. People should be able to buy insurance that covers major financial hardships, rather than predictable, routine care. And they should be able to purchase insurance directly from any provider.
2. Offer Discounts for Continuous Coverage. Under the Act, insurance companies have to take anyone in any open enrollment period, so people can wait until they are sick to sign up. This is similar to being able to buy auto insurance after a car crash or home insurance after a fire. Naturally, it raises premiums. People should get a discount if they sign up when they are young and healthy and keep continuous coverage. Conversely, they should be penalized if they sign up after they are uncovered.
3. Give All Americans Refundable Tax Credits for Health Insurance Purchase.
This amount could be adjusted up or down depending on income. Under the ACA, if people do not qualify for health insurance subsidies on the exchange and their employers do not offer insurance, premiums come from after-tax dollars. So a family, earning $100,000 in the 25 percent federal tax bracket with a premium of $12,000 would have to earn about $16,000 before tax to pay for health insurance—more if they owe state income tax. This would modify the employer advantage to providing health insurance and help create an individual market for insurance.
4. State Risk Pools. About 2 million to 4 million people a year have uninsurable conditions—about one-to-two percent of the U.S. population of 313 million. Under the ACA, these individuals are insured with everyone else, raising general insurance costs. In order to enable insurance companies to offer health insurance with low-cost premiums to the general public, AEI scholars James Capretta and Tom Miller have proposed that those with severe illness could be given the option of special health insurance programs through the state, known as risk pools. The federal government should be prepared to help states set up risk pools if they request such assistance. This would provide more choice for those who really need extra help with difficult –to-insure conditions.
5. Block Grant Medicaid Payments to States. States are the best judge of how to cover their low-income residents. They successfully manage to distribute payments from the Children’s Health Insurance Program to those in need. Using the same process, they can cover other individuals through Medicaid. Indiana’s Healthy Indiana Plan is an example of an efficient state allocation of funds to low-income residents. It could serve as a model to other states.
For the past seven years Republicans have been calling for repeal of the Affordable Care Act. Congress should. If that is not possible, then the system has to be made more responsive to vulnerable people’s needs. Bailing out the system through additional infusions of federal dollars, as some are proposing, will not solve Obamacare’s long-term problems.