Tag: health care reform

Short-Term Plans Would Increase Coverage, Protect Conscience Rights & Improve ObamaCare Risk Pools

Any day now, the Trump administration will release a final rule allowing greater consumer protections in so-called “short-term, limited duration insurance,” a category of health insurance Congress exempts from federal health insurance regulations, including ObamaCare regulations. In comments I filed on the proposed version of the Trump administration’s rule and an accompanying Wall Street Journal oped, I explained some but not all of the benefits of allowing these consumer protections. What follows is updated and new information about the benefits of allowing those consumer protections.

Introduction

In 2016, the Obama administration arbitrarily prohibited certain consumer protections in short-term plans. First, it exposed sick consumers to underwriting and loss of coverage by shortening the maximum duration of short-term plans from 12 months to 3 months. Second, it prohibited “renewal guarantees” that would protect consumers who develop expensive illnesses from ever facing underwriting or losing their coverage.

Last year, President Trump urged the Department of Health and Human Services to allow short-term plans to last 12 months and to allow consumers to bridge together consecutive short-term plans with “renewal guarantees” that protect them from being re-underwritten after they get sick. With ObamaCare premiums soaring and the consulting firm Avalere warning of “substantial increases” in ObamaCare premiums for 2019, these consumer protections would mean “consumers could purchase health-insurance protection for 90% less than the cost of the average ObamaCare plan.“ Renewal guarantees would keep people with expensive conditions out of ObamaCare plans, thereby improving ObamaCare’s pools and reducing the cost of ObamaCare. Along the way, allowing these consumer protections would “increas[e] transparency in government and provid[e] voters and policymakers with better information about the cost of the ACA.”

Trump’s AHPs Rule: a Generally Lousy Idea that Would Reduce Premiums for Some and Make ObamaCare’s Costs More Transparent

The Trump administration has released its final rule expanding so-called association health plans. The rule would allow many consumers to avoid some of ObamaCare’s unwanted regulatory costs. But the rule also highlights both the destructive power of ObamaCare and Republicans’ utter lack of imagination when it comes to health care.

As originally proposed, the idea behind association health plans was to allow small businesses that purchased health insurance through a member-organization (i.e., an association) to enjoy the same federal exemption from insurance regulation that large businesses have traditionally (if unwisely) enjoyed. Small businesses have long wanted that exemption so they could escape oppressive state regulation. Now, small businesses are clamoring for association health plans because they want to escape oppressive federal regulation.

ObamaCare exempts large-employer health plans from many of the regulations it imposes on small-employer plans. The new rule treats association health plans like large-employer plans for purposes of ObamaCare, which allows small employers who purchase health insurance through a member organization to avoid those costly regulations. The consulting firm Avalere estimates the ability to avoid some of ObamaCare’s unwanted regulatory costs would induce 3.2 million people to enroll in association health plans and reduce their premiums:

Premiums in the new AHPs are projected to be approximately $2,900 a year lower compared to the small group market and $9,700 a year less compared to the individual market.

By Grabthar’s hammer, what a savings!

Traditionally, association health plans have always been a terrible idea that violates Republicans’ federalist principles, because they would move health-insurance regulation from the state level to the federal level. But since ObamaCare went ahead and federalized regulation of small-business health plans, and the association-health-plans rule merely allows small businesses to opt for lighter versus heavier federal regulation, association health plans no longer violate federalism. Credit ObamaCare with making a bad idea good.

Even in this iteration, however, association health plans still aren’t much of a good an idea. Trump’s association health plans rule builds on the broken model of employer-sponsored health insurance. Employer-sponsored coverage is lousy coverage. It deprives workers of control of their health-insurance dollars and decisions. It sticks millions of workers with health plans they would never choose themselves. It leaves millions of workers with uninsurable preexisting conditions, because it disappears for no good reason after workers get sick. It increases prices for health care and health insurance. The failures of our government-created system of employer-sponsored coverage are what created the demand for ObamaCare in the first place. Rather than offer an agenda to make health care better, more affordable, and more secure, Trump’s association health plans rule works entirely within that framework. It does nothing to move Americans toward a better system of providing health insurance.

Still, it would allow some workers to avoid some unwanted regulatory costs. So there’s that.

And that part gives rise to the only other good part of this rule, which is also the part that ObamaCare supporters hate the most: the rule will make ObamaCare’s costs more transparent. ObamaCare imposes its highest hidden taxes, in the form of higher premiums, on the healthy. The association-health-plans rule will free an estimated 1 million disproportionately healthy people to escape those unwanted regulatory costs. When those folks drop out of the Exchanges, the average risk in ObamaCare’s risk pools will rise. Correspondingly, ObamaCare premiums will rise, perhaps even faster than they have to date

ObamaCare supporters decry this as “sabotage,” but that is a subterfuge. When ObamaCare premiums rise to reflect the cost of ObamaCare’s regulations, it is what the world calls transparency. ObamaCare supporters fear such transparency because, as ObamaCare architect Jonathan Gruber admitted, the public would have rejected the law (and still might!) if they could actually see what it does. “[If] you made explicit that healthy people pay in and sick people get money,” Gruber admitted, “it would not have passed.”

And if you reach a point where you decry transparency as sabotage, it may be time to reevaluate your life. 

ObamaCare’s Greatest Political Vulnerability

In two new posts at the Health Affairs blog, I lift the fog of economic jargon to show ObamaCare’s preexisting-conditions provisions are reducing quality, are wildly unpopular with voters, and are indeed the law’s greatest political vulnerability:

Public opinion surveys show voters support ObamaCare’s preexisting conditions provisions by a two-to-one margin. If those provisions have the effect of reducing quality, however, that initial support flips to two-to-one opposition. The biggest shift is among Democrats, who swing from 82 percent in favor to 55 percent opposed. Voters turn against those provisions whether the erosion in quality comes in the form of less access to medical tests and treatments, longer waits for care, more surprise medical bills, or less access to top-rated treatment centers…

In “Is ObamaCare Harming Quality? (Part 1),” I explain that new research shows that ObamaCare is not working how it is supposed to work in theory: the law’s preexisting conditions provisions create perverse incentives for insurers to reduce the quality of coverage; those provisions are reducing the quality of coverage relative to employer plans; and the erosion in quality is likely to accelerate in the future.

In “How To Ensure Quality Health Coverage (Part 2),” I explain why regulators cannot fix this problem, and why providing sick patients secure access to quality health care requires allowing consumers to purchase health plans not subject to ObamaCare’s preexisting conditions provisions.

Part 2 also explains how expanding the definition of “short-term” health insurance to include policies that include guaranteed-renewability riders, a change the Trump administration can make on its own via regulation, would free consumers from ObamaCare and pressure Democrats to come to the negotiating table.

Uwe Reinhardt, R.I.P.

Uwe Reinhardt, a beloved health economist at Princeton University, died Monday at the age of 80. Uwe was a giant in his profession. His combination of insightful economic analysis and wit knew no equal. I always, always looked forward to hearing what Uwe had to say. We are proud to have hosted him at the Cato Institute, to have debated him, and to have called him a friend. The Cato Institute offers its condolences to the Reinhardt family, for whom Uwe made no secret of his love, and to all those in the health policy and economics professions who will miss him dearly.

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Senate Republicans Offer a Bill to Preserve & Expand ObamaCare

Yesterday, I posted “Five Questions I Will Use to Evaluate the Phantom Senate Health Care Bill.” The phantom bill took corporeal form today when Senate Republicans released the text of the “Better Care Reconciliation Act.”

So how does the Senate bill fare with regard to my five questions?

1. Would it repeal the parts of ObamaCare—specifically, community rating—that preclude secure access to health care by causing coverage to become worse for the sick and the Exchanges to collapse?

No. The Senate bill would preserve ObamaCare’s community-rating price controls. To be fair, it would modify them. ObamaCare forbids premiums for 64-year-olds to be more than three times premiums for 18-year-olds. The Senate bill would allow premiums for the older cohort to be up to five times those for the younger cohort. But these “age rating” restrictions are the least binding part of ObamaCare’s community-rating price controls. Those price controls would therefore continue to wreak havoc in the individual market. The Senate bill would also preserve nearly all of ObamaCare’s other insurance regulations. 

2. Would it make health care more affordable, or just throw subsidies at unaffordable care?

The Senate bill, like ObamaCare, would simply throw taxpayer dollars at unaffordable care, rather than make health care more affordable.

Making health care more affordable means driving down health care prices. Recent experiments have shown that cost-conscious consumers do indeed push providers to cut prices. (See below graph. Source.)  

How Cost-Conscious Consumers Drive Down Health Care Prices

Five Questions I Will Use to Evaluate the Phantom Senate Health Care Bill

Rumor has it that tomorrow is the day Senate Republican leaders will unveil the health care bill they have been busily assembling behind closed doors. So few details have emerged, President Trump could maybe learn something from Senate Majority Leader Mitch McConnell about how to prevent leaks. Even GOP senators are complaining they haven’t been allowed to see the bill.

Here are five questions I will be asking about the Senate health care bill if and when it sees the light of day.

  1. Would it repeal the parts of ObamaCare—specifically, community rating—that preclude secure access to health care for the sick by causing coverage to become worse for the sick and the Exchanges to collapse?
  2. Would it make health care more affordable, or just throw subsidies at unaffordable care?
  3. Would it actually sunset the Medicaid expansion, or keep the expansion alive long enough for a future Democratic Congress to rescue it?
  4. Tax cuts are almost irrelevant—how much of ObamaCare’s spending would it repeal?
  5. If it leaves major elements of ObamaCare in place, would it lead voters to blame the ongoing failure of those provisions on (supposed) free-market reforms?

Depending on how Senate Republicans—or at least, the select few who get to write major legislation—answer those questions, the bill could be a step in the right direction. Or it could be ObamaCare-lite.

Large Majorities Support Key Obamacare Provisions, Unless They Cost Something

A new Washington Post/ABC News poll finds that Americans say they support Affordable Care Act regulations that require health insurance companies in all states to cover a particular set of services (62%) and prohibit insurers in all states from charging higher prices to people with pre-existing conditions (70%).

However, the poll did not find out what Americans would be willing to give up to obtain these regulatory benefits.

Fortunately, a recent Cato Institute/YouGov health care survey investigated how Americans make trade-offs when it comes to their health care. In short, support for once popular regulations plummets as soon as voters consider their costs.

At first, and similar to the Washington Post/ABC poll, the Cato survey found by a margin of 63% to 33% Americans support prohibiting insurance companies from charging higher premiums because of pre-existing conditions—also known as “community rating.” But support flips, and majorities come to oppose community rating…

  • if it limited access to medical tests and treatments: 66% oppose, 27% support
  • If it limited access to top rated medical facilities and treatment centers: 62% oppose, 31% support
  • If one had to wait several months before seeing a specialists for necessary care: 65% oppose, 25% support
  • if premiums increased: 55% oppose, 39% favor
  • if taxes increased: 53% oppose, 40% favor

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