Repeal & Replace With What?
It seems all but certain that Republicans will repeal as much of Obamacare as they can through the reconciliation process that only requires 51 votes in the Senate instead of the normal 60 votes required for cloture of any issue. However, to take advantage of that process, the items need to be revenue related. Certainly, that is not an insignificant piece of the legislation. By my read, that would include the pay or play mandate for employers and individuals. What else? Time will tell. While we are still in the state of uncertainty about what will be repealed, let's engage in a little mental exercise about what SHOULD be repealed and maybe what a replacement will look like.
As we begin, let's not be surprised if the "replacement" looks nothing like the thing it is replacing. Obamacare in its essence is about top down control over the health insurance marketplace. It restricts and regulates what must be purchased and what must be sold. If you think that is the fundamental problem with Obamacare, there is not much that you will want to salvage in the replacement. In my humble opinion, the replacement parts of Obamacare should be aimed at allowing the health insurance marketplace to operate as a marketplace. Transparency of cost should be a "YUGE" deal as we go forward. So, what has to go?
1. The Employer Mandate: there are two requirements for employers within the ACA, offer minimum essential coverage and offer something "affordable." Neither one has improved the options for employees. Instead of no coverage, they can now be offered a deductible plan with a deductible in excess of $5000 as a cost of $130 to $150 per month depending on their income. Their dependent coverage in not subsidized in anyway. They also just lost the ability to obtain a subsidized plan through federal exchange. But the mandate has made an enormous impact on employer behavior, but not in a good way. Thousands of employees saw their full-time jobs turn into part-time jobs in 2014 as a result of the mandate. Moreover, thousands of employers have made it a business plan to stay beneath 50 employees so as to stay out from under the mandate. Finally, the 1094 and 1095 reporting requirements that are necessary to enforce the mandates have created cottage industries because of the complexity and time and expense required to complete the reporting. Eliminate the employer mandate and you will take a huge regulatory burden off of employers at little cost to employees.
2. Eliminate the one-size fits all approach to health insurance plans. Eliminate all the requirements of what a plan MUST provide to be a plan. Essential Health Benefits? Gone. Annual caps? Gone. Lifetime maximums? Gone? Let's allow employers and individuals the ability to purchase what they want. In other words, let the market work.
3. Unleash HSAs, HRAs, FSAs. These are all tax-favored devices that allowed consumers to budget their health care dollars and gave them tax incentives to do so. Obamacare looked upon these devices unfavorably. We should reverse that approach. Instead, they should be unleashed. Your contribution to your HSA should match your annual deductible. If you want to have a $6000 annual, then you should be able to put that much in your HSA and so forth.
4. What about the subsidies to purchase health insurance? Obamacare provided an enormous benefit to people without employer provided health who, due to illness, were shut out of the pre-Obamacare health underwritten individual market. Now, things are not so rosy in the individual marketplace. As we blog, premium escalations have only been outpaced by the number of carriers dropping individual coverage options. It does not take a genius to see that the individual marketplace is headed for disaster on its own, with or without a subsidy. Going forward, Congress should establish something that probably should have been in place for years - a federal high-risk pool. Prior to Obamacare, high risk pools existed on a state by state basis, and I do not believe anyone would rave about the results. Of course, this would forever enshrine this as one more entitlement, but I doubt there is any political will to strip individuals who cannot get coverage elsewhere of their health insurance or their subsidy.
5. Keeping the popular parts of Obamacare. The right to keep children on a plan up to age 26. The ban on pre-existing exclusions. The elimination of annual and lifetime caps. All of these are politically popular aspects of Obamacare that to be sure make insurance more expensive. Still, I would expect to see them stay in one form or another. Won't this sort of create a Frankenstein of health insurance with some parts still continuing and som parts repealed? Yes. But, you are going to need at least a few D votes in the Senate to pull this off and I doubt that will be achievable without throwing some bones at them.
6. Non-discrimination rules. The application of Section 105 non-discrimination rules to health insurance was passed into law, but never implemented. We are STILL waiting on the IRS regulations. Let's wait some. How about forever?
7. Expansion of women's health coverage. Most of this was non-controversial, but the mandate to provide abortion and birth control was extremely controversial for both religious institutions and employers with moral objections to paying to insure these items. Given that this was a regulatory expansion anyway, I would not think an act of Congress would be required to scale this back or at least grant an expansive opt-out option to employers.
8. Community-rating for small groups under 50. Technically, this is included in the Essential Health Benefits. Community-rating was generally a cost escalator for most small groups. However, there are some groups with poor demographics or claims history that saw some rate relief as a result of community rating. No strong opinions are held about the concept, but I would generally like to see fewer mandates in the marketplace. Why not leave it up to the insurers to continue to offer a community rated tier of pricing?
This is probably enough speculation for one blogpost. Here is what we know for sure. Obamacare is still in place and you still have to comply with all of its requirements . . . for now.