Some Thoughts On Health Insurance

Obamacare – the Affordable Care Act or ACA, seems to on its way out with the new Republican Congress and president.  Here are some of the reasons that it is failing.

Its provisions are so restrictive that health insurance companies have had to reduce coverage and increase deductibles and copays to keep the costs under control.

The mandates in ACA make the policies more expensive.  This limits the flexibility in the types of policies that companies can offer and companies have dropped non-compliant polices.  This means there is less choice in the coverage that you may want to buy.  Shopping for more affordable policies becomes more difficult because the choices are limited.

ACA forces the public to buy health insurance, even as the prices of these policies are rising.  There are increasing tax penalties for not having insurance.  This tax surcharge is the Supreme Court’s basis for the legality of the ACA.

The provisions of the ACA have had unintended economic consequences.  The law requires employers with fifty or more full time employees to provide health insurances.  To minimize costs, some businesses have reduced their staff to below the cutoff or reduced their employees’ hours to under the thirty hour level.  Losing your job is not a tradeoff for having health insurance that anyone wants.

So what should replace ACA?  Here is a thought, with some caveats; the government should get out of the health care business.

First, the caveats.  Medicaid should continue for the poor.  There are program reforms that are needed, such as not paying for emergency room visits for non-emergency conditions, when doctors or urgent care centers are available.  Funding should be block-granted to the states.  The states can then decide to expand it beyond the indigent, as they see fit.  The states are in a better position to determine who needs what level of coverage and what their budgets can afford.

Medicare should continue for senior and the disabled.  The hospital coverage is funded adequately by the payroll tax.  The Medicare deficit comes from the doctor coverage side, which is 75 percent general revenues and 25 percent premiums.  This needs streamlining.  However, that is another topic.

Other than these and a few other situations – health care for veterans, employer coverage for its workers, the government should not be in the health insurance business.

Look at it this way – does the government tell you to buy a car or limit the models that you can have?  Does it tell you where to work or where to live?  Why should the government be involved in your health insurance costs?  It is your expense.  If you chose not to have insurance, you pay for the costs out of your pocket.  It is not a taxpayer responsibility.  The question is how to make health insurance affordable.  After all, that is the downfall of the current ACA.

First, remove the coverage mandates.  This will make a variety of policies with different levels of coverage available.  Each person or family can pick the policy that best fits their needs and budget.

Allow insurance policy sales across state lines.  Currently, you can’t buy a Texas health insurance policy in Maine but if you open sales up to competition, the insurance companies will create policies with competitive prices and coverage available.  It is the free market forces at work that will drive down prices.  You have more than one type of phone available to you.  Why should you only have one type of insurance?

Allow Health Savings Accounts – HSA – for all Americans.  HSA’s allow families to purchase less expensive policies with higher deductibles because these costs are paid for with the money in the accounts.  The HSA rules should be changed to allow families to pay for their insurance premiums with the account funds.  Currently, tax rules do not allow this.  The incentive for HSA’s is the money contributed is not subject to income tax.

Subsidize people who cannot afford all of their premiums.  There are various proposals for subsidies.  Some would set them based on age, with higher subsidies for older people.  Another model is the one used by Social Security and CMS for Medicare prescription drug coverage.  The subsidy is based on income reported to IRS.  CMS then calculates the subsidy and reduces the premium accordingly.  A similar method could be used to subsidize health insurance premiums for the people who chose to purchase insurance.

Continue to cover pre-existing conditions.  Federal law that predates the ACA does not permit employer group health insurance policies from excluding people with pre-existing conditions.  This is the majority of the coverage in the United States.  As people sign up for health insurance, the universe of uninsured people with pre-existing conditions will decrease because the universe of insured people will increase.  Almost all medical conditions occur after a person obtains health insurance.  Those costs are factored into the premium calculations.

Pre-existing conditions can be covered by bridge policies of high-risk individuals administered by the states or a re-insurance mechanism among the insurance companies to minimize the costs by spreading them among all companies.

Let the states continue to operate exchange policies.  If the other recommendations are implemented, openly available policies will be the most economical.  However, the states should be allowed to keep their insurance exchanges operating for families who do not want to shop the private market or who do not have employer coverage.

Health insurance is a basic need but it is not a government mandate.  The Supreme Court said that the government could not force you to buy insurance.  That would be an unconstitutional interpretation of the commerce clause.  If you chose to not have health insurance that is your right.  However, you risk the cost if you chose not to carry it.  The government should not rush in to bail you out.  On the other hand, government policies should not make insurance unaffordable.  There is much that can be done to make health care a reasonable cost of living in America.

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