At the recent Democratic presidential primary debate, all 20 candidates agreed on something surprising — that Obamacare was a massive failure.
They didn’t admit that outright. But all of them proposed big changes to our nation’s healthcare system. A handful called for abolishing private health insurance. Others advocated letting people buy into Medicare. But everyone was on board with injecting more government into the healthcare system.
“More government” has been the refrain in healthcare reform for much of the past five decades. It’s resulted in an increasingly unaffordable — and unpopular — healthcare system.
Perhaps it’s time for a new approach, one that will reduce costs and improve the quality of care by dialing back the level of government interference in the healthcare marketplace. A recent report from the White House’s Council of Economic Advisers offers evidence for as much.
The CEA report looked at three changes made by the Trump administration and Congress. First, it examined the repeal of Obamacare’s individual mandate, which forced everyone to purchase insurance or pay a tax. The law’s drafters hoped the penalty would nudge young, healthy consumers into the health insurance market — and thereby diversify the risk pool and keep premiums affordable.
That didn’t happen. Plans in Obamacare’s exchanges were so expensive that millions of healthy people opted to pay the tax rather than buy insurance. Enrollees were sicker than expected. Consequently, individual-market premiums increased 105 percent over Obamacare’s first four years.
Congress effectively eliminated the mandate as part of its 2017 tax reform package; the change went into effect January 1, 2019. The change will generate $14 billion in annual benefits for Americans, according to the CEA report. Consumers no longer have to buy expensive plans they don’t want or can’t afford. And taxpayers won’t have to spend as much money subsidizing plans through the exchanges.
Second, the CEA analyzed the administration’s deregulation of short-term, limited duration health plans, which are exempt from many Obamacare mandates — including the requirement that insurers charge the same premium to people of the same age, regardless of their health status.
In Obamacare’s first years, consumers flocked to short-term plans as a low-cost alternative to exchange policies. eHealth, a private insurance marketplace, received about 147,000 applications for short-term coverage in both 2014 and 2015. That’s more than the double the 62,000 applications it received in 2013, the year before most of Obamacare’s mandates took effect.
Democrats worried this diversion of healthy consumers into short-term plans would destabilize the exchanges. So the Obama administration decreed that short-term plans could only last three months, rather than 364 days. That made the plans too risky for many people. If enrollees became sick, they might not have been able to renew their policies until the next open-enrollment period — and would’ve become uninsured.
The Trump administration changed that policy by allowing plans to last nearly a year and granting insurers the ability to renew them twice.
Short-term plans provide relief for consumers. A 2018 analysis found that unsubsidized premiums for the cheapest Obamacare plan for a family of three averaged $862 a month. The average for a short-term plan was just $116. The Congressional Budget Office projects that 2 million additional Americans will sign up for these plans by 2023 thanks to the rule change. The reform will generate $8 billion in benefits annually, per the CEA report.
Eight states and the District of Columbia have limited the maximum duration of short-term plans, thereby curbing their utility to consumers looking for affordable coverage. California has banned short-term plans outright.
Third, the CEA ran the numbers on a Trump administration rule governing “association health plans” — a type of group insurance that doesn’t have to comply with certain Obamacare mandates, such as the requirement that plans cover 10 “essential” health benefits.
Last summer, the administration empowered small businesses and sole proprietors to form AHPs with other firms in their industry or geographic area. Even gig economy workers, such as Uber drivers, would be eligible to join.
Unfortunately, Judge John D. Bates of the U.S. District Court for the District of Columbia declared the rule invalid in March. It’s currently in limbo pending appeal.
The rule could generate $8 billion in annual benefits for Americans, according to the CEA. The Congressional Budget Office predicts that 4 million additional Americans would enroll in AHPs by 2023, if given the chance.
Obamacare’s mandates priced millions of people out of the insurance market. Yet the Democrats running for president believe that more government is the answer. The Council of Economic Advisers’ analysis suggests otherwise.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The False Promise of Single-Payer Health Care (Encounter 2018). Follow her on Twitter @sallypipes.