Crisis Averted, Promise Fulfilled. Obamacare is No More

Republicans control the House of Representatives, the Senate and the White House for one simple reason: They promised to repeal and replace Obamacare. Today was the first step in fulfilling that fundamental promise.

There are certainly easier promises that Republicans could have made. Health care is complex, both when it comes to policy and politics, and any reform plan is inevitable to create some perceived winners and losers. And honestly, Republicans probably didn’t have to proactively do anything. The system that Democrats created was doomed to fail.

Each of the last three years we have been met with myriad headlines like this one: “Obamacare Plan Premiums In 2017 Higher Than Expected And For Worse Coverage.” And as premiums have gone up, healthier Americans, especially young adults, have withdrawn from the market, which further drives up premium costs for those that remain.

Insurers were stuck. They couldn’t appropriately price their plans because Obamacare’s laws and regulations created an unpredictable mishmash of economic incentives. Ultimately, almost all of them over-estimated the health of the population and under-estimated the cost, which led to them losing hundreds of millions of dollars.

As a result of those losses insurers gradually began leaving the market, which meant fewer choices and higher costs for the insured. Take this week’s news out of Iowa as a microcosm of a larger problem. As is the case with growing areas of the country, Iowa was down to one insurer—Medica—who this week announced that it would likely stop selling plans in the state.

“Without swift action by the state or Congress to provide stability to Iowa’s individual insurance market, Medica will not be able to serve the citizens of Iowa in the manner and breadth that we do today. We are examining the potential of limited offerings, but our ability to stay in the Iowa insurance market in any capacity is in question at this point,” the company’s statement said.

In the course of one year an entire state went from having three insurance options, which isn’t great, to no options. Insurers are demanding swift action. More importantly, Americans are demanding swift action to turn the tide of this very real crisis.

And today, Republicans took the first step to meet that crisis by passing the American Health Care Act, which will repeal and replace Obamacare.

“Let’s make it easier for people to afford their insurance. Let’s give people more choices and control over their care. Let’s make insurance companies come in and compete for your business,” Speaker Paul Ryan said. “Let’s return power from Washington to the states. Let’s help people get real peace of mind. Let’s put the patient—not the bureaucrats—at the heart of the system.”

“This bill does all of these things,” Ryan continued.

So what does the bill do? Here are some critical elements:

  • Contrary to rumor, the bill retains the prohibition on denying coverage to those with pre-existing conditions. It also retains the essential health benefits requirements, the community rating requirement, and the requirement to provide dependent coverage for children up to age 26.
  • In an effort to end the one-size-fits-all approach that led to dramatically higher premiums, states will have the ability to be flexible with the regulations listed above, but only in extremely narrow circumstances. For instance, a state can apply for a waiver to allow insurers to charge someone with a given health condition higher rates, but only under the conditions that (1) that person did not maintain continuous coverage, and (2) the higher premiums could only be charged for one year.
  • Replaces the premiums subsidies with flexible, refundable tax credits, allowing individuals to use them to purchase a wider variety of plans. This serves to give people who don’t receive health care at work the same tax benefit as those who do and creates valuable free market forces along the way.
  • Encourages the use of Health Savings Accounts by increasing the amount that families can put into them without paying taxes.
  • Reforms Medicaid, by replacing federal matching rates with the option for states to either receive a block grant or a per capita amount for Medicaid enrollees. This allows states to be more innovative in the services they provide and puts the federal government on a more sustainable fiscal path.

There is still room for improvement in this bill, but there is also plenty of opportunity—in the Senate and in conference—to make those changes. Nevertheless, this bill represents a tremendous and necessary first step to avoiding the coming collapse of Obamacare.