It would solve the three core problems that called out for real reform even before the Democrats passed Obamacare: getting more people insured; dealing with the problem of preexisting conditions; and lowering costs. In providing politically attractive and substantively sound solutions to these three core concerns, it would justify bringing an end to Obamacare, and thus would pave the way for full repeal.
Just as important as what our proposal would do is what it wouldn’t do. It wouldn’t force anyone to buy insurance. It wouldn’t auto-enroll anyone in any plan. It wouldn’t reduce the tax break for employer-based insurance (aside from closing the tax loophole at the high end). It wouldn’t cost anywhere near the $2 trillion over a decade that Obamacare would cost. It wouldn’t undermine religious liberty. It would allow Americans to keep their current plan if they like it.
In order to increase the number of people with insurance versus the pre-Obamacare status quo without compelling anyone to buy anything, the 2017 Project proposal would address what has long been a basic unfairness in the tax code. Why should millions of Americans who get insurance through their employer get a tax break, while millions who buy it on their own through the individual market do not? We would end this unfairness by offering a refundable tax credit, one that would apply to everyone who buys insurance through the individual market (just as the employer-based tax break applies to everyone in the employer market). Since insurance costs increase with age, the value of the tax credit does too: $1,200 for those under 35 years of age, $2,100 for those between 35 and 50, and $3,000 for those who are 50 or over. There would also be a $900 credit per child. Those who didn’t use the full value of their tax credit could deposit what’s left in a health savings account (HSA). Figures from the Government Accountability Office suggest that—in the absence of Obamacare’s myriad mandates—such credits, combined with the reform of letting people buy insurance across state lines, would make a low-premium (“catastrophic”) policy affordable for everyone.
Obamacare’s taxpayer-funded subsidies are substantial for the near-poor and some of the near-elderly, but they do virtually nothing for most of the young or the middle class. Obamacare’s neglect of these two rather significant groups opens up a huge political vulnerability. A 2017 Project study of Obamacare’s subsidies in the 50 largest American counties shows that a typical 26-year-old man who makes $35,000 would get no Obamacare subsidy whatsoever for the cheapest-priced “bronze” plan. Nor would a 36-year-old woman who is making that same $35,000. Under our alternative, by contrast, they would get tax credits of $1,200 and $2,100 respectively, which they wouldn’t have to use for a government-run “exchange” plan but could use for any plan they’d like. . . .
To solve the problem of expensive preexisting conditions, our alternative would allocate $7.5 billion a year in defined-contribution federal funding for state-run “high risk” pools. Through such pools, anyone could buy affordable, partially subsidized insurance, and no one could be turned away because of a preexisting condition. We also propose (1) that no one could be dropped from, or re-priced by, their existing insurance—including insurance purchased under Obamacare—because of a preexisting condition; (2) that those who turn 18 (or leave their parents’ insurance) have a one-time, one-year buy-in-period during which they couldn’t be denied coverage, or charged more, for a preexisting condition—and that parents be granted a similar one-year buy-in-period for newborns; and (3) that people be able to move from employer-based plans to individual plans, or between individual plans of the same level, without being denied coverage, or being re-priced, for a preexisting condition.
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