4 easy Obamacare fixes

There’s a lot of chatter about how Republicans are going to repeal Obamacare and replace it with, well, either nothing, or a few miserly tax credits, or maybe they won’t at all because they’ll realize how popular its provisions are, even though people don’t realize it when they label the whole thing “Obamacare.” Not long ago Megan McArdle wrote an article about these various popular provisions that Trump and the Republicans are talking about keeping, seemingly not recognizing how complicated it is to do so.

My approach:  “mend it, don’t end it.”  Well, sort of.  Longtime readers will know that I would prefer to replace the whole thing with some form of VoucherCare, and that I think the structure of the subsidies in Obamacare is problematic — that is, the fact that you get Medicaid up to 133% of the poverty line, then a complicated subsidy equal to some portion of a silver-level plan, until you hit 400% of poverty, where, at 400% and $1, you lose everything.  There is also, of course, a fundamental dispute about exactly how poor one must be before the government pays your healthcare costs.

But all that aside, it seems to me there are a couple key changes that could fix a lot of Obamacare’s problems.

Obamacare exchange plan costs are increasing massively from one year to the next for multiple reasons, but the largest is that the young and healthy were expected to subsidize the old and sick — and, turns out, they’re not willing to be suckers.  So, to start with, let’s let insurers price plans actuarially, at least with respect to age, by eliminating the maximum differential between premiums for young adults and the old.  Yes, that’ll mean that healthcare costs for the pre-Medicare group will jump, but not unfairly so, since all you’re doing is eliminating cross-subsidies, not imposing truly new costs.  And government subsidies will rise for the older group and drop for the younger group to a corresponding degree.  But this change would have the benefit of getting more young people onto the exchanges, which pretty much everyone agrees is needed.

A minor but related change has to do with the “adult children” provision, in which young adults can stay on their parents’ healthcare plan until they reach age 26 — regardless of whether they have alternate options for health insurance.  If you want to get young adults to participate in the health insurance market as adults, it really makes sense for that to start, oh, say, when they reach adulthood.  Delay until age 26 and you’ve already communicated that health insurance is something only for old people like their parents.

Now, you say that this is a popular Obamacare regulation that no one would accept changing.  But how about a tweak, in which employees can elect to cover dependents up to age 26, but employers are permitted to provide different subsidy levels for dependents of different ages:  kids under age 18 get a 75% subsidy, say, while young adults of college age, say up to 23, get a 40% subsidy, and beyond that, they pay full price.  Sure, they may still benefit from the group rates, but if you consider that employers generally have a fixed budget for employee benefits, what’s really happening when employers are required to cover 25 year olds at the full dependent-level subsidy, is that the amount of subsidy that would have gone to employees and minor dependents is reduced.  And, after all, it seems unfair that employers can charge much higher rates or even full cost for a spouse who had coverage available elsewhere, but are required to pay the full dependent subsidy for an adult child, which in the end requires parents of young children to pay more than they otherwise would.

The third change:  sure, everyone says that pre-existing condition restriction restrictions are a new third rail — you could never go back to allowing insurance companies to exclude or charge higher premiums for people with pre-existing conditions.  But people also have a sense of fairness.  Now that everyone with a pre-existing condition has been able to buy plans on the exchanges, and the insurers have taken that one-time hit, reimposing a modified restriction would only hit those who have, up to now, refused to purchase insurance, or those who drop it in the future, then get sick.  Call it “stop allowing people to game the system” and continue to protect people who have had continuous individual or group coverage, or a close enough track record, with only small coverage gaps due to a short-term job loss or difficulties getting enrollment sorted out, but don’t let the “gamers” back into the system at the next open enrollment or at a status change.

And the fourth change:  look, without even arguing about whether the employer mandate, in principle, was the right thing to do, clearly the fundamentally most damaging element was the 30 hour cut-off.  Work 29 hours:  no responsibility.  Work 30 hours and the employer is required to provide a sufficiently-subsidized sufficiently-valuable healthcare plan, including first-dollar coverage for check-ups and contraceptives.  This is really easy to fix even if you can’t agree on the other pieces:  keep the full healthcare requirement in place for employees working 40 hours but permit a proportionate benefits level for fewer than full-time work hours:  either in the form of a subsidy that varies each paycheck based on the number of hours worked, or as an additional bit of pay in the form of pre-tax money that can be directed toward the purchase of an exchange plan or another healthcare plan (e.g., a spouse’s plan or that of a second employer if working two jobs).  Sure, a voucher would be somewhat messy — but all that really means is that this portion of the pay would be separately identified, only paid out if the employee maintains some sort of health coverage, and would be treated as pre-tax upon filing taxes if the worker documents purchase of a healthcare plan.  Regardless of the precise mechanics, the net effect for the worker and the employer would be the same:  the incentive to hire 29 hour/week employees that’s caused so many problems would be gone.  (To be sure, for lower-paid workers, this would instead take the form of a minimum wage increase, but that’s another story.)

So there you have it:  four common-sense fixes that sure as heck to me seem doable and step out of the big partisan battles.

Image:  https://commons.wikimedia.org/wiki/File%3ADoctor_examines_patient_(1).jpg; By Unknown photographer [Public domain], via Wikimedia Commons