So it looks like Healthcare.gov is working — or at least working much better than it was before. Hopefully, this means we can soon set aside our collective national freakout over a really serious substantive threat to Obamacare, and go back to freaking out over the purely optical threats. Those would be “rate shock” and the failure of Obama’s “if you like your plan you can keep it promise” to pan out. Unlike the website’s travails, they’re purely political problems, and actually result from Obamacare operating the way it was designed to. They’re exceedingly unlikely to threaten the macroeconomic stability of the insurance markets, or the soundness of any part of the law’s policy design. Their costs are dwarfed by the benefits going to poor people receiving subsidies and covered by the Medicaid expansion.
But rate shock and the plan cancelations also happen to affect a population that’s upper-middle-class and relatively politically active, so our political system actually cares about their troubles in a way it doesn’t for the truly poor and unfortunate. So we treat inconveniences heaped on the former group as major political scandals, and massive alleviations of suffering for the latter group as non-events. Which is shameful and morally perverse, if you ask me.
However! With that bit of throat-clearing out of the way, let me say I’m sympathetic to complaints that Obamacare’s restrictions on health coverage design hamper consumer choice, and hold back innovation in the packaging and delivery of care. Those restrictions also contribute to rising premiums (not much, but somewhat) because expanded coverage comes with expanded costs. And they’re causing the cancellation of a lot of pre-Obamacare insurance plans.
I don’t obsessively fetishize choice and innovation they way reformist conservatives do. But they’re good values to promote, and shouldn’t be undermined unless it’s necessary to pursue some more foundational moral obligation. I don’t think it’s necessary here. And hey, if we can fix rate shock and plan cancellations while we’re at it, why not?
So, without further ado, here it is:
The Official Jeff Spross Plan To Fix Obamacare
1) Remove all but the gold rating from the exchanges.
Right now insurance plans have to meet one of four ratings to be sold on the exchanges. Bronze plans offer the stingiest and least comprehensive coverage; then it goes up to Silver, Gold, and finally Platinum with the most generous coverage. Catastrophic plans can also be sold under certain conditions. Those four “metal ratings” all include a package of essential health benefits (EHB) — ensuring everyone gets at least a minimum level of reliable coverage. They also require various deductibles and cost-sharing.
My recommendation: clear out the EHB requirements and everything except the gold plans. Then change the law so that as long as an insurer sells a gold plan on the exchange, they can sell any other plan they cook up as well.
That would address conservative complaints regarding choice, innovation, and plan cancellations. But it would also still serve the liberal goal of protecting consumers from “junk insurance.” Gold plans would function as a seal of approval: you can take your chances with the other plans if you like, but the government has checked these out, and they’re solid.
Furthermore — if I understand the economics correctly — requiring all insurers to sell at least a gold plan before they can sell anything else should cut down on any risks of adverse selection.
Practically speaking, this wouldn’t bring back the plans that have already been canceled due to Obamacare’s new rules. But it would satiate conservatives’ principled objections, and would open up the possibility for insurers to resurrect similar plans in the next year or two.
2) Simplify the subsidies.
Right now the subsidies customers can get on the exchanges are calculated to cover the premiums they’d pay for a silver plan. The subsidies are adjusted for income — the more you make, the less of your premium is covered — and they phase out completely if you make over 400 percent of the poverty line. Separate subsidies, also adjusted for income, are provided for out-of-pocket costs.
First off, obviously, my plan would peg the subsidies to the gold plans. The division between premium subsidies and out-of-pocket subsidies is also silly, so I’d just have one lump sum that covers everything. Next, there should be no adjusting for income. Everyone should get the full cost of their premium and out-of-pocket expenses covered, regardless of how much they make. Third, don’t phase it out at 400 percent of the poverty line. Give the subsidies to literally everyone on the exchanges.
Obviously, this will significantly increase Obamacare’s annual spending, which would be a big downside for conservatives. But it would also eliminate the policy and paperwork complexities that come along with means-testing; it would do away with rate shock, since everyone will have the entirety of their premiums covered no matter who they are; it would bring Obamacare’s subsidies closer in form to the universal health care tax credit conservatives advocate; and it would eliminate any latent welfare trap effect from the benefit phase-out.
Finally, this would make a gold plan affordable to everyone. Combine that with the “seal of approval” function mentioned above, and gold plans would become the all-purpose fall back plan. And if a customer decides to go with coverage that costs less than a gold plan, they can just pocket the leftover subsidy. That keeps the incentive for customers to shop for the best deal, and the accompanying competitive market pressure.
3) Get rid of the age bands.
Obamacare also instituted a new rule that premiums for older Americans on the exchanges couldn’t be higher than premiums for younger customers by a factor of more than 3 to 1. Older people tend to be sicker and thus a greater risk for insurers, which drives their premiums higher. The rule was meant to help out the older set with an implicit transfer: drive down their premiums by driving them up for younger customers.
It’s unclear just how much the age restriction contributes to premium hikes and thus to rate shock. Most of the hikes are probably due to the rule that insurers can no longer deny customers based on pre-existing conditions. But the age rule obviously contributes some.
So let’s get rid of it. We’ve already removed all limitations on who can and can’t get a subsidy. So no older American is going to be left out in the cold when their premium goes up. I don’t object to the age rule myself, but it seems to me we can accomplish the same goal through less intrusive tinkering in how insurers design their coverage.
4) Get rid of the coverage requirements for the employer-provided market.
Finally, Obamacare imposes some new requirements on the small and large group markets for employer-provided coverage, which are causing some modest disruptions there. Personally, again, I don’t care about this. If your employer cancels your current plan, the most likely outcome is they’ll just provide you with a better one. If they don’t, then you’ll be getting a bigger paycheck (since none of it’s going to premiums anymore) and you can go shop on the exchanges. Either way, you’ll be fine.
But conservatives seem annoyed by these requirements. And much of the impetus behind Obamacare was the idea that employer-based coverage was already the “good” kind, and we were trying to make the individual market more like it. So I don’t see why the employer requirements are strictly necessary. Why not just get rid of them?
BONUS: Cover everyone who got left out by state refusals to expand Medicaid.
I don’t like describing the expansion of coverage to millions of the least fortunate Americans as a “bonus.” (See my bitching above about whose struggles our political system does and doesn’t value.) But I did frame this post as a response to rate shock and plan cancellations, and expanding Medicaid isn’t strictly relevant to that. Still, as a leftwinger with the attendant moral priorities, this would be a huge “win” for me. So I’m including it.
Right now, to qualify for the exchanges, your income has to be at least 100 percent of the poverty level. That’s because lawmakers figured every state would expand Medicaid, covering everyone below that threshold. But 26 states didn’t, leaving almost 5 million Americans — all of whom are far poorer than those seeing rate shock and plan cancellations — high and dry.
But since we’ve already eliminated the income ceiling on who qualifies for the exchanges’ subsidies, we might as well drop the floor as well. That yields a simpler system: as long as you’re not covered through your job or through some government program (Medicare, Medicaid, Veterans Health Administration, etc.) you’re on the exchanges, end of story.
Yes, again, this would significantly increase the law’s annual expenditures. But it would also serve as a détente of sorts on the Medicaid expansion, and take the political pressure off conservative states that don’t want to participate. Continue reading