July 8, 2015

Improving Health Care for Americans

  • Obamacare has significantly increased the cost of health care insurance.

  • The law’s complicated subsidies hide the true cost of health insurance and care.

  • Republican ideas on health care would increase choice and lower costs, reform Medicaid, improve the economy, and increase freedom.

Obamacare has significantly increased the cost of health insurance in the individual and small group markets. A 2014 Manhattan Institute study found that individual market premiums increased nearly 50 percent the first year the law was in effect. To keep exchange premiums from rising even higher, insurers chose to create narrow provider networks and extremely high deductibles. In 2015, the average deductible for an Obamacare silver plan – the most common plan – is $2,927 for single coverage and $6,010 for family coverage.

Early rate filings show widespread, large premium increases for Obamacare plans next year as well. HealthPocket, a company that compiles health care statistics, examined public rate filings for plans available in the most populous cities in 45 states. It found that proposed premiums for 2016 Obamacare plans are 12 percent higher than the 2015 premiums. The average premium increases people will face will likely be higher, since plans with the largest number of enrollees generally have proposed the largest premium increases. As premiums increase, so does the cost of the law’s subsidies since about 86 percent of exchange enrollees need subsidies to afford the costly plans.

Obamacare Premium Increase Chart

On July 3, the New York Times reported on the large premium increases that insurers, generally those with large market share, are requesting for Obamacare plans. Overall, insurers are finding that Obamacare enrollees are generating much higher claims than they expected. The article showed that requested rates can actually be too low and may be increased by regulators to meet solvency criteria. For example, two insurers in Oregon had requested rate increases of nine percent and five percent, but the state approved for them increases averaging 35 percent and 20 percent .  

On June 25, the U.S. Supreme Court upheld the legality of Obamacare’s health insurance subsidies throughout the country. This decision means that tax penalties under the law’s individual mandate and employer mandate apply nationwide.

The subsidies are critical to Obamacare’s Rube Goldberg structure, since other provisions of the law inflate premiums for relatively healthy people. Obamacare’s supporters acknowledge that the law’s subsidies – along with the individual mandate – are necessary to induce healthy people to buy the overpriced plans. The subsidies provide an indirect way for taxpayers to subsidize the health care expenses of older and sicker people enrolled in the individual market.

Middle class people who don’t benefit from the subsidies are largely shunning Obamacare plans. According to the data released by the administration, only 17 percent of exchange enrollees this year have income above 250 percent of the federal poverty level – a rough lower-end proxy for the middle class. In general, middle class people bear Obamacare’s costs – higher premiums and taxes – without receiving a corresponding benefit. A June 22 CBS survey showed that only nine percent of Americans believe Obamacare is working. A Gallup poll from October 2014 found that only 16 percent of Americans believe they or their family have benefitted from the law.

Republicans have outlined numerous ideas for health care reform.

Republican ideas would increase choice and lower costs

In preparing for a possible ruling in King v. Burwell that would have made illegal Obamacare’s subsidies in two-thirds of the country, Republicans coalesced around the idea of allowing states to opt out of Obamacare’s heavy mandates and regulations. Rather than having health insurance regulated by Washington, Republicans would return these key decisions to the states. Republicans also favor removing Obamacare’s restrictions on health savings accounts, products that have been shown to lower health care spending.

Section 1332 of Obamacare allows states to apply to the secretary of Health and Human Services for a waiver to opt out of many of the law’s key provisions starting in 2017. However, the criteria to get a waiver are overly prescriptive and would do little to increase choice and lower costs for consumers. Republicans are willing to work with President Obama and congressional Democrats to allow states a true Obamacare opt out – one that allows them to reform their health insurance markets without large taxes, subsidies, and Washington rules and mandates.

Republican ideas would reform Medicaid

Obamacare contained a large Medicaid expansion, largely aimed at childless adults. The Center for Medicare and Medicaid Services has reported that 71.1 million people were enrolled in Medicaid and CHIP in April 2015, a 21.3 percent increase above its July-September 2013 baseline. In 2014, federal Medicaid spending approached $300 billion. In fact, more than half of the money Washington now sends to state governments goes for Medicaid. Exploding Medicaid rolls are busting state budgets and crowding out spending on other priorities like transportation and education. ER visits appear to be increasing because of Obamacare’s Medicaid expansion.

Medicaid suffered from serious problems prior to Obamacare. These included: low provider participation; poor quality of care; large crowd-out of private sector coverage; and perverse incentives that discourage work and saving. In December 2014, the inspector general at the Department of Health and Human Services released a report showing that half of Medicaid managed care providers, particularly primary care providers, did not offer appointments to Medicaid enrollees. Of those who offered appointments, more than a quarter had wait times exceeding one month.

Congressional Republicans have introduced several plans that would replace the federal government’s open-ended reimbursement of state Medicaid spending with capped allotments and allow greater flexibility for state to tailor the program to their unique populations. Several governors have pursued Medicaid reforms that allow people more choices for coverage. Unfortunately, too often these reforms encounter bureaucratic roadblocks from the administration. Republicans want to make it easier for states to try new approaches to reform their Medicaid programs.

Republican ideas would improve the economy

The combination of Obamacare’s employer mandate and the large phase-out of the health insurance subsidies as people earn additional income reduces work and harms the economy. CBO projects Obamacare will lead to the equivalent of two million fewer full-time jobs by 2017 and will lower national income by nearly one percent. Numerous employers report that they are moving people into part-time work to avoid penalties under the employer mandate. In order to avoid all this economic damage, Republicans have proposed ideas that replace Obamacare’s subsidies and remedies problems with Obamacare’s employer mandate. One leading replacement plan was proposed by Senator Hatch, the Chairman of the Finance Committee, along with Senator Burr and Rep. Fred Upton, the Chairman of the House Energy and Commerce Committee. This plan repeals the employer mandate and creates fixed health insurance tax credits for people with incomes below 200 percent of the poverty level.

The House of Representatives overwhelmingly passed legislation that would replace Obamacare’s definition of a full-time work week from 30 hours to 40 hours. Bipartisan Senate legislation sponsored by Senators Alexander, Collins, Donnelly, Manchin, and Murkowski would do the same. This legislation would lower penalties paid by employers, which are passed onto workers in the form of lower wages and fewer hours. Several liberal groups have proposed scrapping the employer mandate entirely.

Republican ideas would increase freedom

Republicans believe that the individual mandate should be repealed. Washington should not penalize people who refuse to purchase a product – especially when Washington has made that product so much more expensive. Since mandate penalties are difficult to collect, and the administration has expanded its exemptions, the mandate seems unlikely to effectively discourage people from waiting until they are sick to purchase coverage. Republican proposals contain policies like continuous coverage protection, which will encourage people to act responsibility while protecting sick people from escalating premiums.

It has been more than five years since the president and congressional Democrats created Obamacare behind closed doors without listening to Republicans or the American people. The law remains deeply unpopular with the vast majority of Americans, who are skeptical about its workability and affordability. The American people deserved better then, and Congress owes them more than the status quo now. Republicans are ready to work with Democrats to address the many problems people and businesses face from Obamacare and to reform the health care system in a way that works for families.

Issue Tag: Health Care