King v Burwell Decision Could Usher in Obamacare Alternative
April 29, 2015
Senator Ron Johnson (R-WI) has introduced the Preserving Freedom and Choice in Health Care bill, which he frames as a response to the Supreme Court deciding for the plaintiffs in King v Burwell. This lawsuit seeks to force the administration to obey the law by not paying tax credits to health plans that operate in states using a federal health insurance exchange (i.e. healthcare.gov), says NCPA senior fellow John R. Graham.
Victory for the plaintiffs would cause massive disruption in health insurance in the 36 states using healthcare.gov because beneficiaries' premiums would increase significantly. Up to nine million people would experience this effect.
Other Congressional Republicans have proposed bills. However, Senator Johnson has moved the ball forward in the Senate by gathering 29 co-sponsors. Senator Johnson's bill does not repeal and replace Obamacare, nor does he claim that it does. It is a bridge, or transition, to a post-Obamacare health reform. This is also necessary because the bill Congress passes in the wake of the Supreme Court stopping tax credits to millions of people must be one the president will sign without too much complaint.
Senator Johnson's bill would:
- Restore the Obamacare tax credits in the 36 states, but only through August 2017, and only to people who are already enrolled. People who have not yet enrolled would be frozen out of Obamacare.
- Repeal the individual and employer mandates to maintain coverage. Further, it eliminates the federal government's power to define essential health benefits. It also specifies that people with employer-based benefits can maintain those benefits through December 2017.
- And, embrace both individual choice and political reality.
Congressional Republicans just might be on the path to a successful response to the Supreme Court finally striking a significant blow to Obamacare.
A few things would improve the bill without necessarily making it less acceptable to the president.
- "Essential benefits" are not really what is driving up the cost of health insurance in exchanges. The single biggest factor is the age band of 3:1. Section 1201 of Obamacare gives this power to the U.S. Secretary of Health & Human Services, who dictated that it be 3:1. This power should be returned to the states.
- People should be able to buy health insurance from any broker or agent they prefer, in person or online, and claim their tax credit directly from the IRS.
- Obamacare's risk mitigation mechanisms (risk adjustment, reinsurance, and risk corridors) motivate insurers to recruit the healthy and shun the sick. Two of these three expire in 2017. So, a bill that anticipates transition to a new reform in 2017 should at least contain language inviting the relevant authorities (especially the National Association of Insurance Commissioners) to re-visit the question of risk mitigation.
- Obamacare tax credits reduce the incentive to work. A transition to a flatter structure of tax credits that eliminates the marginal income tax "cliffs" in Obamacare would benefit people in ways beyond health insurance by expanding opportunities to work.
Source: John R. Graham, "Senator Johnson Introduces King vs. Burwell Alternative," National Center for Policy Analysis, April 27, 2015.
Browse more articles on Health Issues