NCPA - National Center for Policy Analysis

Republican Presidential Candidates Roll on Health Reform

August 24, 2015

Republican presidential candidates Governor Scott Walker (WI) and U.S. Senator Marco Rubio recently released proposals for healthcare reform, writes John R. Graham, senior fellow at the National Center for Policy Analysis.

Walker's plan allows tax credits to adjust with age. Rubio's does not specify whether tax credits will. Tax credits do not phase out as household incomes increase; a major problem with Obamacare's tax credits.

By repealing Obamacare, Walker would lose a lot of revenue to finance tax credits and have to find spending offsets. Another challenge is that the proposal skates too easily over underwriting for health status. A tax credit of $3,000 may be great for a healthy 50-year old's policy. However, it will not go far to help a 50-year old with medical issues to pay his premium.

Obamacare adjusts risk, whereby insurers that enroll healthy people transfer premiums retrospectively to those which enroll sick people. Walker may simply let states figure this out.

Walker may allow people to switch health insurers without underwriting. Individuals would choose skinny plans with low premiums when they are healthy, and switch immediately to generous plans when they fall sick. Insurers would avoid this by offering only skinny plans.

Finally, tax credits would introduce biases in people's choice of work. Low-income households would prefer the tax credit (and self-employment), while high-income households would prefer the exclusion (and corporate employment). Rubio's proposal includes a "glide path" to harmonizing the current tax treatment of employer-based benefits with individual tax credits.

Republican presidential candidates' willingness to get in front of health reform with this level of detail so early in the campaign is a very positive sign that the eventual candidate will have a credible and effective replacement for Obamacare.

Source:  John R. Graham, "Republican Presidential Candidates Roll on Health Reform," National Center for Policy Analysis, August 19, 2015.

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