Guaranteed Renewability Key to Replacing Affordable Care Act

Source: NCPA

“We need to have a measure of transparency because it’s very hard to be a prudent shopper for healthcare if you cannot find out the price.”

Even though President Barack Obama vetoed the Budget Reconciliation bill aimed at repealing the Affordable Care Act, there is still the potential that, if a Republican nominee wins the presidential election by the end of the year, new proposals to put an end to ObamaCare will continue.

If this were to ever occur, what would replace the legislation? After all, the healthcare industry will need to continue reforming if the nation is to stabilize skyrocketing medical costs. Devon Herrick, Senior Fellow at National Center for Policy Analysis, provided an overview on the organization’s website of some of the potential issues of the Affordable Care Act as well as an outline of what could replace the healthcare law.

In particular, Herrick argued that both the individual mandate and the employer mandate should be abolished due to alleged harm to the consumer. Some ideas Herrick mentioned to improve healthcare reform is offering consumers more choices in their healthcare coverage options, greater cost transparency between providers and patients, and more flexibility for the states in designing their Medicaid program.

To learn more about Herrick’s views on the Affordable Care Act and ideas on a replacement bill, spoke with the representative of the National Center for Policy Analysis. What do you feel are the biggest issues of the Patient Protection and Affordable Care Act?

Devon Herrick: “It is becoming unsustainable. The ACA was premised on the idea of having guaranteed issue, an individual mandate, and subsidies for those who could not afford the cost of coverage. These were all necessary elements. You couldn’t have guaranteed issue if you didn’t require everyone to have coverage and, of course, some people couldn’t afford coverage.”

“The problem is it really has not worked as its proponents had hoped. The premiums have risen sharply over the last several years. Health insurers like Blue Cross of Texas have lost money. Blue Cross lost $400 million, they claimed, in 2014.”

“A recent article in The New York Times explained that a lot of people are gaming the system – they’re waiting to enroll. In the past several years, there were all kinds of special enrollment periods and some of the people who were enrolling in the off season seem to have run up big bills and then bailed again.”

“Premiums are very high and plans appear to be experiencing adverse selection. Something will have to be done about the exchange policies. The only people who seem to buy them are those who get a subsidy. Everybody else has been priced out of the market.” Do you support a repeal of the Affordable Care Act? Why or why not?

Devon Herrick: “Whether you’re a supporter or an opponent, the Affordable Care Act has structural flaws that must be addressed. Yes, I would support repeal and I would want it to be replaced with effective health reform.”

“The Affordable Care Act did not really do anything that would cut the rising cost of healthcare spending. I think we need to have effective reform. We need to have a system where individuals have more incentive to try to control cost and we need to find a way to encourage individuals to watch what they spend along with enabling more cost control.”

“The Affordable Care Act has a few pilot projects and the only real cost control that came with it was inadvertent and that is the rise of high deductible plans within the exchange system.” If Obamacare is repealed, commercial payers would no longer have to cover patients with pre-existing conditions. What alternative plan do you support to provide health insurance to those with pre-existing conditions?

Devon Herrick: “One thing we’ve talked about over the years is guaranteed renewability – affording protection to people that maintain continuous coverage and protecting them against increases in their cost that would be associated with developing health issues.”

“What the Affordable Care Act tries to do is force young, healthy folks in the market to offset the higher cost of those with health problems. But we’re experiencing extremely high premiums that are rising sharply.”

“We need to have a system where individuals are encouraged to have coverage starting at a young age and give them an incentive to maintain that coverage. I think a system of guaranteed renewability for those who have coverage, then allow insurers to risk rate those who do not maintain coverage or let large gaps in coverage occur.”

“I think we can also encourage continuous coverage with a system of tax credits that afforded the individuals the same type of support as the employer tax exclusion gives high-income individuals. It’s not that fair of the system where a substantial part of the tax exclusion goes to high-income earners and those at the lower end of the scale get little by comparison.” What is the type of legislation you would support to replace Obamacare?

Devon Herrick: “I can imagine a system where the open-ended tax credit, not necessarily a fixed sum but a type of tax credit that can be adjusted for age or health status so that some people might get more than others based on their health status., b But everyone who signed up for coverage would have some measure protection against price increases due to health conditions they developed.”

“Guaranteed renewability would be very important. Also, I think we need flexibility in the marketplace as well as transparency. Flexibility recognizes not everybody has the same demand for health coverage. Some people are more risk averse than others.”

“Yet we’ve moved to a system that’s a one-size-fits-all. We removed flexibility from the marketplace and don’t really allow people to choose the level of risk they’re willing to assume. I think we need more of that and we need to allow insurers to try to create innovative products that individuals may prefer.”

“I also think we need to have a measure of transparency because it’s very hard to be a prudent shopper for healthcare if you cannot find out the price. I can imagine a system that encourages providers and patients to talk ahead of time.”

“A provider who a patient may never meet – the anesthesiologist, the radiologist, the pathology lab – has the right to bill patients. Sometimes these bills are outrageous probably because they never meet patients.”

“I don’t think it works to try to force doctors and hospitals to disclose prices but I think we can give them an incentive – maybe a safe harbor would be if a doctor met with the patient and disclosed prices, he or she would be far more apt to get paid as opposed to those who surprise patients with bills that they did not expect and assume a court of law can enforce that.”

“We can create a better set of incentives to encourage providers and patients to actually talk ahead of time and have more price transparency, allowing patients to compare prices.”

“The research shows when people are told they need an MRI or a lab, if their cost-sharing is high, a lot of people don’t really understand that prices vary. What they often do is say, ‘I can’t afford that’ or ‘I won’t pay that’ whereas if they just look around, they could find that service at a lower price.”

“Most people don’t have any idea where to start. I comparison shop. I know that an MRI might cost $340 in one location and $3,000 in a hospital. But a lot of folks don’t know that. Anything that public policy can do to encourage more price transparency would be very beneficial.”