The Coming Republican Opportunity to Change ObamaCare

Republicans may soon have a golden opportunity to make important improvements to ObamaCare. Replacement cannot happen until at least 2017 – and only if the GOP wins the White House. But as early as the summer of 2015 the Supreme Court may provide the impetus for substantial changes.

State Exchanges

On March 4, 2015, the Supreme Court of the United States (SCOTUS) will hear arguments in the case of King v. Burwell. This case concerns the tax-payer-funded subsidies people are receiving on the insurance exchange set up by the federal government. According to the strict wording of the ACA, these subsidies are only available on “exchanges set up by the State.”

Yet, because only 14 states and the District of Columbia set up their own exchanges, the other 36 states have only a federally-run exchange. The Obama administration decided to allow subsidies on the federal exchanges, despite the wording of the law. The IRS, likewise, was instructed to make the same interpretation.

This provoked several lawsuits, including Halbig v. Burwell, King v. Burwell, and Pruitt v. Burwell. Halbig and Pruitt were decided in favor of the challengers to the government’s interpretation of the law. King was won by the government interpretation. That has set up the Supreme Court hearing of King v. Burwell.

Republican Response

The time for Republicans to prepare their response to a favorable SCOTUS decision is now. While SCOTUS is not supposed to consider the political implications of their decisions, they do not live in a vacuum. Many believe the unexpected decision in the 2012 hearing of the law by Chief Justice John Roberts was motivated by reluctance to disrupt health insurance for millions. A Republican response that is ready for implementation shortly after the SCOTUS decision is handed down in June may go a long way toward a favorable outcome. That makes agreement among Republicans soon important in the preparations for the SCOTUS hearing in March.

Avik Roy, healthcare analyst at Forbes, believes there are three options for the Republican response:

  • Doing nothing – “let it burn” – This will result in about 4 million people losing their insurance subsidies with most returning to the ranks of the uninsured.
  • Surrender – Simply legalize what the Obama administration is already doing.
  • State options ­– Congress offers states the option of either going forward with ObamaCare’s exchanges, or setting up an alternative, more market-oriented system.

 

The first option is politically dangerous and makes healthcare worse for millions of Americans. Option two gives in to the continuation of ObamaCare’s perverse incentives and its destructive mandates and regulations. Only option three represents an improvement over the status quo.

Roy proposes the adoption of his plan called Transcending ObamaCare. His plan would give Americans freedom to choose from a broad array of health insurance plans, instead of being forced by the government to choose from a narrow set of federally-certified options. Simply stated his plan would:

  • Repeal the ACA individual mandate
  • Restore the primacy of state-based exchanges and insurance regulation
  • Expand flexibility of insurers to design exchange-based policies
  • Expand access to health savings accounts
  • Encourage Medicaid patients to purchase private health insurance

 

Roy would also give states the option of abandoning state exchanges entirely, and simply offering means-tested tax credits to lower-income residents to purchase private insurance at least equal or better than Medicaid.

According to economic model testing by University of Minnesota economist Stephen Parente, the Roy plan would decrease the cost of the average single insurance plan by 17 percent; more in states with the highest insurance premiums. It also would cover 12 million more Americans than ObamaCare because the plan reduces the underlying cost of health insurance. Furthermore, the plan would offer affordable coverage to those with pre-existing medical conditions.

The beauty of this plan, according to Roy, (some would say the weakness) is that it doesn’t require repeal of ObamaCare. This makes it politically possible even in 2015. President Obama would certainly not agree to such a change unless the government loses in King v. Burwell. But if it does, Obama will face increasing pressure to compromise with Republicans so that millions of Americans will not lose their health insurance.

 

(Next post – Other ideas on alternatives to ObamaCare.)

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