04 Mar 2015 If Plaintiffs Prevail in King v. Burwell, Conservatives and Libertarians Have Many Health Care Reform Options Ready to Help People who Lose ObamaCare Subsidies
On Wednesday, March 4, the United States Supreme Court will hear arguments in the King v. Burwell case. The plaintiffs in King v. Burwell contend that ObamaCare allows premium subsidies only on state-based exchanges. If the plaintiffs prevail, millions of people on federal exchanges will lose their subsidies.
Should that occur, there will be enormous pressure on both sides of the political aisle to help those people. Conservatives and libertarians want help to come in the form of a free-market-based alternative to ObamaCare.
There are people on the political left who claim conservatives and libertarians don’t have a plan. For example, Bloomberg’s Joshua Green recently wrote, “Republicans don’t want to talk [about King v. Burwell] because they’re loath to admit that, even after voting 67 times to repeal or defund the ACA, they have no plan to help the millions who would be affected.”1
By the National Center for Public Policy Research’s count, there are a dozen plans—four by Republican politicians and eight by conservative or libertarian think-tanks—filled with ideas that could be used to replace ObamaCare.
Wall Street Journal columnist Kimberly Strassel notes that prior to a decision being handed down in King v. Burwell, it is urgent to “get out a conservative plan to reassure the Supreme Court that there is one. That’s going to happen in the coming days, as working groups in both the Senate and House – and some individual members – release their own backup proposals.”2 As of now, it is not known what those proposals will contain. But they will no doubt be based in large part on the proposals that have already been released by politicians and think-tanks.
To help the public better understand what these 12 conservative/libertarian health care plans contain, the National Center for Public Policy Research has released a publicly accessible spreadsheet that contains all of the plans and summarizes how each one treats the major health care policy issues. To view it, go here: http://goo.gl/y1ALI2
The spreadsheet lists how each plan treats 11 health care policy issues: tax credit/ deduction, employer-based tax exclusion, pre-existing conditions, the definition of insurance, Health Savings Accounts, Medicaid, Medicare, medical liability/legal reforms, subsidies, mandates and any other distinguishing characteristic.
To make it easy for the public to understand the spreadsheet, the remainder of this analysis defines some terms that may be unfamiliar to readers.
Refundable tax credit: A tax credit is an amount that an individual can deduct from his taxes. Thus, if he receives a tax credit of $1,500 to buy insurance, he reduces his tax bill by $1,500. Refundable means that an individual gets the tax credit even if he pays no income taxes. This allows people with little-to-no tax liability – usually people who are lower income – to make use of the tax credit as well.
Standard deduction: A standard deduction is an amount that an individual can deduct from his taxable income. If he receives a $5,000 standard deduction for insurance, he can reduce his taxable income by that amount. Most plans using this allow an individual to take the full deduction even if he purchases an insurance plan that costs less than the deduction.
Employer-based tax exclusion: Employees receive health insurance tax-free if their employer purchases it for them. This tax break is open-ended, meaning an employee gets it regardless of the cost of insurance. The greater the cost of the insurance, the larger the tax break. Many health care policy wonks and economists believe this open-ended tax break is a prime cause of health insurance and health care prices rising much faster than the rate of inflation.
Health Savings Account (HSA): An HSA is a tax-free savings account that an individual can use to purchase health care. As of 2015, an individual can contribute up to $3,350 tax-free to an HSA, while a family can contribute up to $6,650. HSAs must be coupled with a high-deductible health insurance plan. For 2015, the deductible for an individual must be at least $1,300 and for a family at least $2,600.
High-risk pool: A high-risk pool is an insurance program run by a state government for people who do not have employer-provided coverage and are unable to find coverage on the individual market because they have a pre-existing condition. High-risk pools usually offer a range of coverage options. Premiums are usually higher than those in the individual markets since people entering a high-risk pool are usually considered to be medically uninsurable.
Medicaid and block grants: Medicaid is the health insurance program for the poor that is largely administered by state governments. It is a “matching program,” which means that for every dollar a state spends on Medicaid, the federal government must match at least one dollar (many states get an even larger match). The match is open-ended, in that there is no limit to how much the federal government must match. A Medicaid block grant is a fixed amount of money the federal government sends to the states. In exchange for block granting Medicaid, most reform plans give the states wide latitude is setting up their own Medicaid plan, largely free from federal interference.
Medicare and premium support: Medicare is the federal health care program for seniors age 65 and older and the disabled. Under a premium support model, Medicare enrollees could pick a private insurance plan, and the federal government would pay a pre-determined amount – a premium support – to the insurer. If the cost of the plan exceeded the premium support, the enrollee would pay the difference.
HIPAA regulations: HIPAA refers to the Health Insurance Portability and Accountability Act of 1996. While HIPAA produced many regulations, for the purposes of the spreadsheet this phrase refers to how HIPAA treats pre-existing conditions. Under employer-based insurance, an individual who has a pre-existing condition and (1) has had 12 months of continuous insurance coverage and (2) has had a break in insurance of no more than 63 days cannot be denied coverage for that pre-existing condition if he joins the insurance plan at a new employer. If he has had a break in insurance coverage of more than 63 days he can be denied coverage for that pre-existing condition for one year (18 months if he enrolls late in the plan).
David Hogberg, Ph. D., is senior fellow for health care policy at the National Center for Public Policy Research.
1 Joshua Green, “Is Washington Ready for the Death of ObamaCare?” Bloomberg Politics, February 26, 2015, available at http://www.bloomberg.com/politics/articles/2015-02-26/the-return-of-the-death-of-obamacare-i6m1baro as of February 27, 2015.
2 Kimberly A. Strassel, “A GOP Exit Ramp From ObamaCare,” Wall Street Journal, February 26, 2015, available at http://www.wsj.com/articles/kim-strassel-a-gop-exit-ramp-from-obamacare-1424996362?tesla=y as of February 27, 2015.