Two members of Congress several years ago introduced a bill that would have liberated patients, doctors, and healthcare markets from the bureaucratic system we are living with today.
The basic idea: Take all the spending and tax subsidies we now provide to private health insurance and use that money to give every American not on a government health plan a refundable tax credit. In today’s dollars, that would probably come to about $3,000 a year for an adult and about $9,000 a year for a family of four. This money could be used to purchase health insurance and make deposits to health savings accounts, from which people could purchase health services directly.
On the supply side, insurers would be free to offer products that meet a family’s medical and financial needs — as opposed to “Obamacare” insurance, with its outrageously high premiums and deductibles.
The bill was introduced by Rep. Pete Sessions (R-TX), chairman of the powerful House Rules Committee at the time, and Sen. Bill Cassidy (R-LA), who has become the go-to Republican on healthcare in the Senate. Sessions has now reintroduced an updated version of the bill, and if Republicans retake the House next year, it might get serious attention.
Under the bill, people who buy health insurance on their own would get the refundable tax credit directly and be free to shop in the individual market. People with employer coverage could keep it, but the way the government subsidizes group health insurance would change. As a practical matter, lower-income employees would get more help from government than they do today. High-income employees would get less.
Even with the Sessions tax-credit money in hand, how do we know that people shopping on their own would be able to afford decent coverage? Because we know what health insurance not subject to Obamacare regulations costs today.
According to eHealth, the average premium for Obamacare in 2020 was $5,472 for an individual and $13,824 for a family. But virtually no one is paying these premiums with their own money. Just about the only people who have Obamacare insurance are people who are getting large government subsidies, averaging 80% of the premium.
Even then, Obamacare plans have narrow provider networks and very high deductibles. A typical plan excludes the best doctors and the best hospitals, and the average deductible in 2020 was $4,364 for individuals and $8,439 for families.
In many states, people also have access to “short-term” insurance. Traditionally, this type of plan really was short-term, covering people who were transitioning, say, from school to work, or job to job. But today, people are coming to this market in droves (3 million strong, so far) because of the unattractiveness of Obamacare insurance.
Since it doesn’t face Obamacare regulations or most state government regulations, short-term insurance is the closest thing we have to free market health insurance. The cost is as low as one-fourth the cost of Obamacare, the deductibles are reasonable, and the networks are typically broader — allowing access to doctors and hospitals that won’t take Obamacare.
The short-term market is not perfect. It has glitches that need to be fixed, such as “surprise medical bills” that seem to affect patients everywhere. But it provides a window on how the world could be so much better.
In addition to giving people access to a health insurance market that is free to meet family needs, the Sessions bill has other interesting features. For example, it would allow employers to buy personal and portable health insurance for their employees. This is insurance that workers could take with them from job to job and in and out of the labor market.
It would allow employers to put money in accounts from which employees could select a “direct primary care” doctor who is available by phone, email, and Skype, even at nights and on weekends. And it would allow a special type of health savings account that would be available to everyone, without the requirement of a high deductible.
Instead of tinkering around the edges with Band-Aid fixes, Sessions has given us some bold ideas for a system that sorely needs reform.
John Goodman is the president and CEO of the Goodman Institute and a senior fellow at the Independent Institute.