Ever since efforts to legislatively repeal Obamacare ended ignominiously with a “thumbs down” from the late Sen. John McCain on the Senate floor, the Trump administration has been hard at work doing what they can to give families more and better healthcare choices than what Obamacare saddled them with. In so doing, they have created several welcome escape hatches from Obamacare, or what Phil Kerpen from American Commitment calls “Making Obamacare Optional.”
It goes without saying that Obamacare has been a lousy deal for families like mine which are forced to buy non-employer Obamacare market health insurance but make too much money to qualify for Obamacare’s tax credit to subsidize premiums. Between 2013 and 2017, average premiums for Obamacare plans doubled in price. As a result, Obamacare insurance plans are totally unaffordable. For example, my family is currently enrolled in one of the least expensive options in Virginia, and we have to pay $16,000 per year in premiums for “coverage” which begins after meeting a $13,000 deductible. Talk about junk insurance.
Step one in helping families like mine get an alternative to this health insurance nightmare was repealing Obamacare’s individual mandate to purchase Obamacare insurance. It’s not widely reported, but Congress permanently repealing the Obamacare individual mandate was a seminal plank of the Tax Cuts and Jobs Act. Doing so opens up all sorts of alternative options for families to consider. Without repealing the mandate, a family choosing to purchase some other form of insurance (or none at all) would face an excise tax penalty of 2.5 percent of their income ($2,500 for a family making $100,000 per year). The penalty goes away for good in January 2019. In the meantime, the administration has announced that hardship waivers from the individual mandate will be easier to qualify for in 2018, the last year of the mandate’s life.
Repealing the individual mandate gave the Trump administration the opening to provide more choices for families. This has taken three forms: association health plans, short-term limited duration plans, and health reimbursement arrangements.
Association health plans are health insurance plans that can be sold across state lines. Families can either join a regional AHP or one with a common bond like a professional association. In either case, this will allow people to join with others in purchasing health insurance and benefit from the economies of scale that broader purchasing pools create. For example, an individual restaurant owner might have to pay a lot for an insurance plan just for his family, but might be able to pay a lot less if the National Restaurant Association has an AHP that thousands of restaurant owners can join.
Another option available is short-term, limited duration plans. These plans have been available for decades as “bridge” health insurance for those between jobs, etc. There is no reason why, however, they cannot be used for longer than a few months. In fact, up until the Obama administration capriciously outlawed the practice, many short-term plans could extend for as long as 364 days. The Trump administration has restored this longstanding practice and also allowed them to be renewed for up to three years. This essentially creates a parallel, unsubsidized individual insurance market.
AHPs and STLDPs don’t have to cover all the gold-plated, expensive options that Obamacare plans have to cover. And that’s ok. Blue-check-mark elitist Twitter accounts will tell you that this is a downside, but what kind of paternalism inspires that sentiment? More comprehensive Obamacare plans are also available to people if they want them and want to pay more for them. Alternatively, AHPs and STLDPs will offer something much closer to the insurance people used to have before Obama fibbed about them keeping their plan if they liked it. It beats paying for a gold-plated plan that covers everything, but at the cost of mortgage-sized auto debit from your bank account every month and a deductible you’ll never hit absent a major hospitalization.
What about people who want to get health insurance at work? In addition to large group plans, small group plans, and self-insured plans, the Trump administration just this week also expanded the ability of employers to use health reimbursement arrangements. Under an HRA, an employee can purchase insurance in the individual market (be it an Obamacare plan, an STLPD, or an AHP), and their employer can reimburse them for premiums on a tax-free basis. This puts individual market coverage on the same footing as employer-provided coverage. In addition, employers can reimburse tax-free up to $1,800 per year for sidecar coverage like dental and vision plans via an HRA.
The Trump administration is so committed to giving people choices and options, it is even making Obamacare more palatable. It's done such a good job putting in best practices and common sense reforms that Obamacare premiums will rise next year at a rate of less than four percent, a huge improvement over the double-digit annual premium spikes we’ve had to endure.
Additionally, just this week, the administration expanded the ability of states to design state-specific versions of Obamacare better tailored to their own state. For example, the Obamacare tax subsidy might be ill-designed in a state where income is higher or lower than the national average. Truly needy or sick residents might be able to get better coverage if a state could tailor Obamacare for them. These so-called “1332 waivers” have always been part of the Obamacare law, but the Obama administration made them practically impossible for states to use. The Trump administration is finally letting states innovate inside Obamacare, which is of course all to the good.
When you step back and put it all together, the “Obamacare Optional” agenda of more choices and more affordable healthcare is a very robust one. Made possible by repealing the individual mandate, this series of regulatory proposals offers real hope of making a difference for families. Going forward, it’s important to build on this success and give people budget-friendly choices that no longer put the government between people and their doctors.
Ryan Ellis (@RyanLEllis) is president of the Center for a Free Economy.