Obamacare repeal and replacement: The case of moving quickly

Presidentelect Donald Trump has repeatedly promised voters he will repeal and replace the Affordable Care Act. Now he and his congressional allies have an obligation to fulfill that promise.

Despite some hysterical claims to the contrary, Congress isn’t going throw millions of Americans out of coverage. Under Obamacare, most newly insured people have been enrolled in Medicaid, a welfare program, while the bulk of those covered in the troubled exchanges are getting generous taxpayer subsidies. Thus far, at least, congressional leaders appear focused on avoiding further disruption and securing a smooth transition, particularly for those enrolled in the exchanges and Medicaid.

Meanwhile, there is another, more pressing, problem. There are more than 10 million people in the individual market who get no ACA taxpayer subsidies for their insurance yet are being hit with staggering premium increases.

Moreover, there are also approximately 15 million Americans in the small group markets — small-business employers and employees — who are likewise facing escalating premiums.

In the Obamacare exchanges, the average increase in the benchmark plan premium will be 25 percent for 2017 in the 39 states using the HealthCare.gov platform, and the exchange deductibles are positively breathtaking. For plans with the lowest premium costs, the so-called bronze plans, the average deductible for single coverage is $6,000 annually, while family coverage climbs to more than $12,000.

Premium subsidies aren’t available for many in the middle class. A single person making more than $47,000 is out of luck for help in offsetting her premium costs. And if she makes roughly $15 an hour, she will likely be ineligible for cost-sharing subsidies.

Trump and Congress are inheriting unstable insurance markets. In droves, millions of Americans expected to sign up in the exchanges have not; middle class folks, especially young folks, clearly don’t see much value in high-priced insurance with crazy deductibles.

So a larger proportion of older and sicker people, whose claims costs are often higher than their premium contributions, are driving costs higher. And the individual mandate penalty, which is riddled with exemptions, isn’t much of an incentive to buy Obamacare coverage.

There has also been the steep reduction in health plan competition since the inception of the exchanges in 2014. By underpricing the product, perhaps in hopes of federal bailouts, and then failing to recover sufficient revenues, many of the plans have been losing money, and major plans have withdrawn from the exchanges altogether.

The Obama administration’s political remedies to enhance competition in the exchanges have either failed or become another excuse for more taxpayer bailouts. Note the stunning collapse of the co-op program — 18 out of 23 have disappeared from the markets — and the equally important but overlooked dismal performance of the federally sponsored multistate plans administered by the U.S. Office of Personnel Management. They enroll just 440,000 people, or 4 percent of the entire exchange population.

The new president and Congress must act decisively to stabilize the insurance markets that exist as well as lay the groundwork for the improved markets they envision. Through a combination of early administrative and legislative actions, they can reduce costs and stabilize the insurance markets. Among the many other provisions to be enacted or implemented, they must do at least the following:

• Reduce the costs in the individual and small group markets by liberalizing insurance rules, particularly the federal benefit and insurance rating rules, which artificially drive up premium costs for young families.

• Reduce the costs of employer-sponsored insurance. Administratively, this can be done by liberalizing the “grandfather rules,” thus allowing employers greater flexibility to alter or modify their plans, delaying the employer mandate reporting and penalty requirements. Legislatively, Congress should kill the employer mandate entirely.

• Provide individual tax relief for Americans buying health insurance if they do not or cannot get health care coverage through the place of work.

Trump and Congress must move quickly to prevent even greater disruption to the badly damaged health insurance markets. While Obamacare was designed to insure the uninsured, now Obamacare costs threaten to un-insure those who are insured. It’s time to act.