© Josh Sager – January 2017
The inauguration of Donald Trump paves the way for the GOP to repeal and replace the Affordable Care Act (also known as ObamaCare). While the exact timeline for this repeal and replace process is unknown, we will likely see it start in the next few months.
In preparation for the coming flood of GOP talking points, aimed at selling their “terrific” replacement for ObamaCare, I have identified several key phrases and translated them from right wing political-speak to plain English. Understanding these key phrases is absolutely vital to avoid being tricked into supporting a plan that will not serve the needs of the American people.
“Increase consumer choices”
While increasing consumer choice initially sounds like a good policy, this talking point is often used to cover an unpleasant reality—while there may be more “choices” in the markets, this doesn’t mean that these new choices provide a decent level of care.
If Republicans deregulate health insurance markets and let insurers offer plans which don’t meet the current minimum coverage requirements or have extremely high deductibles, this will let insurers add numerous substandard plans to the current options. These plans would cost significantly less than existing ones and technically increase the number of choices in the marketplace, but they would do little to serve those who bought them. Worse still, these plans create the illusion that people are covered and many will only realize how lacking their plan is once they truly need it to pay for a catastrophic illness.
“Reducing Red Tape and onerous regulation”
The GOP has claimed that regulations on insurers increase prices and don’t actually help consumers. While they often decry “red tape” the GOP is intentionally vague on what specific regulations they will remove. Here are just a few examples of regulations that are part of the ACA and would likely be eliminated if the law is repealed:
- The 80/20 rule (medical loss ratio), which ensures that insurers must spend 80% of your money on delivering care rather than paying executives and stockholders;
- The minimum essential coverage requirements that prevent insurers from selling useless policies which don’t pay for cancer, diabetes, or any other expensive ailments;
- The requirement that insurers let children stay on their parent’s plan until the age of 26;
- The regulations that bar insurers from dramatically increasing your premiums without any legitimate reason (rate review);
- The ban on recession (letting insurers take your money and retro-actively cancel your policy once you get sick, based upon paperwork errors) and requirement that insurers offer plans to people with pre-existing conditions.
The term “red tape” is often used as a buzzword to lump together seemingly pointless regulations with absolutely vital ones, like the ones listed above—it is a bait and switch that helps pro-corporate politicians serve their corporate allies while appearing to be in favor of more efficiency.
If the GOP repeals the ACA, each of the regulations I mentioned would be eliminated unless it is explicitly included in the GOP’s plan. As they have yet to produce a specific plan, there is no way to know which of these regulations would be cut, and which may survive.
“Creating more competition by removing the lines between states”
Currently, insurers can’t sell their product across state lines, confining them to state insurance markets. In most states, these markets are extremely consolidated and there is little competition between private insurers (e.g. 94% of the private individual insurance market of Rhode Island is controlled by Blue Cross Blue Shield). This consolidation in the market gives insurers a large amount of market power and means that there is little incentive for insurers to innovate or cut prices. For more information, please follow this link to a report I produced on this subject for Community Catalyst.
Republicans claim that removing the barriers between state markets will increase competition and force insurers to reduce prices while increasing quality. This claim is not accurate and simply removing the barriers between markets could result in a regulatory race to the bottom. Rather than promoting competition, this plan would cause insurers to move to the least regulated and taxed state, from which they can sell their plans to the rest of the nation.
Enacting this policy would create incentives for states to deregulate insurers so that they move and provide that state with an increase in tax revenue. This dynamic is well established and has been observed at the national (e.g. US banks and mailing companies moving to Delaware) and international (e.g. corporate inversions through Ireland) levels. It would result in higher profits for insurers, job losses in states that refuse to deregulate, and stagnation in insurance quality.
“Allow Americans to establish tax-free health savings accounts”
Health savings accounts (HSAs) let individuals put aside money in a tax sheltered account, specifically to fund future medical expenses. This is a decent option for Americans who have a lot of disposable income, but is completely inadequate for the average American. An expensive illness (e.g. cancer or a degenerative neurological disease) can run up medical bills of hundreds of thousands of dollars, and there is no way for a middle class worker to pay for this, even with the tax considerations included in HSAs and discount prices available to direct purchasers.
A system relying upon HSAs has a massive coverage hole that encompasses virtually all of the middle class—the very wealthy benefit from the tax reductions that come from putting money into their HSA, while the poor rely upon Medicaid, thus have access to insurance. Everybody who falls between these two groups lacks the money to fully fund their care and doesn’t have guaranteed access to private insurance. Even where a middle class worker has a high deductible insurance plan, the HSA funds are unlikely to pay for the costs of a severe illness (assuming that the illness is even covered by the plan if minimum essential coverage regulations are eliminated).
“Create public high-risk pools for the sickest Americans”
This policy would create public insurance pools for the sickest Americans who have the highest costs and most need for care. Rather than expecting private insurers to cover these expensive consumers, the public pool would pick up the tab using taxpayer dollars, leaving the least expensive consumers for the private market.
Care pools function by aggregating risk (healthy people who don’t need expensive care pay for sick people who need a lot of care) and segregating all of the most expensive patients into the government pool, while letting the private insurers care for mostly healthy and least expensive people, would dramatically increase the profits of these private insurers; conversely, the taxpayers patients who are expected to pay into the high risk pool would have to pay significantly more.
Put simply, this policy is a way of subsidizing private insurers and increasing their profits. There is no legitimate reason to create these pools without opening them to all consumers, creating a public option with a more balanced risk pool. Of course, the GOP is extremely unlikely to implement such a public option, as it would provide a legitimate alternative to private insurers and drive down overall insurance prices.
“Ensure that no American is denied life-saving treatment”
This talking point is most commonly used as a disingenuous attempt to assure Americans that they won’t be denied care, even if they are worried about not being able to afford it. All this statement means is that the GOP doesn’t want to repeal the Reagan-era Emergency Medical Treatment and Active Labor Act (EMTALA) which requires that hospitals provide emergency care to anybody who needs it.
EMTALA requires hospitals to stabilize and save the life of anybody at their doors, but it does nothing to help people with chronic conditions, nor does it prevent you from getting bankrupted due to medical bills. In short, if you get into a car crash, EMTALA will guarantee you emergency care, but, if you have diabetes or health disease, you will have to wait for a life-threatening event to get care.