The Affordable Care Act’s regime of regulations, penalties, mandates and subsidies has accomplished a remarkable feat: It has produced unaffordable insurance coverage that often doesn’t finance care for those who need it most.
The federal government should therefore give states flexibility to permit the sale of alternative policies.
Let’s start with premiums. A 40-year-old selecting the cheapest possible policy on the ACA marketplaces pays an average annual premium of more than $4,000. For a family of three, premiums for the lowest-priced plans average more than $10,600. The deductible for such coverage averages over $12,000, meaning that the family would have to run up more than $22,000 in medical bills before they broke even on their insurance outlays.
And those are the costs for in-network services. The costs involved in getting out-of-network care have rendered the “essential health benefits” an empty promise for many of the sickest patients. For example, MD Anderson Cancer Center in Houston is not part of any ACA network in Texas. For a patient with an ACA plan to be treated there and have the coverage be considered in-network, he or she must have a referral and convince their plan to grant a one-time exception. Lots of luck.
Getting treated by non-network providers is pretty much indistinguishable from being uninsured. Your ACA policy won’t pay a dime. And the thousands—or tens of thousands—of dollars you spend on care won’t count toward your deductible or out-of-pocket spending caps.
There should be fewer surprises for purchasers of the short-term plans. The administration’s proposed rule requires insurers to include a disclaimer informing consumers that their plan isn’t required to cover federal “essential health benefits.”
ACA enthusiasts insist that consumers would be harmed if states were allowed to deviate from the fine-sounding benefit package and other regulations written by lobbyists and their friends in the Obama administration.
They fear that if states permit insurers to offer alternatives to ACA policies, many will choose the alternative. It is a telling admission. If ACA policies are as good as their advocates say they are, why do they fear that consumers, given the choice, will flee them?
ACA advocates also believe they must save consumers from themselves by restricting their choices. The ACA coerced state health-insurance regulators into enforcing federal regulations. Intoxicated by their own ideas, the architects argued that regulations that (allegedly) worked in Massachusetts would work in Mississippi and Montana. That has proved false.
Just as misguided is the criticism that the new short-term plans aren’t really short term. The rule the Trump administration is considering merely reinstates the regulation that was in effect for 20 years—from 1996 until Jan. 1, 2017—and that defined short-term plans as coverage whose duration was “less than 12 months.” No court enjoined that rule.
And let’s not characterize short-term plans as unfair because they may appeal to healthy people. ACA policies have always attracted the sick and repelled the healthy, creating unstable risk pools and unaffordable premiums. Giving healthy people the option of affordable coverage will induce some to gain coverage who would otherwise have been uninsured.
The Affordable Care Act broke the insurance markets. Repairing them will require flexibility and choice—flexibility for states to deviate from the ACA’s regulatory scheme and choice for individuals and families to select the coverage that is best for them.
This piece originally appeared in the Wall Street Journal on June 24, 2018