NTF Issue paper: cong96.doc. 6-16.

BACKGROUND. Obama Care is a pain for providers and consumers, overseen by government wardens who ensure desirable behavior with subsidy carrots and mandate sticks.  The Republican-controlled Congress so far has failed to repeal Obama Care, which has devastated our health care systems and caused skyrocketing insurance premium rate hikes for working Nebraskans. Several free market proposals have appeared in Congress and from conservative think tanks. The political problem is that conservatives have not rallied behind a single plan that could attract taxpayer and congressional acclaim. Conservative Rep. Pete Sessions (TX.) and conservative Sen. Bill Cassidy (LA.), a practicing physician, have mobilized support for a free market solution with a single premise, to replace the expensive and ineffective individual and employer mandates and subsidies of Obama Care with a tax credit for health insurance. The title is the Health Empowerment Liberty Plan (HELP), HR.2254. Bill features would maximize competition in the insurance industry, offering an incentive for consumers to buy private coverage and for the industry to market quality products at reasonable prices, without huge taxpayer subsidies and bailouts. This plan based on the work of John Goodman, president of the Goodman Institute for Public Policy Research and a health policy adviser to conservatives, in conjunction with consultation with hundreds of businessmen, insurers, and physicians.

DETAILS. Individuals and families would have the freedom to use pretax dollars to plan and save for their health care futures.  Each individual could claim a $2,500 federal tax credit and $1,500 for every child, payable on a monthly basis either directly to an insurer or into an HAS. This credit, up to $8,000 for a family of 4, could buy employer-sponsored health insurance, go into a Roth Health Savings Account (HSA) to pay for deductibles or out of pocket costs, or accrue as a yearly payment. Funds from a Roth HSA spent on qualified medical expenses, including health insurance premiums, would not fall subject to taxation. HSA distributions not spent on qualified medical expenses would face a 10% excise tax. HSAs place doctors and patients in charge of health care and not a third party, whether the insurance company or the federal or state government. When people have an HSA, they become much more prudent in how they use the health care system and how they spend their health care dollars. Sessions would eliminate the individual mandate to purchase health insurance or face a hefty fine. By ending mandates, the cost of health insurance premiums and deductibles will decrease. Minimum coverage requirements would disappear. By ending requirements for what insurance plans must cover, HELP opens the free market for cheaper plans. The bill would cover more people than Obama Care and limit unwanted products that Obama Care plans mandate as covered. The objective is to eliminate several regulatory barriers that Obama Care has applied to the health care industry. The plan would end the health insurance burden for young, healthy people paying for horribly expensive and comprehensive policies to subsidize their elders. The insurance industry is angry, because young folks refuse to buy the required expensive policies, even when fined heavily for refusing to comply. More people will buy health insurance reasonably and attractively priced, and the industry will perceive them as profitable customers. Citizens could win reimbursement, if they opt to buy health care outside of the plans offered by their employer. Obama Care mishandled the hard-core uninsured, as emergency room visits actually increased after Obama Care began, and the cost of treating these uninsured in emergency rooms passed along to the insured via higher premiums. HELP will handle this cost. The unclaimed tax credits from those who do not buy insurance will fund a system for uninsured patients who cannot pay their bills for emergency service and not covered by Medicaid. Another benefit is ending onerous regulations to buy insurance during specific enrollment periods, creating much confusion and anger for insured during tax penalty calculations at the end of the tax year. With this universal tax credit and health status risk insurance, people could switch insurance at any time, with little difference between individual and group health insurance markets. New Obama Care enrollees no longer eligible for its financial subsidy. The uninformed could retain their Obama Care insurance but ineligible for the tax credit. It would ease regulatory burdens on doctors by encouraging them to start concierge practices and ease restrictions on doctor-owned health care facilities. Concierge physicians no longer would fear regulation as insurance companies. Patients could pay for these services from their HSA. No national restrictions on state and local walk-in clinics, free standing surgical centers, and other market-based services that in other ways prohibit the delivery of high quality care.

GOOD FOR EMPLOYERS. Employers no longer will suffer Obama Care as something to avoid like the plague and react by reducing employee hours or laying off staff. This proposal would eliminate statutory or regulatory barriers to letting employers give workers cash that the employees can use to buy their own individual coverage. Employers could offer higher wages by ending waste in their health care plans. Employers who remain with Obama Care would continue to suffer from its mandates and penalties.

EASY FOR STATES. This bill would permit states to opt out of Obama Care completely. Citizens, including Medicaid recipients, would become eligible for the tax credits. The bill would stop the fiscal bleeding by both states and citizens. The plan is simple to initiate in every state and will not require thousands of pages of regulations, an army of IRS agents, and a horde of Health and Human Services bureaucrats to administer. States could create their own systems and then publish prices for services purchased through an HSA or paid out of pocket, a better environment for consumers to find the most affordable coverage. States could establish open enrollment periods (including an initial open enrollment period without penalties), permit premium differentials based on age and other factors, and impose other requirements to stabilize their non-exchange market. States could establish a risk adjustment program that would apply to insurers in the individual market modeled initially on the Medicare Advantage risk adjustment program. This program addresses adverse and favorable selection regarding hard-core uninsured. A basic health insurance program would offer limited benefit health coverage. Basic health insurance would have low annual limits as specified by regulation. Although the bill does not say this specifically, this coverage could also have low cost sharing, because the insurer would have protection from risk exposure for high-cost claims. Many low-income people with limited assets might prefer low-cost-sharing, low annual limit coverage. Once an insured with limited benefit health insurance coverage reached the coverage limit, the insured would only be liable for the cost of subsequently incurred health care services to the extent that the bankruptcy valuation of the insured’s estate (taking into account exemptions allowed under the bankruptcy law) exceeded the annual limit on the policy. If an individual had a bankruptcy estate with $100,000 and coverage to $100,000, the individual would owe nothing. The proposal would limit the medical debt liability of patients with the limited-benefit plans who exhausted their benefits. Providers would have no obligation to treat individuals protected by this provision without advance or guarantee of payment once coverage was exhausted, except in emergencies. Although one would expect that providers would routinely obtain payment guarantees, thus evading the law’s protections, ethical criticism from abandonment would target providers who did so.  States would have authority to create their own “opt-out” catastrophic health program for uninsured individuals. The deregulated state insurance exchanges for the private market would appear more competitive than Obama Care exchanges that offer only one provider option, if still available, as insurance companies flee that system.

EFFECT ON MEDICAID/MEDICARE. Block grants to states would decentralize Medicaid, a GOP principle meant to give states more flexibility in how they manage this federal-state insurance program for the poor. States would receive bonus payments based on meeting performance goals. Block grants give a specific amount and no more to each state, which can redesign its program to work best for its poor. If a state spends more, 100% comes from the state treasury. If a state spends less, all savings go into the state treasury. Medicaid payments to states would base on their number of enrollees and permit beneficiaries to enroll in a private plan and make contributions to an HSA. The competitive attraction of private insurance, with more physicians, facilities, and access available, would shift people away from Medicaid into cheaper private plans, as prices dropped to meet the $2,500 tax credit threshold. Non-pregnant, non-disabled adults under 65 would become eligible only if their income did not exceed 100% of the federal poverty level, with current Medicaid population grandfathered in only if beneficiaries maintained continuous coverage. Medicare provisions would not change.

RATIONALE.  Every Nebraskan could make an individual health care choice, save money in a private account, and not forcibly dumped into Obama Care. Each enrolled covered by a separate insurance policy to cover the cost of major changes in health status, like developing high blood pressure. Everyone could buy insurance outside employer coverage. Employees could retain their plan when moving to a new job. No bureaucracy with which to contend. This plan is affordable, predictable, and competitive and will create a healthier population and stronger economy. Insurance companies would have incentives to offer competitive products at the $2,500 price point, permitting consumers to purchase insurance with minimal out of pocket expense. The tax credit would administer much easier than the Obama Care complex mandates and serve more effectively to extend coverage to the uninsured. Meanwhile, unhealthy consumers are proving far more expensive than Obama anticipated for insurance companies forced to enroll them. Insurance companies have much incentive to attract young customers and avoid the chronically ill, because healthy customers are much more profitable. Obama Care addressed this scenario with mandates forcing coverage for sickly patients without commensurate cost increases, forcing private insurers to lose millions on enrollees with existing unhealthy conditions and compensate by hiking premiums sky high on healthy consumers. HELP health status risk adjustments make sickly enrollees as attractive as healthy enrollees. HSAs are popular, and they inspire competition like the tax credits, offering great incentives for insurers to compete on cost and quality. They will eliminate consumer complaints about huge deductibles and copayments, which now make it tough for many enrollees to actually use their Obama Care policies and benefits.

SUGGESTED IMPROVEMENTS. Congressional conservatives have proposed additional suggestions. Adjust the amount of the credit annually for growth in the Gross Domestic Product. End forced coverage for dependents up to age 26, guaranteed renewal of premiums, and prohibition against preexisting condition exclusions. Roth HSAs only available to individuals who maintain “creditable coverage,” a form of public or private, group or individual health insurance coverage. Absent disability or death, if an individual with a Roth HSA became uninsured, contributions made during the time the individual lacked creditable coverage would become taxable and subject to a 10% penalty. Allow HSA funds to pay monthly fees for concierge medicine, expressly not considered health insurance under federal law. After an individual reached Medicare eligibility age, Roth HSA funds could go to any purpose without imposition of the excise tax. Grant HHS authority to waive provisions of state licensure or certification laws, if doing so would increase competition, reduce the cost, or improve the quality of health care. The plans should not cover abortion.

TAKE ACTION NOW. Thousands of Nebraskans still lack health insurance, either because they object to the mandate, do not qualify for premium subsidies, or cannot afford the deductibles. HELP would allow Nebraskans to take charge of their own health care and drastically lower the costs of their health insurance plans. This bill can pass in a Republican Congress. Contact your representative and 2 senators today to co-sponsor and support HR 2254. Email netaxpayers@gmail.com for Capitol Hill contact information.

Research, analysis and documentation for this issue paper done by Nebraska Taxpayers for Freedom, with express prior permission for its use by other groups in the NE Conservative Coalition Network. 6-16 C

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