Monday, October 21, 2019

Joe Biden's Health Insurance Plan Would Fix the Individual Health Insurance System

IF the Democrats capture the White House, keep the House and take over the Senate, no matter who they elect as President, this Biden health care outline, not Medicare for all, will likely be the plan Democrats embrace in 2021


The Biden health care proposal directly takes on the big things that haven't worked in Obamacare.
Here are the things that are most broken in Obamacare:
  • The individual health insurance premiums and deductibles are, and have from the beginning of the program, been unaffordable for many but the most subsidized consumers.
  • That has led to dramatic anti-selection in the risk pool––particularly among those who get little or no subsidy. 
  • That in turn has led to a cycle of ever higher and more unaffordable premiums and deductibles––it isn't uncommon to now see unsubsidized family premiums in the $15,000 to $20,000 annual cost range with deductibles of $7,000 per person.
  • That has led to dramatic shrinkage in the number of those covered in recent years––particularly among the unsubsidized where the number of those covered fell by 40% during 2016 and 2017.
  • To counter substantial underwriting losses early in the insurance exchanges, the insurance companies dramatically increased premiums until the most highly subsidized and premium insulated consumers dominated the enrollment and the carriers had the premiums high enough that they made record profits––they are slated to rebate $800 million this year because they exceeded the law's profit limitations.
What has worked is the Medicaid expansion where 12 million people have gained coverage in the 33 states that have expanded it––likely more states will do so shortly because public support in one traditionally Republican state after another––such as Virginia, Nebraska, Maine, Idaho, and Utah––has grown.

With that backdrop, here is what Democratic presidential candidate Joe Biden is proposing.

First, he is proposing to fix what he sees as wrong with the Obamacare individual health insurance market––not proposing a single-payer Medicare for all plan and thereby not doing away with employer-based care or tinkering with Medicare as we now have it for seniors.

Biden has a comprehensive plan to make the Obamacare individual market policies more affordable.

He would:
  • Base policy subsidies on the more expensive "Gold" plans that have relatively low deductibles, rather then the "Silver" plans that have higher deductibles. This would dramatically reduce the deductibles and co-pays subsidized people now face.
  • Make most families and individuals eligible for premium subsidies by removing the current cap limiting subsidies to only those who make less than 400% of the federal poverty level––under his plan all individual market consumers would pay no more than 8.5% of their income on health insurance premiums. 
  • Make coverage available to the 5 million low-income consumers in states that have not expanded Medicaid by offering access to a federal premium-free option.
The Biden plan directly takes on the most problematic parts of Obamacare by making individual market coverage affordable––particularly for the middle-class who are now the ones most hurt by the existing program.

The fundamental reason the Obamacare individual market policies have seen a long succession of more and more unaffordable rate increases is because of "anti-selection"––as the prices increase more, and more healthy people find the coverage unaffordable, and as a result take the risk of dropping out, leaving the sickest participants behind, and the prices even higher.

A healthy and efficient risk pool requires about 75% of the market to participate in order to ensure there are enough healthy people paying into the pool to pay the claims of the sick. It is likely that as much as 40% of today's high rates are directly the result of premium loading to counter the fact that less than 40% of the eligible market ever enrolled. That loading essentially amounted to the big Obamacare rate increases in recent years that were in excess of baseline health cost inflation.

Ultimately, as enrollment would ramp up under the Biden plan to an efficient level, the anti-selection premium-load carriers have had to apply to Obamacare in recent years, because healthy consumers fled the program, could be reversed as those same healthy consumers returned.

That is a process that would likely take a few renewal cycles as the risk pool improved and health plans were able to recognize better results. And, I would expect Democrats would reinstate an incentive for people to carry insurance as they have done in a number of Democratic states. Separately, premiums would continue to rise to offset annual health care inflation.

Biden also deals with a number of other health care system issues:
  • Medicare could negotiate directly with drug companies for lower prices in that program.
  • Launch prices for drugs that face no competition would have their Medicare and individual market prices tied to a process called "external reference pricing"––based on what a market basket of other nations are willing to pay thereby bringing U.S. prices more in line with what is paid in other industrialized economies.
  • Biden would increase the community health center budget to improve care for underserved populations.
Biden would pay for his plan by:
  • Eliminating the 20% flat tax on capital gains for those with incomes over $1 million and have them pay the top tax rate of 39.6% on capital gains.
  • Roll back the Trump tax cuts for the "very wealthy" and restore the top bracket to 39.6%.
Biden is also proposing a public option to be marketed alongside the private individual health insurance options in the insurance exchanges:
"Whether you're covered through your employer, buying your insurance on your own, or going without coverage altogether, the Biden Plan will give you the choice to purchase a public option health insurance option like Medicare...by negotiating lower prices from hospitals and other health care providers."
Biden goes beyond the historic definition of a public option by making it available to people beyond the individual health insurance market––even letting those participating in employer-based care to opt out of their coverage to take advantage of it.

This is the most controversial part of his plan. Insurance companies, hospitals, doctors, and other health care providers are likely to cheer his proposed efforts to make individual market policies more attractive––and thereby enable insurers to sell more policies in a more stable market and have those private policies pay providers for more care at commercial reimbursement rates.

But effectively putting Medicare in direct competition with the insurance companies and paying providers at Medicare rates––about 50% lower than commercial rates for hospitals and 20% less on average for doctors, and much less for certain specialties––will be a much heavier political lift.

But, most Democrats now regret that they didn't include the public option when they passed Obamacare in 2010 and found themselves in bed with the insurance industry as Obamacare floundered in the face of unaffordable premiums for the middle-class.

If Democrats can't get to Medicare for all in 2020, and as I said in an earlier post I don't believe they can, they will surely settle for nothing less than a public option.

IF the Democrats capture the White House, keep the House and take over the Senate, no matter who they elect as President, this Biden health care outline, not Medicare for all, will likely be the plan Democrats embrace in 2021.

More on how I see the public option playing out if Democrats are able to capture the White House, hold the House, and gain a working majority in the Senate, in my next post.

You might be surprised by my conclusions.

My post regarding the public option

Other related posts:

Obamacare is "Stable" at an Incredibly Unstable Place

 

There is Now No More Support for a Medicare For All Single-Payer Health Care Than There Was in 1977, or 1993, or 2009

 

Medicare for All––the Bernie Sanders and Elizabeth Warren Health Care Plans

 

 
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