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Improve and Repair: Three Ideas to Strengthen the ACA

Two years after Healthcare.gov’s disastrous launch, Obamacare is actually working well. Demagogues speak of repeal and replace, but the responsible path is to improve and repair the landmark law.

By Harold Pollack

Tagged Health Care

The Affordable Care Act (ACA)—aka Obamacare—has been on the books for almost six years now. After its famously rocky start just two years ago this week, the ACA has become a rather remarkable success. It has reduced the ranks of the uninsured by 15.8 million since 2013. Hospital expenditures for uncompensated care have plummeted in states that embraced the ACA’s Medicaid expansion. The new law is costing the federal government markedly less than was originally projected. From a patient perspective, average premiums and premium growth are proving manageable on the new marketplaces. American medical care is better and safer than it’s ever been, in part due to incentives enacted under the ACA.

Given these realities, the “repeal and replace” mantra of the right is increasingly irrelevant. The ACA has become embedded in the fabric of American life. This is therefore a good time to consider how the new law might be improved. This is an essential task. Although progressives (and really, anyone concerned with making the American health system more effective and more humane) should be proud that the ACA has helped millions of people, the new law has many shortcomings and glitches that must be addressed. Here are three simple ways the law could readily be improved:

1.) Allow employed parents greater access to the new marketplaces, and allow employers greater flexibility to offer—or not offer—health insurance coverage.

The ACA includes two major mandates, which are easily confused, but actually quite different.

The individual mandate requires most Americans to purchase health insurance coverage. This remains essential to maintain a stable insurance market. Without this mandate, people might take the calculated risk of “going bare,” in the hope that they could simply buy coverage if they became sick or injured.

The employer mandate, in contrast, requires firms with more than 50 full-time-equivalent workers to provide health insurance to employees and their children or face a penalty. This mandate has been a valuable transition measure to help stand up the new marketplaces. But as the marketplaces have come into their own, the employer mandate has become correspondingly less essential.

Congress should give employers greater flexibility to offer—or not offer—coverage, while allowing workers corresponding flexibility to obtain coverage on the new marketplaces with the same subsidies as other Americans who have the same taxable incomes. To be sure, such a move would cost the federal treasury, because low-wage workers would gain greater practical access to the subsidies available in the marketplaces. But relaxing the employer mandate would help many firms, while curtailing at least the theoretical incentive for some to reduce their full-time hiring. One interesting proposal (among many) would require employers to spend more than some minimum percentage of total payroll on health coverage, whatever their mix of full-time and part-time employees.

More importantly, Congress should repair the ACA’s “family glitch,” which prevents many low-income families from buying affordable coverage. Under the law, an individual worker and her family are eligible for financial help on the new marketplaces if she lacks access to “affordable” employer-sponsored coverage. Unfortunately, current IRS regulations deem such coverage affordable if the cost of covering only the worker herself is less than 9.5 percent of household income—whatever the cost to that employee of covering the rest of her family. Under this rule, a single mother of three earning $40,000 annually would be excluded from receiving any marketplace assistance as long as her employer offered a policy covering only herself that would cost her less than about $3,800, or 9.5 percent of her income, even though average 2013 private-sector employee contributions for family coverage were about $4,400. The rule would thus leave this worker—by any definition, struggling to get by—ineligible for any financial assistance. Until this glitch is fixed, many low-income workers are effectively denied access to affordable health coverage.

2.) Hire a new corps of 10,000 full-time federal enrollment assisters to help Americans enroll in Medicaid or the new marketplaces.

ACA proponents once spoke of the process of buying marketplace coverage as something as easy as selecting a book on Amazon.com. But as Steven Brill rightly argues in America’s Bitter Pill, this aspiration is unrealistic for many people. The challenge is most obvious for people with serious health problems or complicated life circumstances. But the opacity and complexity of the process burdens millions of others, too. Sifting through provider networks, pharmaceutical formularies, and related matters is too complicated a task for many marketplace shoppers. Worse, the process compels consumers to go through the same rigmarole every year.

Here is where navigators and other types of enrollment assisters enter the picture. When the ACA first launched, the federal government provided direct support for the new marketplaces. These funds supported many programs that help consumers with the mechanics of plan enrollment and marketplace subsidies, assist them in deciphering differences between plans, and support them in resolving problems with subsequent coverage. During the first open enrollment period, there were some 4,400 assister programs with more than 28,000 staffers and volunteers who helped nearly 11 million consumers.

These assistance programs were stretched thin. And as direct federal support for the new marketplace dwindles, these programs are now stretched even thinner. Many consumers have been left on their own to navigate the daunting process of buying insurance. This has proved a continuing challenge in the bluest states, and an even greater one in states where governors opposed the ACA and thus have little stake in its success.

The federal government should do more. A permanent, well-trained, federally funded corps of 10,000 additional full-time enrollment specialists would augment existing efforts. The annual costs of such a corps would likely exceed $500 million. That’s still less than $50 for every participant in the new health-care marketplaces.

3.) Offer “public option” early Medicare coverage within health insurance marketplaces to people over 60.

Medicare enjoys unique bargaining power not only in competing with insurers, but also because it can sit across the table from hospitals and physician groups, pharmaceutical firms, medical supply companies, and more. Fear of Medicare’s potential bargaining power sent shivers through the entire supply side of the medical economy during the 2008 election and the ensuing debate over health reform.

I and many other liberals were disappointed that the ACA failed to include a Medicare-based “public option” within the new marketplaces. Simply put, too many interest groups had too many reasons to fear the public option during the tough negotiations leading up to health reform.

Despite the political challenges, it’s time to resurrect the public option, which seems more feasible and necessary today than it did six years ago. We can now debate the public option on its merits, without worrying about its impact on the all-too-important sixtieth senator’s vote for the ACA. Although the practical challenges are great, a well-designed public option might seriously compete with private coverage. It would also impose needed price discipline on providers.

Consider consumers’ predicament in Palo Alto or Pittsburgh, where a few prestigious tertiary care centers dominate the local health-care market. If a few insurers dominate, consumers will pay high prices because there is too little payer competition. Yet if many insurers compete for local business, their very fragmentation also facilitates high insurance premiums because they lack the market power or public credibility to strike hard bargains with (say) Stanford or the University of Pittsburgh. Only Medicare—with its giant market power—can credibly negotiate with these flagship providers.

One initial step would be to offer a public plan to people over the age of 60, a coverage group whose needs resemble those of traditional Medicare recipients. A public option would be a boon to many near-retirees who face rather high premiums yet earn too much to receive marketplace subsidies.

Each of these proposals must be developed in greater detail. (Watch for more on this front from me and my collaborator Timothy Jost in forthcoming work commissioned by the Century Foundation on next steps in health reform.) These proposals underscore what still needs to be done. Republicans still attack the ACA as if it can be repealed or replaced, when it cannot. Democrats still defend the ACA as if it is in mortal danger, when it is not. Health reform is here to stay.

As President Obama prepares to leave office, improve and repair should be the watchwords in addressing his principal domestic policy achievement. It won’t be easy, but nothing in the politics and policy of ACA ever is.

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Harold Pollack is Helen Ross Professor of Social Service Administration and faculty chair of the Center for Health Administration Studies at the University of Chicago.

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