Are the Obamacare wars over? The leading GOP presidential candidates have been spending all of their time sniping at each other over immigration, and talk of doing away with Obamacare has been largely relegated to policy briefs that hardly anyone reads. Granted, Republicans in Congress are currently putting the finishing touches on a bill that will repeal some of Obamacare’s more unpopular provisions, like the individual and employer mandates and the Cadillac tax on high-cost health plans. But no one really believes that President Obama will let the House undo his signature domestic policy achievement. Most Obamacare opponents appreciate that to repeal the law outright, you’d need, at a bare minimum, a Republican president and Republican majorities in the House and the Senate. To really get the job done, Republicans would probably need a filibuster-proof majority in the Senate. And that’s just not going to happen.
Moreover, repealing Obamacare without replacing it is a nonstarter, because doing so would mean disrupting the insurance arrangements of millions of people, and the horror stories that would follow would plague Republicans for years. Though there are a number of semiplausible Obamacare replacement plans floating around, like the Patient CARE Act and erstwhile presidential candidate Scott Walker’s health reform proposal, conservatives are sharply divided over what such a plan should look like. Basically, purists want to spend as little as possible on a replacement plan while pragmatists are open to spending a bit more to ensure that large numbers of people don’t lose their coverage. For now, at least, the conservative dream of completely undoing Obamacare and starting over from scratch appears to be slipping out of reach.
But it’s not just conservatives who have a problem with Obamacare. Just ask Bernie Sanders and Hillary Clinton, both of whom have had a lot to say about how they’d overhaul Obamacare. Sanders favors scrapping Obamacare’s convoluted structure outright and replacing it with a Medicare-for-all single-payer system. Clinton wants to make Obamacare’s benefits more generous while also getting rid of the Cadillac tax, one of the law’s chief revenue-raising measures. Wonks tend to like the Cadillac tax, which is designed to discourage employers from offering overly generous health insurance plans that give consumers little incentive to seek out cost-effective care. The liberal Center on Budget and Policy Priorities recently rallied dozens of economists on the left and right to make the case for the tax. But organized labor hates it, for the simple reason that securing expensive health plans is one of the main ways unions demonstrate their value to their members.
Whether the next president is a Republican or a Democrat, Obamacare is going to be overhauled. The reason is that in its current form, it is not serving middle-class families all that well. Back in June, Robert Laszewski, a close observer of the insurance industry, pointed out that among people eligible for the Obamacare exchanges, it is only the poorest and sickest who’ve been signing up for coverage in large numbers. For example, 76 percent of eligibles earning between 100 and 150 percent of the federal poverty level have enrolled while only 20 percent of eligibles earning between 251 and 300 percent have done so. This is despite the fact that the law uses all kinds of carrots (subsidies for those who can’t afford coverage) and sticks (penalties for those who forego coverage) to get uninsured people to sign up. The problem, according to Laszewski, is that while Obamacare-compliant plans are a good deal for the poor, who enjoy generous subsidies, and the sick, who get far more in benefits than they pay in premiums, they appear to be a bad deal for everyone else.
Recently, the economists Mark Pauly, Adam Leive, and Scott Harrington released a working paper that estimates how much better or worse off “non-poor” uninsured people’s earnings would be after buying Silver or Bronze plans on the Obamacare exchanges. Among other things, they took into account the average financial burden involved in buying coverage as well as the value associated with consuming more medical care. What they found is that while most uninsured people making between 138 and 250 percent of the federal poverty level seem to be somewhat better off, a substantial majority of those earning more than 250 percent seem to be worse off. Essentially, most of the better-off uninsured are paying far more for their Silver and Bronze plans in premiums than they are getting out of them in benefits.
The result is that millions of middle-class people are choosing to go without coverage, despite the risk that entails. It turns out that it is very hard to force people to buy products that they don’t want. True, the IRS could get much tougher about forcing the uninsured middle-class to pay penalties, and Obamacare’s champions could get behind making these penalties more onerous. But does anyone see this get-tough approach as a huge vote-winner? As long as middle-class voters don’t believe that Obamacare is benefiting them, Obamacare is going to be politically vulnerable.
The time has thus come for a temporary Obamacare truce. Conservatives and liberals have very different gripes about Obamacare. On the right, critics fear that it will cause federal spending to skyrocket over time, and that it is stymieing cost-saving, quality-enhancing innovation with its stringent regulations. On the left, there is a sense that Obamacare hasn’t gone far enough to expand coverage and to protect the interests of its poorest beneficiaries. What both sides have to confront is that their best-case scenarios—starting from scratch with a free-market approach for conservatives, embracing single-payer for liberals—aren’t going to pan out any time soon. To achieve their goals, both sides will have to give a little, at least for now.
What might an Obamacare truce look like? Rather than fight the fact that the Obamacare exchanges have become a refuge for the poor and the sick, Republicans and Democrats should embrace it. The central elements of the Obamacare truce would be to repeal the unpopular individual and employer mandates, which are meant to corral people into buying insurance, and to deregulate individual insurance plans that are not sold on the exchanges. (Right now, all individual health insurance plans must be compliant with Obamacare’s insurance regulations.) If you want to buy an Obamacare-compliant policy, you’d be welcome to buy one on an exchange. But Obamacare’s insurance regulations and its premium subsidies would only apply to plans sold on the exchanges. If you choose to buy private insurance not on an exchange, your plan would be regulated by your state government, and you wouldn’t be eligible for any financial assistance. Premiums for off-exchange plans would tend to be much lower than for Obamacare-compliant plans, as they’d offer fewer free services upfront and they’d skimp on Obamacare-mandated benefits that many consumers don’t want or need. Yet because these plans are better-targeted to meet the needs of the middle-class unsinsured people who are avoiding the Obamacare exchanges like the plague, there is good reason to believe that coverage levels would increase. That’s an outcome both the left and the right should celebrate.
In one fell swoop, this Obamacare truce would transform the regulated exchanges into high-risk pools that would serve the people the unregulated private insurance market can’t serve well. Conservatives can talk a big game about replacing Obamacare with high-risk pools. Yet they often underestimate how expensive these high-risk pools would be and how difficult it would be to get them off the ground. The Obamacare exchanges are perfectly designed to serve this function. The downside, of course, is that because the exchanges would serve a poor and sick population, the average cost of serving beneficiaries on the exchanges would be high. This in turn means that insurers would charge very high unsubsidized premiums for exchange plans. But these high unsubsidized premiums would affect relatively few people, as almost everyone who isn’t eligible for premium subsidies would flock to cheaper, lightly regulated off-exchange plans. (One big exception would be states like New York that had heavily regulated insurance markets even before Obamacare. This is an argument for allowing consumers to buy off-exchange insurance policies across state lines, so that New Yorkers could take advantage of lightly regulated Texan policies, or for states like New York to embrace deregulation.)
Liberals will find much to dislike in this Obamacare truce, as it will allow millions of Americans to buy the policies that they deride as “junk insurance.” Yet it will also protect the role of the exchanges in offering low-income households and the chronically ill affordable insurance coverage. Conservatives will bristle at any plan that entrenches any aspect of Obamacare. Nevertheless, they should appreciate that by deregulating the individual insurance market away from the exchanges, the truce will give insurers the freedom to devise plans that better meet the needs of their consumers. And by limiting premium subsidies to the exchanges, it will ensure that subsidies are narrowly targeted to the people who need them most.
One thing I can promise you is that there is no major Republican or Democratic presidential candidate who will embrace this Obamacare truce. They’d be crazy to do so, as activists on both sides still want to believe that they can achieve a total Obamacare victory. By the time the next president takes office, however, I suspect that this truce will look very attractive as the number of middle-class uninsured people remains stubbornly high. There will still be plenty for the right and left to argue about, from the future of Medicare and Medicaid to how exactly we should pay for everything. Why not agree that we’re not going to yank insurance coverage away from the people who’ve gained access to it over the past few years, and find a way to repair the broken system we have?