This article originally appeared in the Wall Street Journal on October 29, 2017.
The Senate has a good chance of passing a sensible bill, put forward by Sens. Lamar Alexander (R., Tenn.) and Patty Murray (D., Wash.), to stabilize American health-insurance. But to get the bill through the House, Democrats will need to accept reasonable suggestions from Republicans.
In response to Republican requests, the Alexander-Murray bill requires faster review of state requests for waivers from Obama Care’s insurance mandates, as well as more-flexible standards for approving these requests. Such state waivers would still be barred from eliminating ObamaCare’s protections for pre-existing conditions.
Republicans also won a major expansion of health-care plans with very high deductibles, geared mainly for catastrophic insurance. ObamaCare allows such catastrophic policies to be bought only by adults under 30 or with a hardship exemption. Under the new bill, all Americans could buy low-cost, catastrophic insurance.
Democrats successfully pushed for the bill to include $106 million in federal funds to encourage participation in the coming enrollment period for individual policies offered on Affordable Care Act exchanges. These funds would nearly replace the $116 million for outreach that Mr. Trump is cutting from the administration’s budget.
In the most significant change, Democrats won a two-year guarantee of federal subsidies for insurers, money that will reduce deductibles and copayments for low-income consumers. Two lower courts have questioned the legality of such payments, because they were not expressly appropriated by Congress. To satisfy President Trump’s concerns about double dipping by insurers, the bill must make clear that these subsidies will all be passed on to consumers.
This is a solid start, but given the GOP’s slim majority in the Senate and its fractious House majority, the bill should be expanded to include other reasonable reforms previously suggested by Republicans.
First, the bill should increase the threshold for requiring employers to offer health benefits to 200 full-time employees from the current 50. This change would reduce the burdens on small employers, a politically potent force. But the bill would retain the individual mandate to obtain health-care coverage, which would lead to more employees purchasing insurance in the individual market.
Second, to help individuals pay for these purchases, Congress should adopt Republican suggestions to broaden the use of tax-advantaged accounts. For example, the bill should expand the use of health reimbursement accounts, established by employers to defray the health-care costs of their employees. Specifically, the bill should overturn the tax ruling, issued by the Obama administration, that allows an employer to make health reimbursement accounts payments only in connection with an approved health-insurance plan.
Similarly, the bill should revise the Obama-era rules on the use of health savings accounts—tax-advantaged accounts set up by individuals in connection with high-deductible plans. The 2016 rules created unnecessary conflicts between the requirements for these accounts and those for high-deductible plans on exchanges. Those conflicts should be resolved so that consumers may use health savings accounts to help pay their high deductibles under silver and bronze policies at the exchanges.
Third, the bill should add a provision creating a federal reinsurance fund to help finance care for America’s most expensive patients. These are the five million Americans who are not yet eligible for Medicare but have three or more chronic conditions. To help states reduce the cost of serving these patients, the bill should dedicate multiyear appropriations to a federal reinsurance fund, as a previous Republican health-care bill did. To avoid moral hazard, the reinsurance fund should require some risk of loss to be retained by insurers and patients, based on the successful reinsurance design in Medicare Part D.
Fourth, the bill should loosen the existing rules to encourage growth of interstate sales of health-care policies. ObamaCare permits cross-border sales in states that have joined a regional compact. Yet this part of the Affordable Care Act has not led to any cross-border sales. The bill should require all states to establish an expedited approval process for any health-insurance policy previously allowed by another state. One approach would be automatic approval after 60 days unless the second state registered objections.
Finally, the bill should repeal the Independent Payment Advisory Board, a panel of appointed officials that is supposed to constrain the growth of Medicare costs. If the entitlement’s costs increase by more than a specified rate for five years, the IPAB must send Congress recommendations to reduce Medicare costs. These recommendations become effective after one year, unless Congress rejects them by a two-thirds vote. The IPAB is opposed by most Republican and some Democratic legislators, who believe it is a powerful but unaccountable board that infringes on congressional prerogatives. The IPAB has not yet actually been impaneled, so it should be easy to abolish.
By adding all or most of these measures, Sens. Alexander and Murray will ensure the bill has a smoother journey through the legislative process. And they could improve the American health-care system at the same time.
Robert Pozen has been a nonresident senior fellow at Brookings since 2010. In 2015, he generously committed to endow the Director’s Chair for the Urban-Brookings Tax Policy Center. Until 2010, Pozen was executive chairman of MFS Investment Management and, before 2002, served in various positions at Fidelity Investments. He did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. He is currently not an officer, director, or board member of any organization with an interest in this article.