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Life Health > Health Insurance

4 PPACA individual mandate alternatives

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Republicans now control both the House and the Senate, and they are looking hard at the Patient Protection and Affordable Care Act (PPACA) individual and employer “shared responsibility” provisions.

The individual shared responsibility provision, or mandates, requires many individuals to have what the government classifies as “minimum essential coverage” (MEC) or else pay a penalty.

The employer mandate requires large and midsize employers to provide a minimum level of coverage for many employers or face the possibility of having to pay penalties.

The House Ways and Means health subcommittee today held a hearing on the mandates.

One speaker, Douglas Holtz-Eakin, showed up with an analysis of the effects of three possible alternatives to keeping the PPACA individual as is.

Another witness, Sabrina Corlette, a health policy specialist at Georgetown University, testified that PPACA has had obvious success with reducing the number of uninsured people, and that keeping the individual mandate is critical to giving insurers the ability to sell reasonably priced coverage to people with health problems.

In Washington state, for example, lawmakers adopted insurance underwriting rules similar to the underwriting rules in PPACA, but without a mandate. “As a result, the state experienced a 25 percent reduction in individual market enrollment and a decline in the number of comprehensive plans offered,” Corlette said, according to a written version of her testimony posted on the committee website. “The largest carrier in the market raised premiums by 78 percent.”

New York state adopted similar reforms, without a mandate, in the early 1990s, and its individual market suffered a similar fate, Corlette testified.

Holtz-Eakin argued that more than 30 million Americans have individual mandate exemptions this year, that the individual mandate has been more of a suggestion than a real requirement, and that the best solution is to rewrite the underwriting rules as well as eliminating the mandates, not simply to eliminate the mandates.

For a look at how Holtz-Eakin sizes up the effects of several mandate alternatives, read on. 

Guy saying "no!"

1. Simply repealing the individual mandate.

Holtz-Eakin says getting rid of the mandate and making no other changes would reduce the number of insured people by about 7 million in 2025 but save $191 billion in subsidy spending over a 10-year period, or about $2,700 per additional uninsured person. 

See also: Uninsured rate falls again 

Diabetes testing

2. Repealing the individual mandate and individual medical underwriting rules.

For decades, people with health problems such as diabetes, cancer, or even obesity complained that they were unable to get private health coverage at all, or had to make do with skimpy coverage from over-crowded “risk pool” programs.

See also: California Limits Health Risk Pool Participation

PPACA underwriting restrictions have helped those people qualify for ordinary health coverage, and simplified for Web-based and brick-and-mortar agents and brokers, by reducing what used to be an arduous medical underwriting process to a short list of questions about age, location and tobacco use.

Holtz-Eakin argued that the PPACA medical underwriting rules have backfired, by pushing up premiums for young, healthy people, who have high uninsurance rates and should, in theory, by cheap and easy to cover.

Returning to the use of subsidized risk pools would be a good way to provide coverage for people with known health problems while holding down the cost of coverage for others, Holtz-Eakin said.

Regulators could make allowances for bad genetic luck, without rewarding irresponsibility, by letting consumers who buy insurance when they are young and healthy and keep the coverage in force renew the coverage on a guaranteed-renewable basis, Holtz-Eakin said.

Making those changes and providing subsidies might increase federal spending on financial assistance by $15 billion over 10 years and could leave the country with 4 million fewer insured people in 2025 when compared with leaving PPACA as it is now, Holtz-Eakin said.

Those changes would cost about $500 per year for each of the 3 million additional people who would get coverage as a result of the programs added to ease the effects of PPACA mandate repeal.

PPACA plan metal levels- bronze, silver, gold, platinum

3. Repeal the mandate, and let insurers sell plans that don’t meet exchange “qualified health plan” (QHP) standards outside the PPACA exchange system.

Regulators now apply PPACA coverage rules, such as a requirement that major medical plans cover an “essential health benefits” (EHB) package, and that plans be put in one of four “metal level” classes based on the percentage of the actuarial value of the EHB package covered, to plans sold outside the PPACA exchange system as well as to exchange plans.

Easing the requirements for off-exchange plans would save the government about $193 billion in financial assistance spending over 10 years, Holtz-Eakin said. He said the country would end up with 3 million fewer uninsured people in 2025 than if PPACA were kept as is.

The government would end up saving about $5,000 per year per additional uninsured person.

See also: CBO Analyzes Cost Of “Bronze Plans” and Reid Lugs Out Senate Health Bill

Wild horses

4. Repeal the individual mandate, the PPACA medical underwriting rules, and the requirements that major medical plans sold outside the exchange system meet QHP standards.

All three of the other changes combined would increase federal spending by $14 billion over 10 years, but it would eliminate the mandate, and it would leave the country with just 500,000 fewer insured individuals in 2025 than if the individual mandate stays in place, Holtz-Eakin said.

Those changes would increase the number of young, low-income adults buying coverage, Holtz-Eakin said.

See also: CBO Analyzes GOP Health Proposal and CBO Combs Through H.R. 3962


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