Obamacare Replacement Proposed by Republicans

NEW YORK (MainStreet) — Senate Republicans revealed their vision for health care yesterday in a proposal drafted by Senators Orrin Hatch (Utah), Tom Coburn (Okla.) and Richard Burr (N.C.) as a legislative blueprint for conservative reform. Unsurprisingly, as its first order of business, the Patient Choice, Affordability, Responsibility and Empowerment Act (P-CARE) repeals President Barack Obama's health care law in its entirety.

It then spends eight pages largely putting that law back together. Rather than overhaul health care in a new direction or return us to the free market free for all, the Senate Republicans' plan is essentially a series of adjustments to the Affordable Care Act, revealing in some measure just how far the health care debate has moved since 2009.

The proposal keeps many of the most popular parts of Obamacare intact, including the bar on lifetime limits and the rule allowing adult children to stay on their parents' insurance until age 26, although it abandons issues unpopular with conservatives such as plan regulation and the birth control mandate.

Senate Republicans would also keep the current law's restrictions on charging higher premiums based on age, although in somewhat looser form. Under Obamacare, insurers can charge older customers a maximum of three times as much as they do the young. The P-CARE proposal would increase that ratio to five, with an option for states to opt out of the requirement altogether if they choose.

As far as the essential "three pillars" of Obamacare, the proposal focuses on modifying rather than abandoning them. Tax credits to purchase insurance remain a part of the system, as does a variation on banning pre-existing conditions.

Instead of the individual mandate, which would no longer exist, the new plan would solve insurance death spirals with "continuous coverage protection."

Continuous coverage would ban private insurance companies from denying coverage based on pre-existing conditions if, and only if, the consumer were already "continuously enrolled in a health plan" for at least 18 months. It would require insurers to offer those plans at "a standard rate" and allow a one time enrollment period during which everyone could purchase plans regardless of coverage or pre-existing conditions.

This continuous coverage plan would eliminate the mandate in principle but not practice. Consumers wouldn't have to buy coverage as a matter of law, just if they ever expect to need health insurance again. It's a change that has more impact on paper than it likely would in real life.

States would also be allowed to create a fail-safe system of auto-enrollment policies for anyone who doesn't sign up for health insurance, although consumers could opt out if they chose.

Since it's not yet an actual bill, the proposal doesn't address how to handle continuous coverage for the people who inevitably fall through the cracks (for example someone who can't find an acceptable, affordable plan). It also doesn't address the regulatory framework that Health and Human Services would have to create in order to actually enforce this rule.

These are both critical issues, as under Senate Republicans' plan most people's future access to health care would depend upon the state and reliability of their current plan at all times. Miss a payment, fill out a form incorrectly or lose a dispute with the carrier, and suddenly a consumer could lose all protection against pre-existing conditions.

These are solvable issues, but without that solution it's possible this plan could perversely incentivize insurance companies further to find technical reasons for denying coverage.

The proposal would keep the existing idea of tax credits to help low income households pay for health insurance, allowing credits for anyone earning 300% of the federal poverty level or less. It would eliminate entirely the Obamacare expansion of Medicaid, relying instead on state reforms and on tax credits to help the poor purchase insurance on the private market.

Finally, yesterday's proposal would keep largely intact tax subsidies for employer health insurance plans. Under current law both employers and employees can deduct the full value of health insurance from their taxes. Since this deduction only applies to employees of companies large enough to provide benefits, many conservatives have long opposed it as an unfair subsidization of the employer health care model.

The new proposal would leave completely intact tax deductions for employers, continuing to allow companies to deduct 100% of their contributions to an employee's health insurance.

In an effort to level the playing field, however, the Republican plan would cap employee deductions at 65% of the value of their health insurance. This would serve as an effective tax increase for anyone currently on an employer health care plan. Everyone self-employed or working at a business with 100 or fewer employees, however, would become eligible for a tax credit to help pay for health care premiums.

The P-CARE plan exists so far only as a proposal. It has not been drafted into a bill nor scored by the Congressional Budget Office. This document presents the bones of a conservative alternative to the Affordable Care Act, the first time we've seen one. The next step will be for Congressional Republicans to address the details of its execution.

What's most telling in this document, however, is its relatively limited scope. For all of the debate over the last several years around the Affordable Care Act, there's no longer a serious question that reform will continue moving forward. Now that that's settled, it turns out both parties' solutions look remarkably similar.

—Written for MainStreet by Eric Reed, a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website www.wanderinglawyer.com.

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