The Affordable Care Act from inception to today has been marked by controversy and, for conservatives and the law’s objectors, a tumultuous debate over whether Obamacare can be repealed, repaired, or replaced. The 2014 midterm results reignited the debate as many saw a repeal vote as now achievable. Attempting to repeal the ACA and replace it with something better is a healthy debate Congress and the nation ought to have. Yet the near inevitability of a presidential veto makes the exercise a healthy political action, but one unlikely to help the nation. Fortunately, regardless of the laws demise, there exists a blueprint to mitigate its damage. What follows are strategies which lie not within Washington DC’s tortured, ineffective landscape, but in our homes, small businesses and state capitols.
As some of you may have heard, the ACA, the one passed into law; not the one existing after numerous administrative and executive delays and rewrites, imposes two mandates: the first on all individuals, the second on employers of more than 50 employees. The mandate requires all persons to have minimal health coverage, a requirement satisfied by purchasing a health plan which meets the Essential Health Benefits’ (“EHB”) requirements established under the law, or by meeting an exception such as being incarcerated, or having coverage through an employer plan.
Small businesses may establish ERISA plans.
The federal Employee Retirement Income Security Act provides for and extensively regulates employer-sponsored benefits plans such as 401ks and employer health and welfare plans. Large employers with thousands of employees have long used ERISA plans to manage healthcare costs. But ERISA does not require a large employer. Rather, the law applies to any employee benefits plan set up, managed, and funded at least in part by the employer. Notably, ERISA plans are not synonymous with insurance, a distinction Congress apparently missed. The Administration has issued Regulations to define the employer-sponsored plan exception to the mandate to include only those ERISA plans which are insurance, however, the propriety of those Regulations in light of the statute’s text is highly questionable, and maybe more so after the Supreme Court rules on King v. Burwell. Because employer plans are an exception to the ACA mandates, i.e., they exist outside it, the more Americans covered by ERISA plans, the less saddled with the higher costs and mandates of the ACA.
Bum rush the Exchanges.
A second strategy might be for some or all of the 36 states that did not create a State Exchange to do so, but to use those Exchanges in a better way. Under the ACA, the State Exchanges’ purpose is to provide a marketplace for the sale of federally subsidized policies meeting EHB requirements. It is those EHB requirements which, along with many other things such as the elimination of individual underwriting, which drove the cost of policies through the roof in most states.
But suppose for a moment that officials in those red states that did not set up an exchange now did so, but allowed policies which peopled liked and could afford? Notably, this could include those policies which were cancelled for more than 5 million Americans, and the more slimmed down and less expensive true catastrophic policies for the young and healthy.
Now the Administration or its successor may well maintain that such policies, because they are not do not meet the literal EHB requirements of federal law (both the statute and the Regulations) are ACA non-compliant and, hence, do not meet the mandate nor are subsidy-eligible. However, in light of the Obama administration’s numerous instances of disregard of the law, e.g., delaying the employer mandate, subsidies for the federal exchange, “you can keep your plan,” make such an argument of dubious policy, political and even legal credence. Further, in light of the 2014 election results, it is arguable whether a subsequent Administration would seek to oppose such state exchange policies. And the Congress could propose legislation amending, not repealing, the ACA to allow such nonconformity policies.
Ultimately, allowing the sale of such policies on the state exchanges would decimate the ACA. The central tenet of the ACA is that everyone is n the same insurance pool with the exact same plan. Allowing large numbers outside the pool through already existing loopholes, as demonstrated above, will undermine the pool causing dramatic premium increases and/or insurer bailouts in the public view. At that point the anti-ACA electorate has real power to push for repeal and replacement, ort simply by voting with their feet and power of the purse, to simply not participate, allowing the ACA to shrivel and wither away.
Direct Primary Care +
Direct Primary Care is a form of healthcare, not insurance, growing rapidly across the nation. DPC involves paying your primary care physician directly and on a monthly or yearly basis instead of fee for service and instead of paying through a health insurance policy. DPC reflects, and remedies what’s wrong with the existing healthcare system – the third party payer system has largely disrupted the normal incentives and detriments in functioning economic system. In other words, the healthcare system we have, both pre and post-ACA, is largely determined by the fact that since the 19320’s most Americans have largely paid for their healthcare with third party insurance, paid for by an employer or the government (e.g., Medicare). Stated differently, the consumer of the healthcare service is not its purchaser. This dislocates the normal economic transaction. Your grocery store provides good products in a clean environment, your cable or internet provider provides reasonably good service, the auto dealer sells cars that work, precisely because if they don’t, you won’t pay for it. The quality and price of goods and services in most economic sectors therefore reflects the highest quality for the lowest price which purchasers will pay. In healthcare however, an insurer is motivated by cost. An insurer contracts with a physician to provide care at the best price for the insurer because the insurer doesn’t really care if you wait an hour in the waiting room for an appointment.
DPC upends that system. Because the patient pays for the care, he or she is motivated to shop for the best care at the lowest price. To obtain their business, the physician is motivated to offer better customer service. By charging anywhere from $49-$139/month DPC physicians eliminate the estimated 40% of overhead spent seeking reimbursement from third parties, which boosts profit margins and permits the physician to see fewer patients, and for longer appointments than he or she otherwise would. Physicians with DPC practices report high professional satisfaction and higher patient satisfaction exactly because if they do not keep the customer satisfied the patient will go elsewhere.
The ACA explicitly permits the combination of a Direct Primary Care plan with a catastrophic plan to satisfy the EHB requirements and, further, allows the sale of such combined DPC + catastrophic policies on state exchanges. Recent reports from around the nation reflect narrower insurance networks, longer wait times to access care, and increasing physician shortages for both Medicaid and exchange plans. DPC practices, because they are market-responsive, will flourish in such an environment. As more Americans who can afford it do in fact move to DPC practices, the physician and access shortages will be exacerbated. The exchange system and its pools will break because of adverse selection (those who can afford a better system will choose one). Chaos in the ACA system will drive reform much as the perceived and actual detriments of the pre-ACA system drove that issue.
Much has been made about the expansion of Medicaid into the middle class under Obamacare. Many such as Sen. Ted Cruz argue that free government healthcare will guarantee a liberal voting electorate. Fair criticism except for two things. One, coverage is not care. The non-poor who are now covered by Medicaid will encounter difficulties in accessing care, accessing specific providers, and getting care they are used to receiving. Second, not everyone will choose free and low quality over paying for better care. For example, the city of Detroit will give you a house for free. Yet there’s not a line to become a Detroit homeowner. Instead Michigan residents appear to prefer paying for housing in other places. As the economy recovers, with better economic policies hopefully getting more Americans back in the workforce, many in the middle class will reject their experiment with the ACA’s pseudo-single payer experience.
Nothing herein suggests that repeal, or repeal and replace are not important and worthy objectives. Rather, using the above strategies to precipitate the need to repeal and replace the ACA should help narrow the areas actually needing real reform and focus the future on a healthcare system which is patient-driven and responsive to ordinary economic principles.
* M. Dylan McClelland is the President of McClelland Advocacy, a Sacramento-based law firm with expertise in healthcare litigation public policy and Constitutional litigation and challenges to state and local government actions.