Sen. Rand Paul (R-KY) has formally introduced legislation to repeal and immediately replace the Affordable Care Act (ACA) with expanded use of health savings accounts (HSAs) and more options for individuals to buy insurance.
Paul’s Senate Bill 222, the Obamacare Replacement Act, would let people buy, without penalty, inexpensive insurance products that need not comply with ACA’s existing 10 mandates for minimum essential coverage. The bill would also legalize the sale of insurance across state lines to increase competition and drive prices down. In addition, individuals would be allowed to buy insurance on their own or as members of a voluntary group unrelated to their employment, such as a church or public service organization. The bill would “equalize the tax treatment” of those buying insurance on their own versus through an employer.
More HSA Freedom
Paul’s plan would “provide individuals the option of a [non-refundable] tax credit of up to $5,000 per taxpayer for contributions to an HSA,” according to a section-by-section summary of the bill provided by Paul’s office. The proposal would eliminate the caps on annual HSA contributions, which are $3,400 per person and $6,750 per family in 2017, and would let people use tax-free HSA dollars to pay for insurance premiums in addition to prescriptions, dietary supplements, direct primary care memberships, and other health care-related purchases.
The bill would provide a two-year open enrollment period in which individuals with preexisting conditions could buy insurance, let states change their Medicaid programs “without interference from Washington,” and allow physicians a “bad debt” tax deduction equal to 10 percent of their gross income, the summary states.
The Senate has taken no action on SB 222 since referring it to the Committee on Finance on January 24, 2017.
‘Makes the Most Sense’
Michael Tanner, a senior fellow specializing in health care reform at the Cato Institute, says Paul’s proposal is great policy but politically challenged.
“I think it’s a very solid replacement,” Tanner said. “I think politically it has a lot of problems, but policy-wise, it makes the most sense.”
Paul’s plan rises above other Republican proposals by accommodating individuals with preexisting conditions outside the mainstream insurance market, Tanner says.
“The most innovative portion of it is the fact that he would not continue indefinitely some form of protection for preexisting conditions,” Tanner said. “I think that there is no realistic way to do that and yet make the other reforms that Republicans want to make by getting rid of the mandate.”
States could use their increased flexibility under Paul’s plan to provide taxpayer-funded insurance to their so-called uninsurable populations, Tanner says.
“Essentially, there’s no way to insure people who are uninsurable,” Tanner said. “I think his long-term plan to move them into some sort of expanded Medicaid-grant type of approach is probably the only reasonable way to do this.”
Paul says shifting decision-making from government to patients will make the country’s health care system much more efficient and increase access.
“Getting government out of the American people’s way and putting them back in charge of their own health care decisions will deliver a strong, efficient system that doesn’t force them to empty out their pockets to cover their medical bills,” Paul stated in a January 25 press release announcing the bill.
Tanner says Paul’s plan shares key components of other Republican plans to repeal and replace Obamacare.
“It includes the usual Republican things: expanding health savings accounts, purchase across state lines, expanding association health plans, and so on,” Tanner said.
The distinguishing and most effective feature of Paul’s plan makes it an easy target for opponents, Tanner says.
“Sen. Rand Paul’s proposal has the biggest obstacle,” Tanner said. “You are going to have the people who are covered today who the Democrats will trot out and say they’re going to lose their coverage. The fact is they are going to end up having to pay more or get less for it, because they simply are uninsurable, by definition. I mean, you can’t simply keep them in the insurance pool.”
Michael McGrady ([email protected]) writes from Colorado Springs, Colorado.
The Obamacare Replacement Act, Senate Bill 222, January 24.
Michael T. Hamilton, “Rand Paul’s ‘Obamacare Replacement Act’ Deserves Trump’s Attention,” Consumer Power Report, The Heartland Institute, January 19, 2017.