Research & Commentary: North Carolina’s Insurance Reforms Would Help Save Families from Obamacare

Published June 20, 2018

Following Congress’ failure to repeal and replace Obamacare in 2017, lawmakers across the country have stepped up to the plate and introduced a variety of patient-centered reforms to reduce health care costs and expand access to health insurance. In North Carolina, the state legislature is considering a bill that would lower health insurance premiums for members and employees of nonprofit associations.

On June 7, the Senate Health Care Committee debated legislation that would make it easier for nonprofit associations to band together to provide their members more affordable insurance through association health plans (AHP). These AHPs would be funded and operated by organizations like the North Carolina Restaurant and Lodging Association and would be available to all participating restaurants and employees who seek health insurance.

The Committee’s co-chairman, state Sen. Ralph Hise (R-Spruce Pine), said in the meeting the bill would provide less expensive health care options than what are now available on the state’s Obamacare exchange. “This provides a better option to provide health care, particularly for those who are self-employed and others who are facing tremendous premiums that may far exceed their health care costs,” Hise said.

AHPs would lower health insurance costs for several reasons. First, they would empower multiple businesses and organizations to pool their members into one large risk pool. This would allow them to disperse their health care costs over a larger number of members and lower premiums across the board. They would also be able to negotiate lower rates with local doctors and hospitals as a result of their increased bargaining power.

Furthermore, every AHP would operate as a self-funded plan, which means AHPs would be exempt from costly and burdensome state and federal insurance regulations. For example, AHPs would not have to comply with the Obamacare mandate that every health insurance plan must cover an array of expensive and often unnecessary benefits many employees don’t need or desire. These include substance abuse services, maternity treatments, and pediatric care.

With fewer regulations and greater bargaining power, AHPs would be able to offer workers less expensive premiums and greater access to coverage. A study by the Congressional Budget Office estimates legalizing AHPs would reduce the cost of insurance offered by small businesses by 25 percent.

These plans would deliver desperately needed relief to North Carolina families. Since 2000, the share of small businesses offering health insurance has fallen from 47 percent to just 29 percent. And without access to employer-sponsored insurance, workers have been forced to buy coverage in the individual market, where premiums have skyrocketed from $143 per month in 2010 to $514 in 2018. According to another report by CBO, more than eight million workers and dependents would enroll in AHPs once states like North Carolina make them more available to consumers.

The North Carolina proposal is only the latest example of a larger national effort to give consumers an array of affordable health insurance alternatives to Obamacare’s increasingly unaffordable plans. In April, Iowa Gov. Kim Reynolds enacted sweeping reforms to allow consumers to purchase inexpensive insurance plans outside of Obamacare’s restrictive rules. And in June, the Trump Administration finalized new rules that would allow small businesses to offer less expensive coverage through association health plans.

After years of rising premiums, increasing deductibles, and diminishing choices, expanding AHPs would allow North Carolina families access to reliable and affordable health coverage. Lawmakers should implement these common-sense solutions, as well as additional reforms that would improve the affordability and quality of health care.

The following documents provide more information about free-market health insurance reforms.

Trump Executive Order Could Save Millions from ObamaCare
Michael Cannon, director of health policy studies at the Cato Institute, examines President Donald Trump’s executive order expanding affordable health insurance options for consumers. “President Trump today signed an executive order that urges executive-branch agencies to take steps that could free millions of consumers from Obamacare’s hidden taxes, bring transparency to that law, and give hundreds of millions of workers greater control over their earnings and health care decisions,” said Cannon.

Trump Administration Restores an Escape Valve From Obamacare’s Insurance Regulations
Avik Roy, president of the Foundation for Research on Equal Opportunity, examines in this Forbes article new regulations introduced by the Department of Health and Human Services that will deregulate short-term, limited-duration health insurance. “The Trump administration has now proposed new rules under which these affordable STDL plans would once again be available to those who want them, for up to 364 days,” Roy wrote.

How Trump Is Bringing More Affordable Insurance for Small Businesses
Josh Archambault, senior fellow on health care policy at the Pioneer Institute, examines new regulations to allow small businesses to enroll workers in association health plans. “Small employers have seen significant health insurance premium inflation since the passage of the Affordable Care Act, combined with restricted choice of plans to offer their workers—AHPs could provide valuable new options for coverage and encourage more small firms to provide health coverage to their employees,” wrote Archambault.

Premium Reconciliation and Pre-ACA Deep Dive
Mckinsey & Company analyzes the impact of Obamacare insurance regulations on the premiums of individuals of various ages. “Obamacare mandates related to pre-existing conditions, including guaranteed issue (the requirement that insurers issue plans to any applicant) and community rating (the requirement that insurers charge the same premium to individuals regardless of health status, use of services, etc.), were the chief drivers of premium increases in the markets analyzed. The analysis shows that these mandates, along with other risk factors, have been responsible for 41 percent to 76 percent of the premium increases in the markets analyzed,” wrote Mckinsey & Company.

Don’t Wait for Congress to Fix Health Care…/dont-wait-for-congress-to-fix-health-care
Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled, even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs, or submit even more ambitious requests for waivers to the Department of Health and Human Services—a procedure the Trump administration has encouraged.

Section 1332 State Innovation Waivers: Current Status and Potential Changes
The Kaiser Family Foundation provides an overview of Section 1332 Medicaid waivers, how they are approved and financed, how states have used them, and how they have impacted health care reform.

How Premiums Are Changing in 2018
Kaiser Family Foundation researchers examine the premium rate increases consumers face in Obamacare marketplaces, which have occurred in large part because of the drop in insurer participation.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s state government relations director, at [email protected] or 978-855-2992.