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You are here: Home / Anderson On Health Insurance / A bill heading nowhere that health economists could love

A bill heading nowhere that health economists could love

by David Anderson|  June 4, 20196:59 am| 1 Comment

This post is in: Anderson On Health Insurance

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Every legislature has hundreds of bills that go nowhere. They are filed, and then they are referred to a subcommittee where they are then politely ignored. Some of these bills are messaging bills that a representative is “DOING SOMETHING” other bills are perpetual hobby horses, while some bills are filed with the expectation that they die as a writing exercise for future policy development.

Oregon has an interesting bill that is a combination of a first draft for future policy and a DOING SOMETHING bill that identifies a real problem and proposes a solution that only a health economist could love.

The problem identified in HB-2009 is that insurance for the non-subsidized population that earns between 401-600% Federal Poverty Level is often too expensive. This is a real problem.

This bill links two policy proposals that have been floating out there. The first is a coverage expansion proposal. The state would create a Medicaid buy-in program for folks who are neither Medicaid nor subsidy eligible and earn between 138% to 600% FPL. They would be able to get an insurance policy that pays very providers significantly less than commercial rates which means the non-subsidized premiums would be at a significant discount compared to most/all other plans.

This is not too adventurous of a policy. New Mexico is investigating an off-exchange only Medicaid buy-in and several other states are thinking about this as well.

The financing side is also fairly straightforward. The bill proposed a state based individual mandate. The mandate would apply to individuals who don’t maintain affordable coverage for at least nine months a year. The revenue would partially fund the Medicaid buy-in administrative expenses.

Again, this is not too unusual. Several states have their own individual mandate that funds various health coverage related programs in a variety of ways.

The interesting portion is that the Oregon bill had to have been written by a health economist:

Except as provided in subsection (3) of this section… The penalty is an amount equal to nine percent of the individual’s taxable income as reported on the individual’s income tax return…
An individual is not subject to the penalty under subsection (2) of this section if:
(a) The out-of-pocket costs for the minimum essential coverage available to the individual exceed nine percent of the taxable income reported on the individual’s income tax return;

Now that is an individual mandate with teeth.

The goal of this mandate proposal is not raise revenue. The goal of this mandate as written is to make being uninsured more expensive than being insured. Some people will opt to do that. But most people will say that if they have to pay 9% of their income irrespective of whether or not they have insurance, they would rather at least get something instead of nothing for the 9% of income.

This bill is going nowhere, but it is an interesting proposal that is the logical (and completely implausible) set of solutions to a real problem in the ACA. It would lower premiums by offering a very low premium plan to a significant segment of the non-subsidized population, and it improves the risk pool by hip checking a good chunk of low risk folks into the risk pools thus lowering average claims and premiums.

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1Comments

  1. 1.

    Mart

    June 4, 2019 at 8:59 am

    I was recently retired by my boss. I am kinda looking at another full time job, and kinda looking at hanging up the cleats. So I review the ACA. My wife is part time w/ low income. Most all of my investments for retirement are tax shielded. So for purposes of the ACA we are living below the Federal poverty level. I could have opted for a good premium “free” ACA policy; but opted to pay half on the assumption I get a job later this year. If I am employed, this will avoid most of the penalty for too much subsidy. If I don’t get a job, I get the $900/month refunded.

    I anticipate totaling my wife’s income, our taxable investment income, and then pulling $ out of a not taxed until taken 401K to total our income near the poverty level. (Over 59.5 so no penalty.) This would take advantage of my low tax bracket, but need to check if legal. I have other schemes in mind but you need to read the tax code fine print. Example – I was planning to pay the ACA premium with my HSA account. You can only do that if on unemployment. I did not sign up as I was pretty sure of getting 1 of 2 jobs right after fired. (You can pay for COBRA with an HSA account without being on unemployment.)

    Realize a long story about rich person’s problems. But that OR proposal would fit me and others who can’t wait for 65 like a glove; and really encourage me to get back to work. A side note – available doctors and urgent care centers with the ACA generally suck – both quality and distance to. If I did not own a car we would be screwed. I now know why there are businesses to sign people up for the ACA. You need a computer and need to know how your finances and insurance work. Three things less privileged folks may not have. There are a myriad of considerations. If my red state legislators slap on a work requirement, that would change the maths.

    Come on 65!

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