How America can make health insurance great again

You may be thinking, “When was health insurance in America ever great?” Point taken, but at least there was a time when health insurance was more affordable and individuals were better able to buy what they wanted, not what the government demanded. And the good news is Republicans can take steps toward getting us moving in that direction again.

For 30 years Democrats have tried to make health insurance “affordable” — or even “free” if Sen. Bernie Sanders (I-Vt.) got his way — by expanding government control. Yet it has never been so expensive, costing about $24,000 for a family of four in 2023.

The federal government had largely stayed out of the health insurance market until President Bill Clinton (D) tried to push through a massive restructuring of the health care system in 1993-1994. That effort failed, but Congress eventually passed the Health Insurance Portability and Accountability Act (HIPAA) of 1996, the State Children’s Health Insurance Program (SCHIP) in 1997, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and the Affordable Care Act (ObamaCare) in 2010. While those laws had some good components, they greatly expanded the government’s role in, and the cost of, health insurance.

The incoming Republicans almost certainly can’t repeal ObamaCare, but there are several steps they could implement that would improve health insurance options.

Free up Association Health Plans. Efforts to allow trade associations to offer self-funded health insurance coverage, like large employers offer, finally succeeded in the Tax Cuts and Jobs Act of 2017. That change allowed associations to bypass some of the restrictions and mandates imposed on traditional health insurance. But giving individuals and organizations more control over their health insurance is not what Democrats want. So the Biden administration’s Department of Labor issued a rule imposing more restrictions on AHPs.

The incoming Congress should reverse those restrictions and give AHPs maximum flexibility.

Embrace large Health Savings Accounts. Health Savings Accounts (HSAs) allow employers or individuals to deposit money into a tax-free savings account that can be used to pay for small and routine health care expenditures. HSAs are combined with high-deductible health insurance — paid for by the employer if it’s a group plan — that covers the large expenses. Since the money in HSAs belongs to the individual, they provide an economic incentive for the individual to be a value-conscious shopper in the health care marketplace.

Michael Cannon of the Cato Institute has promoted an expansion of the HSA concept: large HSAs. The employer could deposit the total amount the company is spending on an employee’s health coverage into an HSA, and the employee can then decide how to distribute that money: buying into the employer’s health plan or choosing an individual policy or purchasing no insurance at all. The idea is to give the money to the employee and let the individual decide how to spend it.

Deregulate short-term health policies. The insurance industry has long offered short-term health policies — usually lasting three to six months — that were primarily intended to provide very basic coverage when a person or family is temporarily uninsured, like when changing jobs.

These plans were intended to provide coverage for a major accident or illness, but not to cover routine care or regular expenses like prescriptions. The application process was quick and easy, and the plans didn’t cost much. But they also didn’t cover preexisting conditions.

Once ObamaCare took effect, millions (including my wife) lost their individual coverage because their plans weren’t qualified under the new law. Many people shifted to short-term policies, which were more affordable. But Presidents Obama and Biden didn’t want people escaping their health insurance paradise and so imposed regulations to limit how long a person could have a short-term policy.

Republicans need to permanently remove the short-term policy restrictions and give health insurers the flexibility to create policies that the public wants and needs.

Repeal some of the ACA’s mandates. ObamaCare mandated insurance cover more health care services, making it more expensive. But not everyone wants or needs that additional coverage. A 60-year-old couple likely doesn’t need maternity care or birth control coverage. Teetotalers don’t need alcohol and drug-abuse counseling. Removing mandates frees up insurers to offer coverage that individuals, not the government, want.

Let insurers underwrite policies again. Obama misled the country about insurers denying people coverage for a preexisting condition. Neither Medicare nor Medicaid nor employers could deny coverage based on a preexisting condition (though employees might have to wait a few months). The relatively small number of individuals with pre-existing conditions trying to buy their own coverage in the individual market could be denied coverage, but most states had a high-risk pool that would provide them with coverage options.

Some high-risk pools worked better than others. So, any reform that incorporated them would need to include a “best practices” provision. But they were an effective safety net.

Republicans probably can’t remake the health insurance system, but they can reform it by allowing insurers more freedom and giving consumers more choices. Republicans will get a lot of grief and handwringing from Democrats and the media for trying, but they may find that the public is ready for a change.

Merrill Matthews is a public policy and political analyst and the co-author of “On the Edge: America Faces the Entitlements Cliff.” Follow him on X@MerrillMatthews.