Senator Paul's ACA Replacement May Provide Universal Insurance
Senator Paul’s ACA Replacement Proposal
Senator Paul’s plan doubles down on health savings accounts as the savior to all of healthcare’s ills. HSA’s as they exist now are limited in scope and don’t provide an easy way to switch into an HSA plan because, as you switch, you start from $0 and are forced to build from there. Paul’s replacement plan attempts to fix a lot of that, increasing flexibility of what the HSA can pay for, who qualifies for an HSA, and attempts to fix the issue of bootstrapping an HSA by allowing it to pay for medical debts.
One of the more significant allowances in Paul’s proposed HSA plan is that insurance premiums can be paid for directly out of the HSA. This would allow healthy people who have built up significant equity in the account an outlet to use the cash saved rather than letting it languish. This would also have the side effect of allowing tax-savvy HSA holders a way to purchase insurance tax-free. And therein lies the loophole.
A Credit by Any Other Name
Before exploring the loophole, it’s important to mention the other major portion of Paul’s HSA changes: in order for the HSA to make more universal sense, Senator Paul has included in his proposal a tax credit up to $5,000 per year for money saved in an HSA. The term credit is the important part, which indicates that it’s $5,000 off your tax bill, as opposed to a deduction, which is to reduce your taxable income by that same amount. There’s already a deduction on HSA’s, so I’m assuming that the use of the term credit was not mistaken.
That credit would be fully taken advantage of by anyone who makes more than right around $40k/year (individual). When you combine that with the HSA’s ability to pay your premium, you get what is, in effect, universal insurance (for anyone making more than $40k per year). I feel like a budget hawk like Rand Paul wouldn’t have overlooked this effect and so must conclude that this was the intent.
So, if universal insurance is a desired goal of yours, you should wholeheartedly support Senator Paul’s proposal.
Other Parts of the Plan
There are a few other interesting observations we can make from reading through this proposal. I’ve broken it down by interest based on things it does and doesn’t have.
Pooled Coverage and Association-based Healthcare
The proposal allows individuals to form pooled coverage more easily, allowing the establishment around various non-profits and for-profit organizations. This extends to small businesses allowing them to pool with other small businesses. It also applies to interstate insurance, allowing these pools to service members across state lines.
I actually like this part of the plan a lot. It could certainly help lead to greater consumer choice and consumer power, as well as create risk management pools that would be more favorable to insurance agencies.
Pre-existing Conditions
Paul’s plan does take a significant step back when it comes to pre-existing conditions. It allows a 2 year period during which those with pre-existing conditions still cannot be denied insurance, but after that reverts back to pre-ACA guidelines that state that pre-existing conditions are only covered while maintaining continuous coverage. Losing that continuous coverage tag through losing work or reaching lifetime limits or simply being dropped from a plan for some other reason had put a number of people in terrible health scenarios where they were unable to regain coverage. This might be the worst thing in the plan, and the most insurance industry-friendly.
Reproductive Health
Somewhat surprisingly, Senator Paul’s plan does not make mention of any sort of reproductive health, be it contraceptive or abortion. I don’t know if that’s because those uses are already denied from HSA’s, if it was an oversight on his part, or if he was looking to break from party, but I’m actually glad to not see it be an issue when it comes to government spending for once.
Medicare Expansion
Paul’s plan does not repeal Medicare expansion.
Cost and Market Reform
The proposal does next-to-nothing in regards to market reform. It doesn’t attempt to address any ideas about forcing medical services to operate more like a free market, nor does it do anything in regards to bringing costs down.
I’m not sure if we should expect any bill to deal with cost of care. There’s a lot of lobbying money tied up in keeping prescriptions and hospital care expensive. I don’t know if there is enough knowledge of doctor billing practices for that contributor to high costs to ever be reformed either.
In Closing
I expect that a lot of this will be changed, but if you support universal healthcare or its slightly more ungainly brother, universal insurance, this is a plan you should consider supporting.
Questions? Comments?
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