Health insurance policy is complicated.  I know this, my Insurance Law students know this, and, I daresay, most of our politicians know this.  Rushing to action – either in terms of quickly passing health insurance legislation or quickly passing judgment on one’s political opponents  ­–  is especially unwise in this area.

Strongarmed by President Trump, the House of Representatives has begun debate on the American Health Care Act, the Republican plan to repeal the Affordable Care Act.  President Obama’s ACA has increased health insurance coverage for many, but at prices too high for others to afford.  Although Republicans have a majority of both the House and the Senate, President Trump’s AHCA must balance more conservatives’ desire to eliminate ACA-style regulations that reduce competition in the insurance marketplace with moderates’ desire to keep certain provisions, like the requirement that insurers offer certain essential health benefits, intact.  Essential health benefits mandates ensure that everyone has health insurance coverage for their basic needs and prevents insurers from creating policies that cover far less than consumers expect, but they drive up health insurance costs, undermine choice for those who want a more limited plan, and reduce competition among insurers.

Deciding how to fix what is an increasingly broken health care system (with health insurance coverage being only one facet of the problem), requires an examination of both broad principles and specific proposals.  Below, I offer a little of both.

 

In proposing their specific solutions, politicians and constituents should frame the debate as a tension between competing values in several dimensions, such as:

• Health care as a right or as a privilege/entitlement

Those Republicans and Democrats, such as Senator Kamala Harris, who label health care as a “right” believe that all Americans should be guaranteed health care regardless of ability to pay.  This label elevates what has in the past been treated as a privilege, or a mere government entitlement, to the status of fundamental right- such as freedom of speech or guarantee of counsel in criminal matters.  The major problem with classifying health care as a right is that the government hasn’t created the illness in the same way as the government’s suppression of speech or forced incarceration, leading to the need for counsel.  Classifying health care as a right necessitates deciding what threshold level of health care humans deserve, solely by being human, in an age where health care advances rapidly, depends on private labor, and is increasingly costly.  That said, the law already requires emergency rooms to treat patients regardless of ability to pay, largely on the theory that allowing people to die solely based on insolvency is an inherent moral wrong.

Whether access to health care (via health insurance) is described as a fundamental right or as a government entitlement matters.  For one, the debate on how to balance tradeoffs is affected by whether you believe the government is simply deciding what is the best policy for all Americans or whether the government must ensure a threshold level of health care access for all.  The number of Americans who will become uninsured if the ACA is repealed is viewed as intolerable to those who label health care as a right.  However, to those who believe the government need not provide health insurance as a right, designing a system where some lose health insurance may be a necessary cost to save the system, to incentivize health-promoting behaviors, or to reward hard work, especially for the middle class, by allowing Americans more control of their own money.

• Concerns about adverse selection versus concerns about “unfair discrimination”

President Obama’s ACA was designed to prevent insurers from engaging in certain types of pricing based on risk, such as charging higher premiums to those with pre-existing conditions.  This type of risk allocation by insurers is necessary to avoid adverse selection, where high risk individuals (such as those who are already sick, and thus will likely incur high medical costs) are much more likely to join an insurance pool than low risk individuals.  When low risk people leave an insurance pool, insurance premiums rise, leading more lower risk people to leave the pool, and this becomes a vicious cycle.  The ACA has meant that those with cancer and diabetes cannot be denied coverage, or charged higher prices, based on those conditions.  This has dramatically increased coverage for those in need, but has fueled adverse selection – because not enough people are opting into increasingly expensive insurance pools, even with the “individual mandate” penalizing people for not buying insurance.

The AHCA’s alternative to the individual mandate may not incentivize enough for people to opt into health insurance.  I do not believe that health insurers can continue to cover those with pre-existing conditions at non-exorbitant prices without a fairly heavy handed way of forcing people to have health insurance.  Requiring people to buy health insurance is somewhat of an unfair governmental imposition, especially if you do not believe either health insurers or individuals must serve as charities for others.  However, although I generally disfavor paternalistic reasoning, I could support a strong individual mandate, given the right conditions, because health insurance is generally a beneficial thing for consumers to purchase.  You never know when/if you’re going to fall ill or be hit by a bus.  The ACA’s penalty may not have been high enough to force everyone to acquire health insurance.

In between my fellowship at Harvard Law School and my job here at Ohio Northern Law, I opted not to purchase health insurance, which was too expensive for me, on balance.  I paid the pro-rated penalty when filing my taxes.  Many, like me, however, gamble with insurance coverage especially if insurance costs are higher than projected medical bills.  Now that I am again employed, my employer sponsors my health insurance.  Under federal law that predates the ACA, large employer-based insurance plans are already generally not permitted to charge high risk employees higher prices, and this is largely a good thing, because discriminating against high risk individuals causes the sickest among us to lose insurance coverage.

• Incentivizing Behavior Versus Accommodating Factors Outside of Our “Control”

The tension between incentivizing good behavior and accepting human frailty, I believe, is the most difficult one to resolve in all areas of law, and underlies much of what separates true progressives from true conservatives.  Comments about choosing iPhones over health care aside, there are two ways a more conservative approach to health care can incentivize better behavior by Americans and may even bolster some progressive policies.

Removing some of the significant subsidies the ACA provides for the purchase of health insurance will force individuals to make appropriate spending choices within their means in a way that saves the government money.  More importantly, allowing insurers to price based on risk could encourage Americans to take better care of their health, including eating healthier, exercising more, and not smoking.

Of course, healthy food costs more money, and those working several jobs have less time to exercise.  Ultimately, to the most liberal, even factors like diet and exercise are outside of one’s “control.”  That said, because these factors are so highly correlated with health outcomes, including increased rates of cancer and heart disease, I would like to allow insurance companies more ability to discriminate in these areas.  This type of discrimination will lower adverse selection, incentivize good behavior, and decrease health care costs overall.

Currently, because of federal laws like the Health Insurance Portability and Accountability Act, large employer sponsored health plans must generally charge the same price to all employees buying the same plan, regardless of health factors.  They can charge more to smokers only if their programs meet certain requirements, although they can set an overall higher price for the group if it includes smokers.  Under the ACA, small group plans and individual plans can charge higher rates to smokers by a 50% increase.  I would like to see the smoker’s penalty increase even more, but for tax dollars to go to helping individuals quit smoking (the ACA already has certain requirements for helping policyholders quit smoking).  Over 15% of American adults smoke, which is tragic.  Although smoking is correlated with having a low income, and addiction does have a genetic component, the government should allow insurance companies even more leeway to price based on risk in this area as an incentive to quit this unhealthy behavior.  This principle could also be extended to exercise, for those who don’t already have a condition that limits their ability to exercise.

I generally oppose this sort of governmental paternalism, but it does mimic what insurance companies would rationally do anyway, price based on risk.  The difficulty with regulating health insurance is that there are always tradeoffs.  Republicans and Democrats who sell their proposals as making everyone happy, keeping coverage for all while lowering premiums, are lying.  Getting more people covered means that some people, lower to middle income individuals above the poverty line, who are working hard and saving money, may be burdened with premiums that force them to actually cancel health insurance they were purchasing for themselves.  Increasing subsidies for this population will cost the government a lot of money, which it can’t exactly afford.  Balances must be struck, and I think a good way to strike these balances is deciding where we will allow insurers and employers to price based on risk.