A conservative group known as the 2017 Project, headed by Jeffrey Anderson, has released another proposal rooted in the following premise: "The common formulation is that we need to 'repeal and replace' Obamacare. The truth is more nearly the reverse: We need to advance a winning alternative to pave the way to full repeal."
Like the proposal offered by Sens. Tom Coburn, R-Okla., Richard Burr, R-N.C., and Orrin Hatch, R-Utah, the latest proposal would repeal Obamacare, offer tax credits to individuals to purchase health insurance, cap the tax exemption for employer-based health insurance without eliminating it, and address health insurance coverage for those with pre-existing conditions.
Under the 2017 Project proposal, all individuals who are either uninsured or currently insured on the individual market would be offered a tax credit, ranging from $1,200 for those younger than 35 to $3,000 for those older than 50. The value of the credits would not vary by income level, and would be scheduled to grow at 3 percent a year. Any money not spent on premiums could be put in a health savings account.
To address the issue of individuals with pre-existing conditions, the plan would require insurers to continue offering coverage to those with pre-existing conditions who are covered at the time of the enactment of the proposal, including those who obtained insurance through Obamacare.
This presents a problem for the proposal, however. Given that the earliest realistic time that an Obamacare replacement could be enacted would be 2017, that would mean that those with pre-existing conditions would have had more than three years to sign up for health insurance through Obamacare. During that time, millions likely will. And insurers will be covering those individuals with the understanding that the individual mandate and generous subsidies for lower-income Americans are in place. If, three years from now, all of those other provisions are wiped away, but insurers are still forced to cover high-risk individuals, it could ravage the insurance market.
There are other ideas that are meant to mitigate this risk. For instance, the plan increases funding for high-risk pools, which aim to remove those with pre-existing conditions from the broader insurance market over time.
The proposal would also give a one-year opening for 18-year-olds to get covered and remain covered, and enables individuals who maintain continuous coverage to switch plans and still stay covered with a pre-existing condition. That is another way to motivate individuals to get covered and maintain insurance coverage.
In addition, the proposal would cap the employer-sponsored health insurance tax exemption for plans above the 75th percentile of cost. As an example, "If a family plan costs, say, $22,000 and the cap is set at $20,000, a family with that plan would continue to get a tax break on the first $20,000 of its cost; it simply wouldn’t get a tax break on the last $2,000."
Like the Coburn-Burr-Hatch proposal, the 2017 Project proposal assumes that undoing the employer-based insurance model would be too disruptive and too tough of a sell politically. However, I don't think it's possible to create a vibrant and truly free individual market for health insurance without undoing it.
The proposal, according to the 2017 Project estimate, would cost $977 billion from 2015 to 2024, compared with the $2 trillion gross cost of Obamacare over that period. However, the authors estimate that $399 billion of their proposal would come from direct spending. This direct spending represents spending on high-risk pools as well providing tax credits to lower income individuals in which the value of the tax credit exceeds their income tax liability. The remainder of the money would represent a tax cut, because the credits would be reducing individuals' tax burden.
Taken together with Coburn-Burr-Hatch, the 2017 Project report is a part of the ongoing policy conversation among conservatives about how to combat Obamacare now that it's already in place.