Tag Archives: under-26 mandate

Five Factors That Could Interfere with Graham-Cassidy’s State Health Care Waivers

Some conservative writers—including others who write for this publication—have opined that the legislation written by Sens. Lindsay Graham (R-SC) and Bill Cassidy (R-LA) offers states the ability to innovate and reform their health care systems. Most conservatives, including this one, consider state flexibility an admirable goal.

Certainly reforming Medicaid—through a block grant or per capita cap, coupled with additional flexibility to allow states to manage their programs more freely—would go a long way towards improving care, and reducing health care costs.

But does Graham-Cassidy as written deliver on its promise regarding Obamacare insurance regulations? On the two critical questions surrounding the legislation—will it lower insurance premiums, and will it generate a system that works for states?—a textual analysis of the bill yields significant doubts. At least five issues could hinder the results its sponsors have promised, and which all conservatives hope for.

1. Subsidizing Moral Hazard

The language on the top of page 15 explicitly links waivers to funding from the new system of block grants the bill creates. Any waiver will only apply to 1) coverage provided by an insurer receiving block grant funding and 2) coverage “provided to an individual who is receiving a direct benefit (including reduced premium costs or reduced out-of-pocket costs)” under the block grant.

This requirement that each and every person subjected to a non-Obamacare-compliant plan must receive a “direct benefit” subsidized by federal taxpayers has several potential perverse consequences. By definition, it encourages moral hazard. Because individuals will know that if they are subjected to health underwriting, or an otherwise noncompliant plan, they must receive federal subsidies, it will encourage them not to buy health insurance until they need it.

It means that either states will have to extend taxpayer-subsidized benefits to highly affluent individuals (allowing them to buy noncompliant plans), or have to permit only low- and middle-income families to buy noncompliant plans (to restrict the subsidies to low-income families). Both scenarios seem politically problematic to the point of being untenable.

If states try to provide a de minimis direct benefit—say, a $1 monthly premium subsidy—to some enrollees to minimize the two problems described above, they would face high overhead costs, and a complex system to administer.

When considering the two considerations above—will the bill lower premiums, and will it work?—this provision alone seems destined to preclude either from occurring. The moral hazard could increase premiums, not lower them, driving more healthy people out of the marketplace by telling them they will receive subsidies if and when they become sick and need coverage. The requirement that every person subjected to a waiver must receive subsidized benefits appears potentially destabilizing to insurance markets, while also creating political problems and administrative complexity.

2. Encouraging Lawsuits

The provision on page 12 requiring states applying for waivers to describe “how the state intends to maintain access to adequate and affordable health insurance coverage for individuals with pre-existing conditions” presents two concerns. First, a future Democratic administration could use rulemaking to define “adequate and affordable health insurance coverage” so narrowly—prohibiting co-payments or cost-sharing of more than $5, for instance—that no state could maintain access to “adequate and affordable” coverage, thereby eliminating their ability to apply for and receive a waiver.

Second, courts have ruled that Medicaid waiver applications are subject to judicial review, a standard that would presumably apply to the Graham-Cassidy waivers as well. While a Congressional Research Service report notes that courts have traditionally given deference to the Centers for Medicare and Medicaid Services (CMS) on waiver applications, the Ninth Circuit Court of Appeals in 1994 did in fact strike down a California waiver application that CMS had previously approved.

If a state receives a waiver, it seems highly likely that individuals affected, with the strong encouragement of liberal activists, will seek relief in court, and point to the page 12 language to argue that the court should strike down the waiver for not providing “adequate and affordable coverage” to people with pre-existing conditions. At minimum, the ensuing legal uncertainty could place states’ waiver programs in limbo for months or even years. And only one judge, or one circuit court, that views the pre-existing condition language as applying to more than states’ waiver application could undermine the program.

Congress could theoretically include language in Graham-Cassidy precluding judicial review of administrative decisions regarding waivers, as Democrats did 13 separate times in Obamacare. But on this particular bill, such a provision likely would not pass muster with the “Byrd rule” that applies to budget reconciliation measures.

Specifically, language prohibiting judicial review would have no (or a minimal) budgetary impact, and would represent matter outside the committees with jurisdiction over the reconciliation bill (Senate Judiciary versus Senate Finance and HELP Committees), both points of order that would see the provision stricken absent 60 Senate votes (which the bill does not have) to retain it.

Given the ongoing political controversy surrounding pre-existing conditions, some moderates may view the inclusion of this phrase as critical to their support for the bill. But its inclusion could ultimately undermine the entire waiver process and one of conservatives’ prime goals from the “repeal-and-replace” process, namely relief from Washington-imposed regulatory burdens.

3. Encourages Activist Judges and Bureaucrats

Language on page 13 of the bill includes language limiting any regulatory waiver: “A health insurance issuer may not vary premium rates based on an individual’s sex or membership in a protected class under the Constitution of the United States.” Here again, a future Democratic administration, or activist judges, could easily take an expansive view of “protected class” to include age, family status, gender identity, etc., in ways that undermine the waivers’ supposed regulatory relief.

4. Allows States to Waive Only Some Regulations

While states may waive some Obamacare regulations, they can’t waive others, an internal inconsistency that belies the promise of “flexibility.” For instance, states cannot waive the under-26 mandate if they so choose. Moreover, language on page 15 prohibiting a waiver of “any requirement under a federal statute enacted before January 1, 2009” precludes states from waiving regulations that preceded Obamacare, such as those related to mental health parity.

If the sponsors believe in state flexibility, they should allow states to waive all federal insurance regulations, even ones, such as the under-26 mandate or mental health parity, they may personally support. Or better yet, they should move to repeal the regulations entirely, and let states decide which ones they want to re-enact on the state level.

5. No Funding Equals No Waivers

Because the bill explicitly ties waivers to federal funding, as noted above, the “cliff” whereby block grant funding ends in 2027 effectively ends waiver programs then as well. Such a scenario would put conservative policy-makers in the perverse position of asking Washington to increase federal spending, because any regulatory relief under Obamacare would otherwise cease.

Meaning of Federalism

The potential concerns above demonstrate how Graham-Cassidy may not provide full flexibility to states. Whether through cumbersome administrative requirements, a future Democratic administration, court rulings, or key omissions, states could find that as written, the bill’s promise of flexibility might turn into a mirage.

Given that, it’s worth remembering the true definition of federalism in the first place. Federalism should not represent states getting permission from Washington to take certain actions (and only certain actions). It should represent the people delegating some authority to the federal government, and some to the states. A bill that looked to do that—to remove the Obamacare regulatory apparatus entirely, and allow states to decide whether and what portions of the law they wish to reimpose—would help to restore the principles of federalism, and a true balance between Washington and the states.

This post was originally published at The Federalist.

Tomi Lahren Is What’s Wrong with Obamacare

Over the weekend, as commentators Chelsea Handler and Tomi Lahren engaged in a political debate, a comment by the latter unwittingly pointed to one of the singular problems of Obamacare. When Handler asked what health plan she belonged to, Lahren responded, “Luckily I am 24 so I am still on my parents’…” Cue sarcastic laughter from the crowd.

The liberal audience in Pasadena mocked Lahren for her hypocrisy—attacking Obamacare while benefiting from it by staying on her parents’ health insurance—but they weren’t wrong in their criticism. While Lahren rightly pointed out that Obamacare “fails the very people that it’s intended to help,” if she wants to know the root cause of that failure, she should look in the mirror.

The Slacker Mandate Is Aptly Named

One report on the incident claimed that “extending insurance to older ‘dependents’ is not typically targeted by conservatives who criticize Obamacare.” In reality, though, conservatives have targeted this mandate—for instance, the paper released in 2012, while I worked for the Senate Republican staff of the Joint Economic Committee. It noted that mandates such as the under-26 provision raise premiums by a minimum of several hundred dollars per year, and that proposals to provide health insurance to 20-something “dependents” like Mark Zuckerberg (then 28) would create definite costs to achieve questionable benefits.

Since then, the case against this particular mandate has only increased. A National Bureau of Economic Research paper released last year found a significant economic impact: “We find evidence that employees who were most affected by the mandate, namely employees at large firms, saw wage reductions of approximately $1,200 per year. These reductions appear to be concentrated among workers whose employers offer employer-sponsored health insurance; however, they do not seem to be only borne by parents of eligible children or parents more generally.”

As the Wall Street Journal noted last year, the paper made clear that “no alleged government benefit is free and people should be allowed to make the trade-offs for themselves.” Apparently, however, alleged “conservative” Lahren believes otherwise.

The Tomi Lahren Case Study

Lahren’s comments provide a perfect case study against the under-26 mandate, in two respects. First, the “dependent” mandate has few statutory limits—whether income, lack of access to employer coverage, or both. That a pundit like Lahren can hold lucrative media contracts while remaining on her parents’ health coverage speaks to the absurdity of Obamacare’s definition of “dependent.”

Second, it proves Lahren’s criticism of Obamacare that the law “fails the very people it’s intended to help.” Because Lahren refuses to buy her own insurance plan, she raises premiums 1) for her parents’ co-workers, who have to pay for Lahren’s health costs as part of their coverage and 2) on insurance exchanges, where individuals are older and costlier than average precisely because many young adults remain on their parents’ policies.

With upper-middle-class households largely obtaining coverage through employers, and households of more modest means going through exchanges instead, the under-26 mandate represents a sizable transfer of wealth from the working class—who pay higher premiums—to the affluent—who gain the benefit of “free” coverage for their children. So Lahren is correct that Obamacare “fails the very people it’s intended to help”—because of people like her, who grab government “benefits” irrespective of the other individuals those “benefits” harm.

The end of the 2012 Joint Economic Committee paper noted that “a welfare state administered by the private sector, yet mandated by government, remains a welfare state at its core.” If Lahren wants to help the people Obamacare hurts, or even if she just wants to adhere to the conservative political beliefs she purports to follow, then perhaps she should use the coming weeks to explore her own health insurance options, rather than remaining part of the Obamacare welfare state she claims to abhor yet perpetuates.

This post was originally published at The Federalist.

Obamacare versus the American Health Care Act

A PDF version of this document can be found on the Texas Public Policy Foundation website.

Obamacare

House GOP Proposal

Refundable tax credit entitlement

Check

Section 1401, Page 129

Check

Page 23 of Ways and Means bill

Raid Medicare to pay for new entitlement

Check

“President [Obama] took $716 billion from the Medicare program—he raided it—to pay for Obamacare” (Rep. Paul Ryan)

Check

Medicare savings RETAINED to pay for Ryancare entitlement spending

Allow illegal aliens to receive new entitlement

Check

“Insufficient and ineffective verification methods…allow for illegal immigrants to access the Exchange and subsidies” (Rep. Tom Price)

Check

Retains same verification system—Page 41 of Ways and Means bill

Federal bailouts for health insurers

Check

Sections 1341-42, Page 124

Check

Page 45 of Energy and Commerce bill

Medicaid expansion to able-bodied adults

Check

Section 2001, Page 198

Check

Page 5 of Energy and Commerce bill

Federal control of insurance markets
  • Pre-existing conditions

Check

Section 1201(1), Page 64

Check

Page 61 of Energy and Commerce bill

  • Insurance Exchanges

Check

Section 1311, Page 88

Check

RETAINED

  • 26-year-old mandate

Check

Section 1001(1), Page 34

Check

RETAINED

  • Essential health benefits

Check

Section 1302(b), Page 78

Check

RETAINED

  • Medical loss ratios

Check

Section 1001(1), Page 40

Check

RETAINED

  • Annual/lifetime limits

Check

Section 1001(1), Page 33

Check

RETAINED

  • Prevention and contraception mandate

Check

Section 1001(1), Page 33

Check

RETAINED

  • Actuarial value

Check

Section 1302(d), Page 82

X

Repealed in 2020—Page 65 of Energy and Commerce bill

 

“Repeal and Replace” Becomes Repeal vs. Replace

In the past few weeks, various articles summarizing Republican moves on health care have attempted to analyze the factions and dynamics driving the debate. Why, some reporters have asked, are Republicans struggling to draft a consensus alternative to Obamacare, given that the party had seven years to create such a plan?Apart from the point that Democrats faced their own not-insignificant divisions on health care eight years ago, much of the debate within Republican ranks has its roots in fundamental disagreement about what an alternative to Obamacare should do. If two people or factions can’t agree about the ultimate goals of legislation, it shouldn’t be surprising to find them disagreeing on the policies to include in said bill.

For all the emphasis on the “repeal and replace” slogan since the day Obamacare passed Congress in March 2010, the current debate might be characterized as “repeal vs. replace.” Repealers focus more on eradicating the law, while replacers wish to make sure that an alternative does not leave many of Obamacare’s newly covered uninsured.

Repealers
The repeal faction generally comes from the conservative wing of the party. It wants every word of Obamacare repealed — lock, stock, and barrel — and, in some cases at least, is willing to consider blowing up the Senate filibuster (aka the “nuclear option”) to do it. Repealers generally do not want to maintain many, or any, federal regulations on health insurance, deferring to the states (as was largely the case prior to Obamacare).

When it comes to alternative policies, some repealers don’t care about “replacing” Obamacare at all and would content themselves with a return to the status quo ante. Other repealers would focus more on enacting reforms to lower health-care costs rather than expanding coverage or providing subsidies to previous Obamacare recipients. Some repealers would go beyond repeal to examine prior federal encroachments on health policy that preceded President Obama’s tenure.

Of particular import: Repealers believe that repeal means the elimination of all of Obamacare’s taxes and spending — and that these should go away, not to return. That directly contrasts with the approach of replacers, who focus on another policy objective.

Replacers
Whereas repealers want to eradicate the health law’s spending and taxes — to use the Washington lingo, they would return to the pre-Obamacare fiscal baseline — replacers focus on maintaining, or at least not eliminating, Obamacare’s coverage baseline. They would like an alternative to Obamacare to at least be competitive with current law when it comes to the number of individuals with health insurance — although for different reasons. Some replacers believe in the goal of universal health coverage, while others simply believe that an alternative, to be politically viable must offer something to those currently covered by Obamacare.

Coming from more moderate or establishment wings of the Republican party, replacers focus on preserving coverage gains as an objective of any alternative legislation, whereas repealers focus solely on lowering health-care costs. To preserve Obamacare’s expansion of coverage (albeit perhaps with reduced benefits), replacers would either preserve some of Obamacare’s tax increases, or repeal them all but institute new measures to raise revenue in their place.

Replacers also would maintain a greater level of federal oversight of health insurance than repealers. They would attempt to preserve policies such as Obamacare’s under-26 insurance mandate, ban on annual and lifetime limits, and the ban on preexisting conditions; repealers would either devolve these policies to the states or scrap them entirely.

As for the president, he has — as on many issues — given mixed messages. His public statements — “insurance for everybody,” “simultaneous repeal-and-replace” — tend to put him in the replacer camp. But candidate Trump’s platform on health care, with a minimalist approach focused largely on reducing health-care costs, emphasized the repealer elements of his agenda during the contentious Republican primaries last spring.

Rorschach Test
It is perhaps oversimplifying matters to view these two schools of thought as diametrically opposed. Members of Congress could agree with elements of both factions, depending on the specific issue.

But it does not oversimplify to say that the question of emphasis — who cares more about repeal, and who cares more about replace? — has driven much of the debate since the November 8 election results gave Republicans an opportunity to impose their will on health care. It explains why some replacers have argued in favor of keeping some or all of Obamacare’s tax increases, and it explains why conservative repealers have expressed opposition to replacing Obamacare’s subsidies with another system of refundable tax credits.

The New York Times recently profiled Josh Holmes, the former aide to Senator Mitch McConnell who coined the “repeal-and-replace” phrase when working for the Republican leader seven years ago. But while the phrase proved catchy among elected leaders, it did not solve the debate about which policies to include in an alternative plan. Instead, by creating a new Rorschach test, in which candidates could emphasize either the “repeal” or the “replace” elements depending on their political views and the audience of the moment, it effectively postponed the day of decision within the party.

With views on Obamacare alternatives not fully litigated during the 2016 campaign cycle (or, for that matter, the cycles preceding it), that day of reckoning has finally arrived. Whether and how Republicans resolve the conflict between the repealers and the replacers will help determine whether the catchy phrase “repeal-and-replace” gets dubbed with a catchphrase of its own: Too cute by half.

This post was originally published at National Review.

Will Health Insurance Premiums Related to Obamacare Sway Voters?

As candidates in both parties focus on the general election campaign, some Republicans wonder if large premium increases related to the Affordable Care Act could be an “October surprise” that helps propel them to victory in November. The causes of the approaching premium increases vary, but some are rooted in a 2013 Obama administration proposal.

In reporting on premium increases by one Iowa insurer, the Des Moines Register noted that individuals who bought new plans that complied with Affordable Care Act regulations could face premium increases of 38% to 43% next year. “Another 90,000 Wellmark customers who hold older individual insurance plans are expected to face smaller increases, which will be announced in June,” the paper said.

The disparity stems from a policy proposal in late 2013, when HealthCare.gov was not functioning, millions had received insurance cancellation notices, and President Barack Obama was being heavily criticized for pledging, “If you like your health-care plan you can keep it.” The administration allowed states to extend existing plans for one year.

Some states chose not to take this option. Those that implemented it did so for varying lengths of time. After extending the policy twice, the administration said this year that these temporary extensions would expire by the end of 2017.

States that implemented extensions created an actuarial problem for their health-care exchanges, the market where individuals not insured through their employer can buy their own plans. Enrollees seeking the enhanced benefits provided by Obamacare-compliant plans were the most likely to use them, while many people with little need for additional benefits preferred the status quo. In Iowa the problem is particularly acute: 90,000 residents have pre-Obamacare coverage, significantly more than the 55,000 who had signed up on the exchange as of February. By keeping these people, who tend to be healthier than those with ACA plans, out of the exchanges, the “fix” created another problem, laying the groundwork for the larger premium increases for next year.

The issue is more pronounced in Iowa, but other states are affected. This isn’t the only component of Obamacare that could exacerbate premium spikes. One popular feature is that parents can cover their children up to age 26. At the same time, however, this policy point discourages those young people from buying a plan of their own. Enrollment among these “young invincibles” remains well below expectations three years into the exchanges. Data from 2014 had suggested that those young people enrolling in plans were incurring high medical costs—which could also contribute to a trend of premium spikes.

For every action, there is an equal and opposite reaction. Political solutions from years past may materialize in the form of rate hikes this fall–and could generate a distinct reaction among voters on Election Day.

This post was originally published at the Wall Street Journal’s Think Tank blog.

More on Under-26 Insurance Mandate

As a follow-up to Sen. DeMint’s Member Viewpoint yesterday on government mandates for health insurance policies to cover dependent children, the liberal Commonwealth Fund is out this morning with a study regarding the issue.  The study concludes that, while the under-26 coverage mandate increased the number of covered adult children by up to 2.5 million, a total of 6.6 million youths took advantage of the under-26 mandate included in the health care law to remain on their parents’ policies.  Related points from the study:

· If accurate, the study findings would mean that 4.1 million youths, or more than 60% of those taking advantage of the under-26 mandate, likely had access to other forms of health coverage – for instance, from their own employer,* from a student health plan, or from an individually-purchased plan – yet chose instead to remain on their parents’ health insurance.

· The benefits of the under-26 mandate have disproportionately accrued to affluent and wealthy families.  The study found that nearly seven in ten (69%) of young adults in families with incomes over four times the federal poverty level – over $92,000 for a family of four – stayed on their parents’ health insurance.  Conversely, only one-sixth (17%) of young adults in families with incomes under 133% of poverty – just over $30,000 per year for a family of four – utilized the under-26 mandate to remain on their parents’ insurance.

Some may argue that the study illustrates several perverse incentives resulting from the new federal mandate:

1. The high number of young adults turning down other forms of coverage suggests a high rate of crowd-out – youths declining to seek their own health coverage to stay on their parents’ plans for “free.”

2. The costs of this “free” insurance will be socialized across the health insurance system – but in a non-transparent manner.  The Administration claimed that the under-26 mandate would affect 2.37 million young adults, and raise premiums by about one percent (some studies have concluded the Administration under-estimated the cost impact).  However, if the mandate actually affected 6.6 million young adults, the premium impact would almost certainly be higher.

3. The under-26 mandate may also be exacerbating premium increases among student health plans.  Other Obamacare mandates taking effect this fall are raising premiums, by as much as 350% in some cases.  Some news reports have indicated that, rather than pay the higher premiums for student insurance, students who have access to coverage through their parents will choose that option instead.  However, as noted above, the under-26 mandate is disproportionately helping affluent families – meaning that only students from lower-income households without access to a parental health plan may be forced to pay these higher premiums.

Finally, even the Commonwealth study admits that the poor economy is a major reason why many young people do not have insurance coverage:

The lingering softness in the U.S. economy has likely contributed to high rates of reported gaps in health insurance among young adults in the survey.  More than one of 10 (11%) 19-to-29-year-olds in the survey said they were unemployed but looking for work.  Of those, 62 percent had experienced a time without health insurance in the past year compared with 32 percent of those who were employed full time and 38 percent of those who were employed part time.

The study further found that fully 9.6 million Americans aged 19 to 29 lost their jobs between November 2009 and November 2011, and of those who lost jobs providing health insurance, more than half (52%) became uninsured.

It is this last conclusion – the devastating damage this Administration’s failed economic policies have wreaked – that should remain the focus of policy-makers going forward.  Some would argue that maintaining mandates that have encouraged millions of young Americans to drop their existing coverage to obtain “free” insurance through their parents is inconsistent with this objective.  During the SCHIP debate in 2007-08, conservatives opposed using taxpayer funds to expand a government program in a way that would allow middle-income families to drop their current insurance and obtain government-run coverage instead.  By this same logic, conservatives should be concerned about government mandates on the private sector that have had much the same effect.

(* The law does allow so-called “grandfathered” (i.e., pre-Obamacare) employer plans to exclude young adults from their parents’ health plans through 2014, if the young adult in question has access to employer-provided health insurance himself.  However, as even the Administration’s own regulations admit that most employer plans have lost, or will soon lose, grandfathered health status, this option is not available to many employers.)

JEC Member Viewpoint: Sen. Jim DeMint on Mandates to Cover Dependent Children

Health Insurance Mandates to Cover Dependent Children

Numerous press reports in recent weeks have focused on what actions Congress may take in the event that Obamacare is repealed, or struck down in its entirety by the Supreme Court.  Many of these stories have focused on the law’s new mandate requiring insurers to cover policy holders’ children under age 26.  Several Members of Congress have expressed support for this provision, and one has even proposed extending the mandate for coverage of dependent children to all those under age 31.[1]  If the latter proposal passes, 28-year-old Mark Zuckerberg, with an estimated net worth of $17.5 billion, would be one of those eligible for dependent coverage under his parents’ health insurance.[2]

While the Obama Administration has attempted to use the under-26 mandate to sell their unpopular health law, the mandate itself is not without costs and perverse incentives, both to the health system and the economy as a whole.  A closer examination of the costs of this new government mandate reveals it may not be the panacea supporters have claimed.

Impact on Costs:  In its interim final rule implementing the under-26 mandate, the Administration claimed the provision would impose transfer costs of $3.5-$6.9 billion annually, and would raise premiums by 1 percent per year.[3]  However, a George Mason University study released in January found that the Administration omitted several key components in its regulatory impact analysis for this rule, understating its cost, potentially by billions.[4]  Given an average premium for employer-sponsored insurance of $15,073 in 2011,[5] an under-26 mandate raising costs by 1 to 3 percent would increase premiums by $151 to $452 per year.[6]  Conservatives have frequently criticized Obamacare for raising health insurance premiums, in direct violation of candidate Obama’s promise to lower them.[7]  Even the Administration admits that the under-26 mandate has led to higher premiums for businesses and families.

Impact on Coverage:  While many press reports have focused on the “children” obtaining coverage thanks to the under-26 mandate, fewer have examined how many individuals have lost coverage due to the federal requirements.  However, studies suggest these numbers are not insignificant.  For instance, multiple[8] studies[9] have suggested that every 1% increase in premiums increases the number of uninsured by approximately 200,000-300,000 individuals nationwide.  With the under-26 mandate raising premiums by at least 1%, and potentially much more for some plans, it is reasonable to conclude that hundreds of thousands of individuals have lost coverage – because they were priced out of the individual market, or because their employers decided to stop offering coverage – as a result of the new requirements.  These newly uninsured individuals represent what authors William Graham Sumner and Amity Shlaes famously referred to as the “Forgotten Men” – the individuals suffering harm as a result of government intervention.

Meanwhile, the mandate would turn one of the health market’s few remaining natural incentives on its heads, discouraging young adults from purchasing insurance for themselves.  Instead of mandating that health insurance plans include family coverage for adult children, policy should encourage all young adults to purchase an individual health plan that they can afford and keep throughout their lives.

Impact on Jobs:  The under-26 mandate could have a negative impact on jobs and the economy, in two respects.  First, to the extent that businesses are forced to absorb the billions of dollars in costs associated with the mandate, they would prove less eager to take on additional workers, or increase hours for existing workers.  Second, numerous[10] studies[11] have illustrated that extended unemployment benefits tend to lengthen the average duration of unemployment, and increase the unemployment rate, by discouraging individuals from looking for work.

For similar reasons, some would argue that the under-26 mandate likewise provides financial incentives that discourage work, thereby increasing unemployment.  Both the Congressional Budget Office and then-Speaker Pelosi have admitted that Obamacare’s health insurance provisions will hinder the labor market.  The CBO stated that the law as a whole will “discourage work,”[12] reducing the labor supply by about 800,000 jobs.[13]  Pelosi encouraged young people to “leave your work” and “go be creative and be a musician or whatever,” because Obamacare would provide them with health insurance, thanks to the under-26 mandate and similar provisions.[14]

The heightened focus on under-26 coverage in many respects focuses on the symptom of a larger problem.  Put simply, fewer Americans would need to remain on their parents’ health insurance if they had stable, full-time work.  As of last year, a majority of firms, and more than five of six firms with more than 25 employees, offer insurance coverage to their workers.[15]  However, most firms do not offer health benefits to part-time or temporary workers.[16]  Recent surveys indicating that half of all recent college graduates are unemployed or under-employed – a devastating indictment of the Obama Administration’s failed economic policies – illustrate the real reason why the under-26 provision has attracted so much attention:  Because millions of young Americans can’t find full-time work.[17]

Given prolonged economic stagnation and its toll on young Americans, economic growth and job creation – not new government mandates – should take precedence.  Just as conservatives insisted on reducing the length of extended unemployment benefits as part of the payroll tax extension earlier this year, removing disincentives for young people to seek full-time employment may be one ingredient necessary to restoring the job market to full strength.

As policymakers ponder the fate of the law in the wake of the Supreme Court’s ruling, Congress would be wise to consider the economic impacts listed above.  Re-instituting a government mandate on the private sector would have significant economic costs, and would also undermine the cause of individual liberty in the process.  A welfare state administered by the private sector, yet mandated by government, remains a welfare state at its core.

A PDF version of this document can be found on the Joint Economic Committee’s website.


[1] Louise Radnovsky, Naftali Bendavid, and Sara Murray, “Tension in GOP Over Health Care Response,” Wall Street Journal May 23, 2012, http://online.wsj.com/article/SB10001424052702304019404577420210854278188.html.

[2] “Mark Zuckerberg,” Forbes 400 Profile, http://www.forbes.com/profile/mark-zuckerberg/.

[3] “Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 Under the Patient Protection and Affordable Care Act,” Federal Register May 13, 2010, http://www.gpo.gov/fdsys/pkg/FR-2010-05-13/pdf/2010-11391.pdf, Tables 1 and 5, pp. 27127-29.

[4] Christopher J. Conover and Jerry Ellig, “Beware the Rush to Presumption, Part A: Material Omissions in Regulatory Analyses for the Affordable Care Act’s Interim Final Rules,” Mercatus Center Working Paper 12-01, January 2012, http://mercatus.org/sites/default/files/publication/Beware_the_Rush_to_Presumption_PartA_ConoverEllig.pdf, pp. 14-15, 40-49.

[5] 2011 Kaiser Family Foundation/HRET Employer Health Benefits Survey, http://ehbs.kff.org/pdf/2011/8225.pdf, Exhibit 1.1, p. 1.

[6] Bruce Japsen, “Young Adults’ Coverage May Cost Parents Even More,” New York Times Prescriptions blog, November 23, 2011, http://prescriptions.blogs.nytimes.com/2011/11/23/young-adults-coverage-may-cost-parents-even-more/

[7] Freedom Eden, “Obama: 20 Promises for $2,500,” http://freedomeden.blogspot.com/2010/03/obama-20-promises-for-2500.html.

[8] Todd Gilmer and Richard Kronick, “It’s the Premiums, Stupid: Projections of the Uninsured through 2013,” Health Affairs Web Exclusive, April 5, 2005, http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.143/DC1.

[9] Government Accountability Office, Impact of Premium Increases on Number of Covered Individuals is Uncertain GAO Report HEHS-98-203R, July 7, 1998, http://archive.gao.gov/paprpdf2/160930.pdf, pp. 3-4.

[10] Bhashkar Mazumder, “How Did Unemployment Insurance Extensions Affect the Unemployment Rate in 2008-10?” Chicago Fed Letter No. 285, April 2011, http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2011/cflapril2011_285.pdf.

[11] Lawrence F. Katz and Bruce D. Meyer, “The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment,” NBER Working Paper No. 2741, October 1988, http://www.nber.org/papers/w2741.pdf.

[12] Congressional Budget Office, “The Budget and Economic Outlook: An Update,” August 2010, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/117xx/doc11705/08-18-update.pdf, Box 2-1, Effects of Recent Health Care Legislation on Labor Markets, pp. 48-49.

[13] Lester Feder and Kate Nocera, “CBO: Health Law to Shrink Workforce by 800,000,” Politico February 10, 2011, http://www.politico.com/news/stories/0211/49273.html.

[14] Nicholas Ballasy, “Pelosi to Aspiring Musicians: Quit Your Job, Taxpayers Will Cover Your Health Care,” CNS News May 14, 2010, http://cnsnews.com/node/65950.

[15] 2011 Kaiser Family Foundation/HRET Employer Health Benefits Survey, Exhibit 2.3, p. 37.

[16] Ibid., Exhibits 2.5 and 2.6, p. 39.

[17] Associated Press, “Half of New Graduates are Jobless or Underemployed,” USA Today April 23, 2012, http://www.usatoday.com/news/nation/story/2012-04-22/college-grads-jobless/54473426/1.

We Passed the Bill, But We STILL Don’t Know What’s In It…

The Mercatus Center is out today with several papers examining the quality of Obamacare regulations.  The papers take a specific look at eight Obamacare-related interim final rules – those rules that took effect WITHOUT prior public comment – published last year, and effectively undermine Speaker Pelosi’s famous quote that we had to pass the bill to find out what’s in it.  According to the studies, the regulatory analysis performed by the HHS bureaucrats to justify these Obamacare regulations is so poor, we passed the bill and we STILL don’t know what’s in it:

  • The health care [regulatory impact analyses] presented no monetary estimates of benefits, often overestimated the number of people who would benefit, and usually underestimated costs – often by hundreds of millions or billions of dollars.”
  • “The regulation establishing subsidies for early retiree health insurance failed to consider the possibility of “crowd out,” meaning a substantial portion of the subsidies would be given to employers who were going to continue health insurance for early retirees anyway.  This omission means the analysis substantially overstates the number of people who would retain coverage as a result of the regulation.”
  • “None of the regulations consider “moral hazard” – the risk that individuals will engage in wasteful health care spending or unhealthy activities because the insurance company is paying most of the cost.”
  • For at least three and possibly five of the eight rules, more accurate estimates of benefits and costs would likely have reversed the conclusion that benefits outweighed costs.”
  • In numerous cases, the agencies neglected to analyze alternatives that would have been obvious to researchers familiar with the health policy literature.  For the regulation extending health insurance coverage to adult dependent children up to age 26, the analysis did not even consider using the established Internal Revenue Service (IRS) definition of “dependent,” even though that arguably would have made compliance much simpler. Instead, the regulation involved a whole new definition.”
  • “The analysis of the regulation mandating coverage of preventive services did not consider alternative criteria for covered services, such as services that produce net cost savings or that produce results at some specified cost per outcome.  In addition, this analysis selectively cited literature that conveyed the impression that most preventive services pay for themselves by reducing the need for future health care expenditures, when in reality only a minority of such services do.”

Another Mercatus analysis found that Obamacare regulations scored significantly lower than other federal regulations with respect to their quality.  When judged on 12 criteria such as data documentation (How verifiable are the data used in the analysis?) and goal metrics (Does the rule establish measures to track its future performance?), the eight Obamacare regulations scored lower than other federal regulations issued in 2008 and 2009, including those issued by HHS.

As a reminder, through the end of 2011 the Administration had ALREADY issued more than 10,000 pages of Obamacare-related regulations and notices in the Federal Register.  By noting the weak analyses that regulators have used to justify these Obamacare regulations, the Mercatus studies have made the case not only that Obamacare’s impact on business could be more costly than advertised, but also that the supposed benefits of these regulations may end up being illusory – meaning at a time of economic weakness, businesses have been saddled with additional costs for no great purpose.

Obamacare Leads to Highest Premium Increases in Five Years

From Aon Consulting today comes a survey indicating that “HMO plans will have the highest premium increases in five years” – an overall average increase of 9.8 percent.  One reason: “HMO plans have also been more aggressive in estimating the cost impact of some of the most immediate applications of health care reform—including covering children up to age 26, the elimination of certain lifetime and annual limits and covering preventive care at 100 percent.”

In other words, while candidate Obama promised a $2,500 premium reduction for families as a result of his health care plan, premiums are rising at an even faster rate thanks to the new mandates imposed by the law.  As a result, middle-class families struggling in a difficult economy will have to pay more for their health insurance – meaning the “Affordable Care Act” is not living up to its name.

Premiums 2010

Obamacare Dis-Union: SEIU Local Drops Dependent Health Coverage

Just before the holiday break, the Wall Street Journal reported on the decision by SEIU local 1199, which represents home health workers in New York, to drop dependent coverage for more than 6,000 children – a decision made as a direct result of the health care law that the SEIU worked feverishly to support.  While the SEIU 1199 health fund previously covered some children up until age 23, a letter from a union official explained that the new law’s costly mandates proved unsustainable for the plan: “New federal health-care reform legislation requires plans with dependent coverage to expand that coverage up to age 26….Our limited resources are already stretched as far as possible, and meeting this new requirement would be financially impossible.”  In other words, instead of some dependent children having health coverage prior to the law’s enactment, now none will.

Also of note in the article: Because SEIU local 1199 represents home health care workers, the union’s finances were strained as a result of $370 million in cuts to Medicaid reimbursement rates that the state of New York enacted in the past two years.  This of course raises another interesting question: If New York is making reimbursement cuts because it can’t afford its Medicaid program now, how will states handle the fiscal impact of an estimated 18 million new enrollees after 2014?