Republicans Can't Just Fight Bad Healthcare Policy, They Must Reduce Costs and Improve Access

The U.S. House just passed legislation that will help make health insurance more affordable —  without extending the enhanced premium subsidies for exchange coverage that Democrats enacted during the COVID-19 pandemic.

The House action comes on the heels of votes on two measures in the Senate: one from Democrats that would have extended those subsidies and another from Republicans that would have addressed the affordability of health insurance in other, more fiscally responsible ways.

Both votes failed.

The upshot is that Obamacare's enhanced subsidies will sunset on schedule at the end of this year. That's good news. Their expiration is a rare victory for fiscal sanity.

The three-year extension championed by Democrats would cost roughly $83 billion over the next decade.

But this issue is not going away.

House Democrats were able to attract enough Republicans to force a vote on extending the enhanced subsidies; that vote will likely take place in January, 2026.

In the meantime, Republicans must make the case for their brand of healthcare reform — and advance legislation that would nudge the U.S. healthcare system in a market-oriented, patient-centered direction in the new year.

The House bill that passed — and the Senate Republican bill that failed — both appropriate money for "cost-sharing reduction" payments for the first time.

These payments are intended to go to insurers to reduce out-of-pocket costs for people making less than 250% of the federal poverty level —  $80,375 this year for a family of four -- who select a mid-level silver plan .

Congress never formally provided money for these CSR payments.

But Obamacare still required insurers to cover them. Insurers responded by inflating silver premiums — a practice known as "silver-loading."

If they had to cover CSR payments, from their perspective, at least they'd be able to claim additional premiums, generally with a hefty assist from federal taxpayers.

Silver-loading had another benefit for insurers.

Obamacare's premium subsidies are based on the second-lowest premium for a silver plan.

So jacking up silver premiums effectively entitles enrollees to higher subsidies that they can apply toward the purchase of any plan.

It's a way for insurers to claim even more taxpayer lucre.

Funding CSR payments ends all this arbitrage.

U.S. Senate leaders say that it will reduce premiums by roughly 11% — and federal spending by more than $30 billion.

People with incomes below 400% of the poverty level — $128,600 for a family of four — would still qualify for subsidized coverage under Obamacare's original terms.

Those of modest means in the CSR population would see the government cover 80% to 90% of their premiums.

Another way the Senate bill intended to expand access to affordable coverage was by opening up catastrophic plans, which feature lower premiums and higher deductibles and are designed to protect people in the event of an emergency, to all consumers.

Previously they'd only been available to people under the age of 30 and those granted federal hardship exemptions.

The House bill included other provisions for making insurance more affordable. Among them was a move to codify rules put in place by the Trump administration in 2018 to expand access to association health plans.

Under these arrangements, small employers band together to sponsor a single large-group plan. There's strength in numbers — together, small employers can comprise a more stable risk pool and negotiate more effectively with insurers and providers.

All these ideas deserve another hearing come January.

Republicans have been right to stand against the costly, irresponsible extension of Obamacare's enhanced subsidies.

But they can't be content to fend off bad policy. Next month, they need to advance healthcare reform that will reduce costs and improve access.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It." Follow her on X @sallypipes. Read more of Sally Pipes' reports — here.