Understanding the Issues: Federal Health Care Reform
Since the passage of the Affordable Care Act (ACA) in 2010, federal healthcare policy has been a major topic of discussion in Congress and on the campaign trail. Despite predictions of major healthcare reform during the early days of Donald Trump’s Presidency, all major healthcare reform bills in 2017 failed to pass Congress, putting a halt to consideration further discussion of the topic for the remainder of the Congressional term. Since then, the administration has taken incremental steps to reform health care and reduce the burden of federal regulation on businesses and individuals.
Recent History of Federal Health Care Policy
In May 2017, the House of Representatives passed the American Health Care Act, which would have repealed most provisions of the ACA and made reforms to Medicaid funding, including creating block grants for the states to use to fund the health care program. The Senate ultimately voted 49-51 to reject the bill, ending the chances of passing a major health care reform bill for the rest of the year. Since the failure of this large-scale repeal package, the federal government has taken steps to repeal portions of the ACA and other federal health care mandates.
The most significant change enacted under the Trump Administration has been the repeal of the ACA’s mandate that all individuals must have health insurance or pay a penalty to the IRS. This individual mandate was repealed as a part of the Tax Cuts and Jobs Act and removes a tax penalty of between $695–$13,100 for individuals who do not have health care coverage. Additionally, in June 2018, the U.S. Department of Labor released a new rule expanding Association Health Plans (AHPs). These plans allow small employers or self-insured individuals to band together, by geography or industry, to enroll in health care plans similar to those offered by large employers. Supporters of AHPs argue that the plans offer small businesses more choice at a lower cost, reducing the burden of health care on businesses’ bottom lines.
Employer-sponsored health insurance is by far the largest source of health insurance for Oklahomans. Approximately half of all Oklahomans receive their health insurance from an employer. The next largest sources of health insurance come from Medicaid and Medicare, which cover about 1-in-5 and 1-in-6 Oklahomans, respectively.
Employer-sponsored health care costs are a major expense for business. The average employer-sponsored health care premium for an Oklahoma family is approximately $16,650 per year, of which the average Oklahoma employer will pay about one-third, according to the U.S. Department of Health and Human Services. Nationally, this cost has been on the rise, equating to a more than 12 percent increase from 2013 to 2016.
Many factors can lead to higher employer health care costs — and therefore a higher cost of doing business — for Oklahoma employers. One contributor is the hidden costs of uncompensated care. Uncompensated care occurs when uninsured individuals require health care and are unable to pay the bill. Oklahoma hospitals provide over $550 million in uncompensated care per year, and are forced to shift these to their insured customers through higher service prices.
Oklahoma is in the bottom 10 states for its rate of uninsured individuals, with approximately 1 in 10 Oklahomans without health insurance. Oklahoma also has the 9th highest rate of uncompensated care, equating to more than half a billion dollars in uncompensated costs annually for Oklahoma hospitals alone.
Possible Next Steps
Access to affordable health care coverage is integral in creating a business-friendly environment in Oklahoma, both for the health care industry as well as all Oklahoma employers. Policies that increase the cost of health care in Oklahoma discourage business development and harm Oklahoma’s potential for long-term economic development. As the Trump Administration pushes for additional reforms, the federal government may look to giving states more control over health care policies and programs. One approach Congress may use achieve this goal is broadening the innovation waiver currently afforded states under the ACA. This waiver, also called the Section 1332 waiver, allows states to be exempt from specific provisions of the law, including the mandate that employers provide certain employees with healthcare, as well as requirements for qualified health plans, mandated health benefits, tax credits and subsidies, and exchanges, if they can demonstrate alternative health care plans more appropriately meet their state’s unique needs.