Urban Institute: 9 ways the ACA could be improved without repealing it

While Congress grapples with the financial and legislative challenges of repealing and replacing of the ACA, a better solution may be to strengthen the weak parts of the law and keep the parts that are working, a research report from the Urban Institute suggests.

The paper was authored by two fellows at the Urban Institute's Health Policy Center, Linda Blumberg, PhD, and John Holahan. Dr. Blumberg and Mr. Holahan outline several proposals to strengthen the law and address concerns about coverage, affordability and stability.

Here are the nine recommendations to improve the ACA, based on Dr. Blumberg's and Mr. Holahan's paper.

1. Update the individual mandate penalties. This is one of the most unpopular features of the ACA, yet it is vital to enrollment and risk pools, according to the authors. Dr. Blumberg and Mr. Holahan recommend replacing the individual mandate penalties with penalties similar to those used in Medicare Parts B and D, which have previously garnered bipartisan support. The Medicare Parts B and D penalties function as lifetime premium surcharges. For example, people who do not enroll for Medicare Part B when they become eligible are required to pay 10 percent more on premiums for every year they go without insurance. They are required to pay this surcharge as long as they are enrolled in Medicare Part B. The authors suggest using a similar system for the individual insurance marketplace that is not as long-lasting.

2. Do away with the employer mandate. If this mandate were repealed, it would not affect coverage. Because employer contributions to health plans are tax-exempt and aid in employee recruitment and retention, the authors believe this mandate is not necessary because employers are incentivized to offer employees health benefits anyway. "The limited gains in coverage and the revenue it generates have not been worth the controversy it has caused," the authors wrote.

3. Repeal the Cadillac tax, and instead cap the tax exclusion for employer-based health plans. The Cadillac tax is an excise tax on luxury employer-sponsored health plans, intended to help contain costs and generate revenue to offset the costs of implementing the ACA. It was unpopular and its implementation has been delayed. The authors suggest instead putting a limit on the tax exclusion of employer contributions to health plans.

4. Reduce cost-sharing and cap premiums at 8.5 percent of income. To lessen the burden of premiums, deductibles and other costs for individuals, the authors suggest increasing federal financial assistance and putting a cap of 8.5 percent of income on benchmark premiums for all enrollees.

5. Loosen the 'age rating bands' from 3:1 to 5:1. Under current law, payers cannot charge older adults more than three times what they charge younger adults for the same plan. This is considered a 3:1 age rating. The authors suggest loosening this rating to 5:1, meaning older adults could pay up to five times as much as younger adults for the same plan. However, capping benchmark premiums at 8.5 percent of income would limit financial exposure and allow costs to be distributed by income rather than by age, according to Dr. Blumberg and Mr. Holahan.

6. Keep essential health benefits. Though some say the essential health benefits required by the ACA for all health plans drives up premiums, the authors believe they are necessary to maintain risk pools. "For example, men do not use maternity care and women do not use prostate care, but everyone's contributions to all types of care, regardless of individual needs, allow the costs of everyone's care to be spread over a large population," they wrote. 

7. Increase marketplace enrollment. Dr. Blumberg and Mr. Holahan presented three policies to increase enrollment and stabilize the exchanges. The first is allotting additional funds for outreach and enrollment assistance. The second is fixing the "family glitch," which prevents families from receiving financial assistance for marketplace plans if one family member receives employer-sponsored insurance, even if it only covers the individual. The third would be to allow Medicaid expansion up to 100 percent of the federal poverty line, rather than the current rate of 138 percent. The authors believe this lighter version of Medicaid expansion may push states that have not expanded Medicaid to do so. Those who fall within 100 and 138 percent of the FPL could buy insurance on the exchanges, according to the report.

8. Cap provider payments rates for nongroup insurers at Medicare rates. This improvement aims to tackle effects of provider and payer consolidation, which can drive up the cost of premiums because the concentrated groups are not incentivized to operate efficiently. The authors suggest taking a cue from Medicare Advantage by capping provider payment rates at Medicare levels for in- and out-of-network services on nongroup plans.

9. Allot government funding for high-risk enrollees. Some nongroup marketplaces still have a disproportionately high-cost pool of enrollees, according to the authors. To adjust for this, the authors suggest pulling funds from taxpayers or from the employer-sponsored insurance market, and redistributing those funds across nongroup marketplaces with disproportionately more high-cost enrollees.

Read the full report here.

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