Universal health coverage in the US – once thought to be a hopeless goal without enforcing a single payer plan – is surprisingly within reach. Thanks to the Affordable Care Act and improved subsidies in the 2021 American Rescue Plan, more than 91% of Americans now have health insurance.
Closing the gap would be a win-win-win for the uninsured, for healthcare providers, and for policyholders, who would see lower premiums through broader risk sharing.
However, it would be far too costly to just use additional federal subsidies to achieve universal coverage. The Congressional Budget Office estimates that simply extending expanded subsidies permanently will cost the government more than $25 billion a year. Price subsidies large enough to attract more people to ACA marketplaces could be many times that number.
A better answer is to create an individual health insurance mandate, which would be more politically palatable than the ACA version. let me explain.
The ACA included a tax penalty of up to $2,085 per family for those who did not enroll in a plan. Although the ACA’s mandate followed an approach used by a predecessor Massachusetts plan (sometimes referred to as “RomneyCare”), which was widely accepted in that state, ensuing partisan struggles over whether to repeal the ACA resulted in a Demonizing this approach to mandates. What economists saw as a way to share responsibilities and risks — and keep the costs of extending coverage down — was viewed by many Americans as government overdoing. As a result, Congress repealed the tax penalty in 2019.
A more effective and friendlier approach is “backstop” insurance. Here’s how it would work:
Imagine an uninsured person seeking help in an emergency room. Once the hospital determines that the patient is uninsured and ineligible for Medicaid, the patient is automatically placed on a “backstop” plan on the ACA marketplace. As with all Marketplace plans, the Backstop plan would pay claims and scale rewards based on ability to pay through existing ACA subsidies. Upon filing after the end of the year, individuals covered by the backstop plan would be retrospectively charged a premium based on the number of months not covered by any other insurance.
Automatic registration could effectively create universal coverage as individuals would be covered by the backstop plan whenever they had no other source of coverage. The backstop plan would provide temporary cover, with individuals then moving to traditional individual market plans.
Of course, details would have to be clarified. Should the backstop plan be run by the government to effectively create a “public option” insurance plan? Alternatively, private insurers could compete for designation as a backup plan for an ACA marketplace. Or multiple private insurers could offer backup plans on an exchange, with the government allocating uninsured people to plans with lower premiums.
Additionally, the ACA marketplace would likely need to employ various risk management tools to account for the fact that some individuals may opt for backstop insurance rather than pay for higher premium coverage.
The improved subsidies in America’s bailout plan – originally designed to get the country through the COVID pandemic – could make backstop insurance more acceptable than in the past, as premiums required when filing taxes could be lower than those in the past Premiums owed as part of the COVID pandemic original AK. The fact that the enhanced subsidies were extended until 2025 in the recent Anti-Inflation Act makes them likely to continue, although Congressional budgeting practices make them unlikely to be turned into an explicit claim.
Other countries, such as Switzerland, the Netherlands and Germany, which use private insurance to achieve universal coverage, make effective use of the obligation to insure individuals. The approaches used are more akin to a backstop plan than the original ACA approach of uninsured penalties. It would be a shame for America, having come so close to achieving universal coverage, to back down when the tools are available to achieve it.
Paul B. Ginsburg is a Senior Fellow at the USC Schaeffer Center for Health Policy & Economics and Professor of Public Health Policy Practice at the USC Price School of Public Policy.