Democrats, Republicans, and Your Health Insurance

Healthcare reform has been a contentious political topic in the U.S. for many years, and is shaping up to play a major role in the 2020 presidential and congressional elections. What does each party want? Let's take a look at how the priorities of the Democratic Party and the Republican Party could impact your health insurance.

Universal Coverage vs. Market-Based Reforms

Democrats generally continue to support the Affordable Care Act (ACA), but would like to fix its flaws and generally improve the law. Democrats want to empower states to use innovation waivers (1332 waivers) to create their own approaches to healthcare reform that are as good as—or better than—the current system. Many Democrats also support fixing the ACA's "family glitch" by basing affordability calculations for employer-sponsored coverage on family premiums rather than employee-only premiums, and most also support expanding premium subsidies to higher income ranges in order to soften the subsidy cliff.

But increasingly, Democrats are also getting behind the idea of a transition to some sort of universal coverage system. All of the Democrats who ran for the 2020 presidential nomination were in favor of universal coverage, although they had differing opinions on whether we should transition entirely to a single-payer system or use a combination of government-run and private health coverage (this Kaiser Family Foundation tool lets you compare the various proposals side-by-side).

Joe Biden, who clinched the Democratic presidential nomination, has a health care platform that could be considered "ACA 2.0." It calls for a variety of improvements to the law, such as the addition of a public option and the elimination of the current income cap (400% of the poverty level) on premium subsidy eligibility. Biden's plan also calls for premium subsidies to be calculated based on expecting people to pay a lower percentage of their income for their coverage, and for subsidies to be calculated based on a gold plan instead of a silver plan. These changes would increase the size of the subsidies people get, and thus make it easier for people to afford more robust coverage.

Biden's healthcare proposal also calls for an end to surprise balance billing, premium-free coverage under the public option for people who are caught in the Medicaid coverage gap (in states that refuse to expand Medicaid), and allowing Medicare to negotiate prices with drug companies.

Biden's proposal checks most of the boxes that many Democrats have been calling for over the last decade in an effort to improve the ACA, and that are incorporated into the official Democratic Party healthcare reform platform for 2020. And while Biden is not in favor of a Medicare-for-all or single-payer approach, his proposals call for significant healthcare reform aimed at making coverage more universal.

The Republican Party has not rolled out a new healthcare platform for 2020, and is instead utilizing the same platform they had in 2016. So in general, their approach can be expected to be the same as it has been for the past several years.

The Trump Administration and most Congressional Republicans began 2017 with the goal of repealing as much of the ACA as possible and starting over with a new approach. But those efforts were largely unsuccessful in 2017 and were mostly off the table once Democrats gained control the House of Representatives (the GOP was successful in repealing the ACA's individual mandate penalty, with the repeal effective at the start of 2019).

While many in the GOP would still like to see the ACA dismantled, the Trump Administration has been approaching this from a regulatory standpoint since the legislative approach failed. The Administration has expanded access to short-term plans and association health plans (currently in legal limbo), encouraged states to implement work requirements for Medicaid beneficiaries (also in legal limbo), and relaxed the rules that apply to 1332 waivers. In general, Republicans tend to be opposed to the idea of a single-payer system, and prefer "free market" approaches to healthcare reform, with little in the way of government intervention.

The Trump Administration and some GOP-led states are also actively working to overturn the ACA in the judicial system, with a lawsuit scheduled to be heard by the Supreme Court during the term that begins in the fall of 2020.

Let's take a look at how each party approaches several important aspects of our current healthcare system:

Medicaid Expansion

Medicaid expansion is a cornerstone of the ACA and accounts for a significant portion of the increase in the number of Americans who have health insurance. The ACA called for Medicaid to be expanded in every state, to provide coverage to people with household income up to 138% of the poverty level.

But the Supreme Court ruled in 2012 that Medicaid expansion would be optional for states, and as of 2020, there were still 14 states that had not accepted federal funding for Medicaid expansion, although two (Missouri and Oklahoma) will do so by mid-2021 after voters approved Medicaid expansion ballot initiatives in 2020. In 13 of those 14 states (all but Wisconsin), there's a coverage gap caused by the states' refusal to expand Medicaid; roughly 2.3 million people are stuck without access to Medicaid OR premium subsidies in those states.

Democrats generally want to push for the ACA's Medicaid expansion in the states that have not yet expanded coverage, and are opposed to proposals to block grant Medicaid funding to the states (block grant proposals involve eliminating the current system of federal matching funds based on state Medicaid funding, and instead giving states a set amount of federal funds to use as they see fit for their Medicaid program). Biden's healthcare platform specifically calls for the government to provide premium-free coverage under a new public option plan for people who aren't eligible for Medicaid simply because their states have refused to expand coverage under the ACA.

Some Democrats would also like to go a step further and implement Medicaid buy-in programs that would allow anyone—or at least some additional people, depending on the proposal—to purchase coverage under a state's Medicaid program, even if they wouldn't otherwise be eligible for Medicaid (in most cases, Medicaid is currently provided to eligible enrollees without premiums, but Medicaid buy-in programs would be based on having people who aren't otherwise eligible for Medicaid pay premiums for the coverage).

Republicans generally support repealing the ACA, which would include repealing Medicaid expansion. Their preferred approach to Medicaid is block granting and per-capita funding limits, and the 2016 party platform noted that they would give allow states to modernize Medicaid by block-granting the program without strings. Republicans also tend to be in favor of work requirements for non-disabled, non-elderly adults enrolled in Medicaid. These were implemented or approved in several states over the last few years, but none are in effect as of 2020 (due to courts overturning them or states suspending them as a result of lawsuits and/or the COVID-19 pandemic).

Health Savings Accounts

Health Savings Accounts (HSAs) are tax-advantaged accounts that people can use to save money to pay for future healthcare costs. They amount to a trifecta of tax savings:

• The money you deposit in the account is deductible on your tax return (or entirely pre-tax if you contribute to your HSA via payroll deduction).
• The money in the account grows tax-free.
• You're still not taxed on the money when you withdraw it, as long as you use it to pay for qualified medical expenses (some people use these accounts like a Traditional IRA, as the money can be withdrawn for purposes other than medical expenses without penalty after age 65. But in that case, the withdrawals would be subject to regular income tax).

Current IRS regulations only allow people with HSA-qualified High Deductible Health Plans (HDHPs) to contribute to an HSA, and there are contribution limits: For 2020, the maximum amount you can contribute to an HSA is $3,550 for an individual, or $7,100 if your HDHP coverage is for a family. (These amounts will increase to $3,600 and $7,200 in 2021).

Although HSAs are certainly a useful tool for funding future healthcare costs—and their tax advantages are significant—we have to keep in mind that their usefulness only extends as far as a person's ability and willingness to fund the account. As such, they tend to be favored by those with higher incomes.

Although Democrats don't tend to focus on HSAs as much as Republicans do, the Medicare for America legislation (a universal coverage bill with more gradual implementation guidelines than the single-payer Medicare for All legislation) that was introduced in 2019 called for the elimination of the HSA tax deduction after the end of 2023 (note that this legislation has no chance of passing in the Senate while it's under GOP control, but can be seen as a bellwether for where Democrats might take healthcare reform if they can get enough legislative support). But the Democratic Party's 2020 platform does not address HSAs at all.

Republicans, on the other hand, consider HSAs to be a potential healthcare reform solution. The first line of Trump's healthcare page during the 2016 campaign stated "Repeal and replace Obamacare with Health Savings Accounts." They have proposed various changes, including higher contribution limits (perhaps aligned with the HDHP deductible), fewer restrictions on who can contribute to an HSA, and more relaxed rules in terms of how HSA funds can be used without taxes or penalties.

Premium Subsidies and Affordability

The ACA's premium subsidies (premium tax credits) were designed to keep health insurance affordable for people who buy their own coverage in the individual market. Premiums for individual market plans increased alarmingly in 2017 and 2018, although they were much more stable in 2019 and 2020, and rate changes for 2021 appear to be mostly modest. But premiums for people who aren't eligible for premium subsidies can still amount to a substantial portion of their income.

The individual market is a very small segment of the population, however, and rate increases have been much more muted across the full population (including people with employer-sponsored health coverage, Medicaid, and Medicare, which account for the vast majority of the population).

Democrats have proposed various strategies for making coverage and care affordable. Joe Biden's healthcare proposal includes larger premium subsidies that would be based on the cost of a benchmark gold plan (instead of the current benchmark silver plan) and based on having people pay only 8.5% of their income for that plan (instead of the current 9.86%, which was initially 9.5% when the ACA was implemented, but has since been indexed for inflation). Biden's proposal would also eliminate the ACA's income cap for premium subsidy eligibility (currently 400% of the poverty level, or $104,800 for a family of four in 2021) and provide subsidies to anyone who would otherwise have to pay more than 8.5% of their income for a benchmark gold plan. This would eliminate the "subsidy cliff" that currently exists for some enrollees.

The 2020 Democratic Party platform calls for a "public option" health plan that would compete with private health insurance carriers in an effort to bring down prices, and lowering the eligibility age for Medicare from 65 to 60.

Many Democrats also want to give the government authority to block rate increases that are deemed unjustified. Right now, to have an "effective rate review" program, a state—or the federal government—only has to review proposed rates and determine whether they're justified or not. But unless the state has enacted rules that allow them to block unjustified rates, there's no built-in provision for that. It should be noted, however, that the current medical loss ratio rules require insurers to send rebates to members if their administrative costs eat up more than 20% of premiums; this creates some built-in protection against price gouging for the purpose of driving up profits or executive compensation.

Republicans have proposed allowing individuals to fully deduct their health insurance premiums on their taxes, which would lower the real cost of coverage. Employer-sponsored health insurance premiums are currently paid pre-tax, and self-employed individuals can deduct their premiums. But non-self-employed people who buy their own health insurance cannot currently deduct their premiums unless they itemize their deductions. If they do itemize, they're only allowed to deduct medical expenses—including premiums— that exceed 10% of their income (this threshold was previously 7.5%, and will revert back to 7.5% as of 2021). This is much less beneficial for individuals than the current rules for employer-sponsored insurance and self-employed individuals, especially now that the standard deduction has been increased and itemized deductions aren't worthwhile for the vast majority of tax filers.

Republicans also want to allow people to purchase health insurance across state lines in order to increase competition and bring down prices. However, it's unclear whether insurers would be interested in expanding their current coverage areas, due to the challenges involved with building a network in a new area.

There are also questions about regulatory control, as the current setup allows each state's Insurance Commissioner to regulate all plans that are sold in that state (even though the insurance companies are often based in another state), which means carriers have to modify coverage offered in each state to conform with specific state regulations. If that regulatory control were eliminated for out-of-state plans, consumer protections would likely decline as insurers would choose to domicile in states with lax regulations.

Using regulatory authority, the Trump Administration relaxed the rules for short-term health plans, allowing them to have initial terms of up to a year and total duration, including renewals, of up to 36 months (but states can still set more restrictive rules, and the majority have done so). Short-term health plans are much less robust than ACA-compliant health plans in terms of coverage and benefits, but that also means they're less expensive. This is why they've been heralded by many in the GOP as a solution to the affordability issues surrounding ACA-compliant health plans for people who don't qualify for premium subsidies. But the lack of coverage for pre-existing conditions and essential health benefits is worrying to many consumer advocates, and the expansion of these plans is generally opposed by Democrats.

The Trump Administration has also relaxed the rules for association health plans in an effort to make these plans (which don't have to follow many of the ACA's rules that apply to individual and small group health plans) more available to small businesses and self-employed individuals. A federal judge invalidated the new rules in 2019, but the Trump Administration has appealed.

The Administration has also relaxed the rules pertaining to 1332 waivers, in an effort to make it easier for states to get around some of the ACA's rules and requirements. Their hope is that states will take innovative approaches to drive down health insurance premiums, but there are widespread concerns that people with pre-existing health conditions could end up with higher premiums and less realistic access to health coverage and health care.

Contraceptives and Abortion

In general, there's a fairly strong split between Democrats and Republicans when it comes to the abortion debate. The Democratic Party's platform notes that "every woman should be able to access high-quality reproductive healthcare services, including safe and legal abortion." while the GOP is "firmly against" abortion. The Trump Administration finalized a rule in 2019 that prevents Planned Parenthood and similar organizations from receiving federal Title X funding, but the Democratic Party's 2020 platform calls for reversing that rule change.

The Hyde Amendment has been in place since 1976, and bans the use of federal funds to pay for abortion in most cases. While the Democratic Party's platform calls for the repeal of the Hyde Amendment and the codification of Row v. Wade, Republican lawmakers generally support making the Hyde Amendment permanent (currently, it has to be continually reapproved as part of the budget process).

Democrats generally support the ACA's provision that all health insurance plans must cover contraceptives with no cost-sharing, and Democratic leaders were instrumental in making emergency contraception available over-the-counter.

But the Trump Administration issued guidelines in 2018 that make it easier for employers to use moral or religious objections in order to avoid providing contraceptive coverage in their health plans.

Pre-Existing Conditions

The ACA changed the face of individual health insurance by making it guaranteed-issue in every state, regardless of pre-existing conditions. Group health insurance plans (ie, employer-sponsored plans) already had to cover pre-existing conditions, but they could impose pre-existing condition waiting periods prior to 2014 (to be clear, insurers were allowed to charge employers higher premiums in many states based on the group's claims history, but individual employees could not be rejected from the group's plan due to pre-existing conditions).

Now that the ACA has been implemented, pre-existing conditions are covered on all plans (except individual market grandfathered plans and grandmothered plans, neither of which can be purchased by new enrollees) with no waiting periods. Employers can still have a waiting period of up to 90 days before coverage takes effect, but once it does, pre-existing conditions are covered with no additional waiting period.

Democrats want to preserve the ACA, or expand on it by moving towards universal coverage, possibly with a single-payer approach. All of the options supported by Democrats include full protections for people with pre-existing conditions.

When Republican lawmakers were calling for the repeal of the ACA in 2017, there was talk of reviving state-based high-risk pools to serve consumers with pre-existing conditions. But these pools didn't work particularly well in the pre-ACA days due to a lack of funding.

One approach that has gained bipartisan support is reinsurance, which is sometimes referred to as an "invisible high-risk pool." The idea is that when insurers have members with particularly high medical costs, the reinsurance program picks up a significant chunk of the tab. This keeps premiums lower for everyone, as the total claims costs that the insurance company has to pay are lower than they would have been without the reinsurance program. As of 2021, there will be 14 states operating their own reinsurance programs, all of which have lower individual market premiums as a result. Reinsurance has proven itself to be a solid means of protecting people with pre-existing conditions while simultaneously making coverage more affordable, although it should be noted that the improvement in affordability is only guaranteed for people who pay full price for their coverage. For those who get premium subsidies, reinsurance can sometimes result in a higher after-subsidy premium, depending on how the cost of the benchmark plan in the area changes.

But there are other approaches that have been political lightning rods, including the Trump Administration's decision to relax the rules for short-term health plans, association health plans, and 1332 waivers. All of these rules raise concerns about pre-existing conditions, as they expand access to plans that simply don't cover pre-existing conditions (short-term policies, in particular) or that have less robust benefits and thus might not appeal to people with pre-existing conditions (association health plans can fall into this category). The worry then is that the pool of people who remain in the ACA-compliant market might be less healthy, since the non-compliant plans are really only appealing to people who don't have pre-existing conditions. That, in turn, could result in higher premiums in the ACA-compliant market, pushing more healthy people into the lower-quality plans that the new regulations encourage.

Prescription Drug Costs

Democrats want to limit monthly out-of-pocket costs for pharmaceuticals (the concern here is high-cost specialty drugs, which are typically covered with coinsurance—a percentage of the cost—rather than flat copays; some states have already capped out-of-pocket costs for prescriptions).

Democrats also want to end "pay for delay," (a practice that keeps low-cost generics drugs out of the market), eliminate the current ban on Medicare negotiating drug prices with pharmaceutical manufacturers, and allow Americans to buy prescription drugs from other countries.

In 2019, the Democratic-led House passed legislation that would make it easier for generic drugs to enter the market, although they also added in various provisions to shore up the ACA and thus garnered very little GOP support with the measure. Republicans in the House were generally supportive of the provisions in the legislation that were aimed at lowering the cost of prescriptions (albeit only slightly, as the bill doesn't make substantial changes), but most were unwilling to go along with the overall bill because of the provisions related to strengthening and improving the ACA.

During the 2016 campaign, Trump said that he wanted to negotiate costs with the pharmaceutical industry, and to allow for the import of lower-cost drugs from other countries. However, his position on negotiating drug pricing had changed by early 2017. In 2018, he proposed the idea that Medicare could base prescription drug costs on what other industrialized countries pay for them, and the concept of more regulatory control over prescription drug prices was gaining bipartisan support by 2019. In 2020, President Trump signed four executive orders that the Administration touted as "historic action to lower drug prices for Americans," but the impact of those executive orders is expected to be mixed.