What's the Big Idea?

A door to solving several public-policy challenges opens if health insurance is separated from employment. It’s an approach with features attractive to both major parties- and every American.

In the realm of health care reform, the term “decoupling” refers to separating health insurance from employment. It’s an idea that gets almost no attention in DC, and not much outside. Pity. It’s the lynch-pin of a scheme solving an impressive array of public-policy challenges, including the biggest of them all.   

Start by declaring that health care insurance benefits are not deductible for employers and are taxable income for employees, end health insurance for federal employees, and impose a 50 percent tax on employer-provided health care benefits. This makes employer-provided health insurance a lot less attractive for both employers and employees. It would also  generate billions in tax revenues, except that the goal is to eliminate that revenue stream by getting employers to stop offering health insurance as a benefit.

Instead, everyone could get health insurance in state-run exchanges. ObamaCare requires the creation of such exchanges. But the exchanges are only a source of insurance for small businesses and individuals who don’t already get insurance through their employment. Under “decoupling,” everyone could get insurance in these exchanges, and nearly everyone would once employers stop offering it.

Make it attractive by prohibiting insurance companies selling insurance in the exchanges from rejecting claims for health care authorized by a physician (with an appeal procedure through which the exchange can cancel payments to doctors for procedures judged inappropriate or unnecessary), defining a “basic” insurance plan, prohibiting rate hikes any more frequently than annually, prohibiting rate-setting based on age (except for children and mothers-to-be), retaining  the prohibition in Obama Care on refusing to sell policies – or setting rates -  based on pre-existing conditions, prohibiting cancellation of policies for any reason, and requiring that insurance companies announce their rate hikes for the upcoming calendar year by Sept. 1 of every year, and  giving everyone 30 days to decide which plan to buy.

Next, add in two features critical to containing health care costs by putting individuals in charge of a significant portion of their first health care bills every year. One: require that all insurance plans be high-deductible plans (deductibles of no less than $1,200, and as much as $2,400 or $3,600). The other:  prohibit plans from covering any more than 80 percent of the first $5,000 in health care expenses a year.